Beyond Structured Settlements

Time for a Rewrite

John Darer is an articulate and passionate critic of structured settlement factoring companies.

In a July 29, 2006 weblog post titled “Structured Settlements 3.0: Time for a Rewrite”, John references a presentation titled “The Future of Structured Settlements” which The Mangelsdorf Companies invited me to deliver at their 2006 Annual Meeting in Phoenix, AZ. John also includes a link to one of several diagrams incorporated in that presentation.

While I appreciate John’s commitment to structured settlement, as well as his reference to both the Mangelsdorf presentation and the legal textbook I co-author, I respectfully disagree with John’s interpretation of the legal and business relationships between structured settlements and structured settlement transfers (aka factoring).

Questions for Consultants - Structured settlement producers (including John) who aspire to be professional consultants should focus on three basic questions about structured settlement transfers in the context of their own business practices:

• Prior Customers - What information have you communicated to claimants who previously purchased structured settlement annuities through you (directly or indirectly) about the changes in federal law (IRC 5891) and state law (protection statutes) that impact their ability, options and process to transfer structured settlement payment rights?

• Current Customers - What information do you currently provide to claimants during personal injury negotiations about laws and settlement documentation language that impact their ability, options and process to transfer structured settlement payment rights?

• Product Providers - What product changes and settlement documentation changes have you recommended to your annuity providers to improve your products in the context of the new federal and state structured settlement transfer laws?  To help prepare for discussions with your product providers, see this prior S2KM weblog post.
  

For structured settlement professionals interested in understanding and successfully addressing structured settlement transfers, here are some recommended educational resources:

The Future of Structured Settlements – This prior S2KM weblog post summarizes the Mangelsdorf presentation and includes three additional Power Point slides, in addition to the Transaction Diagram, that were featured in the Mangelsdorf presentation.

Structured Settlement Transfers – This prior S2KM weblog post features educational resources about settlement transfers and their relationship to structured settlements.

“Structured Settlements and Periodic Payment Judgments” – Release 39 of this legal textbook features a new Chapter 16 titled “Transfer of Structured Settlement Payment Rights”. Release 40 (available in September 2006) will include a substantial re-write of several additional chapters necessitated by recent and continuing legal changes impacting structured settlements. Release 40 includes new commentary about the definition of structured settlement. Significantly for settlement transfers, each of the two primary statutory definitions for “structured settlement” is incorporated in settlement transfer legislation:

• IRC Section 5891

• Model State Structured Settlement Protection Act

ATLA 2006 Annual Meeting – This earlier weblog post highlights the increasing interaction among participants in several related niche industries (including structured settlements and structured settlement transfers) each of which markets financial and/or insurance products to plaintiff attorneys and their clients.

Adam Scales’ Article – Professor Scales wrote a provocative law review article in 2002 about structured settlement transfers challenging some of the fundemental assumptions of the structured settlement industry and describing the new economic life cycle of personal injury claims.  A quick summary: follow the money!

Legal Broadcast Network (LBN) Podcasts – Persons interested in judging the professionalism of the structured settlement industry (and its representatives) compared with the structured settlement transfer industry (and its representatives) are encouraged to listen to LBN podcast interviews by Mark Wahlstrom of John Darer, a representative of the structured settlement industry, and Matt Bracy, a representative of the structured settlement transfer industry.

Web 2.0 – In his LBN podcast interviews and weblog posts, John Darer provides a valuable service to both the structured settlement and settlement transfer industries by highlighting the irresponsible business practices of some structured settlement transfer companies. John is especially critical of their Internet business practices. John also chastises the structured settlement industry for its incredibly inept strategic response to the increasing Internet dominance of the settlement transfer industry.  If the structured settlement industry has any hope of successfully competing with structured settlement transfer companies in communicating via the Internet with structured settlement recipients, their leaders should quickly learn more about Web 2.0. Here is an introductory weblog post about Web 2.0 for lawyers that may be helpful.

ATLA 2006 Annual Meeting

ATLA (the “Association of Trial Lawyers of America”) held its 2006 Annual Meeting in Seattle from July 15-20. The most important result: ATLA members voted to change the organization’s name to the “American Association for Justice” (AAJ or A2J?).

As explained in a written communication to attendees signed by 17 former ATLA presidents: “Our current name – the Association of Trial Lawyers of America – is all about us. It describes who we are. In contrast, our ….new name – the American Association for Justice – is about what we do. And what we do is fight for justice – for our clients and all Americans each and every day".

The featured A2J speakers included James Carville, John Edwards and Eliot Spitzer.

From a structured settlement and settlement planning perspective, the most important A2J speakers were:

• William Dussault – “Ethical Considerations in the Use and Implementation of Structured Settlements”.

• Matthew Garretson – “What You Must Know About Medicare’s Growing Role in Catastrophic Personal Injury Cases”.

• Robert DeRose and Deborah Kohl – “Social Security Issues in Workers Compensation Cases”.

Approximately 300 companies exhibited at the A2J Annual Meeting at a minimum cost of $2600 per exhibitor. Many of these exhibitors also contribute to ATLA programs as sponsors and advertisers. Exhibitors of interest to the structured settlement and settlement planning industries included:

• Annuity Providers – Mass Mutual; MET Life; John Hancock.

• Structured settlement producers – Creative Capital, Enterpriz Economic Consulting, EPS Settlements, High Impact Litigation, Innovative Settlements, Lesti Structured Settlements, Mass Tort Settlement Services, Millenium, Forge, Ringler Associates, Robert Johnson & Associates, Settlement Services Group, SSP.

• Trust producers – Rich Halpern & Associates; the Settlement Services Group.

• Banks (offering special needs trusts) – Wells Fargo, US Bank.

• Litigation Financing (non-recourse) – American Asset Finance, Fast Funds, LawCash, LawFinance Group, Law Max, Lawstreet Capital, Peachtree Funding and Plaintiff Support Services.

• Non-bank recourse lenders – Advocate Capital and Counsel Financial.

• Economists – Enterpriz Consulting and Robert Johnson & Associates.

• Life Care Planners – Beacon Rehabilitation Services

• Medicare and Medicaid lien adjustors – Settlement Services Group

• Trade Associations – Society of Settlement Planners (SSP)

• Technology companies – many: including Structure Online and translation.net.

• Factoring companies – Wentworth and Strategic Capital.

Obviously these and other companies now recognize one truism about the Future of Structured Settlements: plaintiff attorneys are the primary “purchasers” and/or “deciders” for numerous financial and insurance products.

By comparison, with only a few exceptions, ATLA (now A2J or AAJ) has done a regrettably poor job in educating its members about important, developing issues related to these same exhibitors, sponsors and advertisers – and to the emerging industries they represent including:

• Structured settlements;
• Settlement planning;
• Settlement trusts;
• Settlement transfers (aka factoring);
• Legal finance.

As a separate comment (and criticism) about A2J’s educational program in Seattle: except for Ringler Radio’s mobile podcast recording studio, the conference was completely devoid of any evidence or education about Web 2.0 for Lawyers.  By comparison, and simultaneous with the ATLA meeting in downtown Seattle, Edward Tufte spoke to consecutive one day sell-out audiences (500 persons at $360 per person) about the topic of “envisioning information” - an important Web 2.0 core competency.