Beyond Structured Settlements

NSSTA 2015 Annual Meeting

Continuing to advance a theme of "industry unity", which now appears to encompass some collaborative political lobbying as well as education, the National Structured Settlement Trade Association (NSSTA) hosted its 2015 Annual Meeting April 22-24 in Washington, D.C.

Incoming NSSTA President Michael Goodman highlighted these developments during his introductory address when he listed among other recent NSSTA successes: 1) a strong relationship with the American Association for Justice (AAJ); 2) improved dialogue with the Society of Settlement Planners (SSP); 3) guest educational participation involving SSP and National Association of Settlement Purchasers (NASP) representatives; as well as 4) successful cooperation with NASP to enact revised structured settlement protection legislation in Illinois.

The new Illinois legislation provides an antidote for problems created by the Brenston case. Among other changes to the prior Illinois statute, the new legislation also includes provisions to: 1) restrict forum shopping; 2) require the seller of payment rights to appear in person at the court hearing (unless the court determines that good cause exists to excuse the payee from appearing); and 3) require disclosure of prior transfers.

Representatives of both NSSTA and NASP have expressed their intent to cooperate in pursuing similar legislative reforms in other states including Florida, Tennessee, Virginia and Wisconsin.

Goodman also identified several goals for NSSTA during his term as President. These include: 1) modifying NSSTA's traditional "protect and preserve" message to inspire primary market growth; 2) moving beyond "interest rate selling"; 3) moving beyond a focus on factoring; 4) identifying and pursuing new markets for structured settlement annuities; 5) adding one or more new life company providers; 6) engaging new, younger structured settlement brokers; 7) providing a new and improved training initiative.

Goodman will be joined on the NSSTA Board by two newly-elected Directors: Jim Early and Geoff Kissel. They replace retiring Directors John Machir and Dan Goodmann. John McCulloch was re-elected to a new three year term of directorship. McCulloch was also honored as NSSTA's annual President's Award winner. Karen Meyers and Bill Wakelee were named recipients of NSSTA's annual Leadership Award.

NSSTA Executive Director Eric Vaughn updated members on the Structured Settlement Caucus which is co-chaired by Congressmen John Lewis and James Sensenbrenner and currently consists of 53 congressional members. The objectives of the Caucus include: 1) expanding the base of Congressional support for structured settlements; 2) educating new members of Congress about structured settlements; and 3) protecting and promoting structured settlements.

As an important auxiliary portion of its meeting, Vaughn and 125 NSSTA members "Took the Hill" to meet with Senators and Representatives. Their efforts received strong encouragement from Congressman Lewis who exhorted NSSTA members "to make some noise."

"Stand up! Speak up!" Lewis urged. "Structured settlements have always enjoyed strong bipartisan Congressional support. They are the right and necessary thing to do. They work by providing long term financial security for injury victims to live with dignity."

NSSTA and its Education Committee face a continuing challenge: how best to educate its members, who possess varying degrees of experience and who market to a diverse group of structured settlement producers and decision makers, to deliver high value services to their respective clients. NSSTA has addressed this challenge with multiple new initiatives:

• Structures 202 provides a comprehensive program of case management fundamentals and business development opportunities. Unlike Structures 101 (a prior NSSTA educational program for case managers), Structures 202 is also designed for structured settlement brokers who are new to the market and therefore includes an important, primarily plaintiff-oriented, business development component.
• Complementing and extending its Certified Structured Settlement Consultant (CSSC) Professional Certification Program, NSSTA has added a new Master's Certificate in Structured Settlement Consulting (MSSC). NSSTA recognized and honored the most recent graduates of both programs during its 2015 Annual Meeting.
• During its Fall 2014 Conference, NSSTA announced a new "NSSTA University" service whereby NSSTA will partner with any member to secure CE credits for member-sponsored educational seminars or insurance claims departments or law firms.
• In partnership with CLM Advisors, NSSTA's Marketing Committee has commissioned a three part survey project to provide its members with valuable marketing tools for discussions with the audiences surveyed. Part 1 (claims executives) and Part 2 (claims adjustors) have been completed. Part III will survey plaintiff attorneys.

In addition, from S2KM's perspective, NSSTA continues to upgrade its traditional educational conferences.

SPEAKERS AND TOPICS - NSSTA 2015 Annual Meeting

• Kevin Silo - Opening Remarks
• Congressman John Lewis - Keynote Speaker
• Michael Goodman - NSSTA Agenda and Objectives
• Sally Greenberg - Consumer & Legal Protections for Injury Victims
• Mike Montemurro and John Stanton - Internal Revenue Service Update
• Taylor Smith, Ronna Ruppelt, Robert Sampson - Delivering High Value Services to Claims Professionals
• Karen Meyers, Anne Marie VonBank, Cody Shively - Trigger Trusts
• Christi Fried, Paul Hansen, Phil Sanders - Trust Asset Allocation and Structured Settlements
• Stephen Harris, Timothy O'Driscoll and Peter Vodola - Judicial Education
• Susan Clark and Melissa Price - NSSTA Took the Hill
• Michael Miller, Earl Nesbitt, John McCulloch - Factoring Panel Discussions
• Dr. Quincy Krosby - Macro Economics and the Financial Markets
• Nancy Bond - Life Care Planning

For additional S2KM reporting about past NSSTA conferences, see the structured settlement wiki.

Settlement Planning Market - 1

Following three 2012 settlement planning conferences, what have we learned, and what do we still need to know, before settlement planning can be recognized and analyzed as a business and professional market?

The settlement planning conferences provided:

• Definitions for Settlement Planning - Joseph Tombs, Director of the Registered Settlement Planner (RSP) certification program, defined settlement planning as "a profession helping recipients of settlement proceeds use those proceeds to achieve post-loss goals and transition successfully to post-settlement financial life. Settlement planners represent a blend of several professionals: part tax lawyer, trial lawyer, special needs lawyer, financial planner, annuity specialist, social worker, and medical case worker."
• Descriptions of an Emergent Profession - Several conference speakers described settlement planning as a larger and more complex successor business and profession for structured settlements. For example, Jack Meligan stated: "SSP and its members have been promoting the practice of Settlement Planning as a more comprehensive solution for the financial issues facing personal injury victims and their families, and the profession of Settlement Planning as the next evolutionary step for members of the financial and legal communities that serve these injured Americans."
• Product Introductions and Descriptions - In addition to structured settlement annuities, conference speakers discussed multiple financial and insurance products in the context of settlement planning including: settlement trusts; blended structures; alternative asset management options; market linked CDs; long term care insurance; life insurance; and reinsurance.
• Government Benefit Updates - Integrating financial and insurance products with available government benefits represents one of the most important settlement planning priorities and requires effective interaction among multiple settlement planning participants. The conferences highlighted settlement planning roles for special needs attorneys as well as financial and insurance professionals. In addition, government benefit developments related to settlement planning were discussed including new requirements for liability Medicare Set-Asides (MSAs) and special needs pooled trusts as well as the Patients Protection and Affordable Care Act.
• Tax Law Updates and Improvements - In addition to integrating tort settlement proceeds with government benefits, settlement planning requires careful tax planning and specialized document drafting. The SSP conference featured Robert Wood and Jeremy Babener, who provided tax law tips and updates for settlement planners, as well as David Higgins, who proposed a potential tax law alternative to expand the use of structured settlement annuities in settlement planning.
• Business Standards and Practices Discussions - The SSP's "Standards of Professional Conduct for Settlement Planners" (SSP Standards) represents a significant accomplishment and valuable industry resource.  Professor Carl Pierce, who helped review and draft the SSP Standards, continued his analysis of related settlement planning issues as part of the Risk Settlement Planning Practicum. Karen Meyers, Director NSSTA's Certified Structured Settlement Consultant (CSSC) program, led a discussion about product suitability during the SSP Annual Meeting.

Unanswered Questions

Despite continuing educational progress, however, certain questions about the settlement planning market still need to be prioritized and addressed before settlement planning becomes a recognized business and profession. Among the most fundamental and important:

• What types of settlements comprise the settlement planning market?
• How large is the settlement planning market?
• Is the settlement planning market increasing or decreasing?
• What informational resources exist to help answer these questions?

Towers Watson Updates

Beginning with the last question, S2KM recommends the Towers Watson updates on "U.S. Tort Cost Trends" as a starting point for discussing the settlement planning market. Since 1985, Towers Watson (and its antecedent Towers Perrin) have published 15 such updates with the most recent 2011 update analyzing U.S. tort costs from 2010. Each study:

• Consists of three components: 1) losses paid to third parties; 2) defense costs; and 3) administrative expenses.
• Calculates tort costs resulting from five insured plus uninsured business lines: 1) commercial multi-peril; 2) medical malpractice; 3) product liability; 4) other liability; and 5) commercial auto;
• Excludes: 1) no-fault auto insurance; 2) property coverages; 3) workers compensation; 4) certain extraordinary (one time) costs - example: tobacco litigation.

Highlights from Towers Watson's "2011 Update on U.S. Tort Cost Trends"

• The tort costs in 2010 ($264.6 billion) were the highest in U.S. history and represent a 5.1% increase from $251.8 billion in 2009. Towers Watson estimates the 2010 U.S. tort system cost approximately $857 per person, versus $820 per person in 2009.
• Towers Watson attributes the increase to the April 2010 Deepwater Horizon drilling rig explosion and resulting oil spill in the Gulf of Mexico. Absent the costs from this event, Towers Watson estimates 2010 tort costs would have decreased 2.4% from 2009.
• Since 1984, tort costs as a ratio of U.S. Gross Domestic Product (GDP) have ranged from a low of 1.70% to a high of 2.30% with relatively rapid increases in the ratio during the mid-1980s and early 2000s offset by intermittent and multi-year declines in the ratio.
• Since 1950, even adjusting for inflation, increases in U.S. tort costs have far exceeded U.S. population growth. However, inflation-adjusted tort costs per capita were 16% lower in 2010 than in the peak year of 2004.
• The weak U.S. economy has had a notable impact on commercial auto insurance claims. 2010 tort costs were the lowest since 2000 and 19% lower than 2004.
• Although medical malpractice costs have increased at an average annual rate of 9.7%, versus 7.5% for all other tort costs, since 1975, growth in medical malpractice costs from 2005 to 2010 averaged only 0.3% per year.
• Looking ahead, Towers Watson:
  • Anticipates employee practices litigation to be significant in the future despite the U.S. Supreme Court's 2011 ruling in favor of Wal-Mart in the sexual discrimination and civil rights class action case Wal-Mart Stores Inc. v. Betty Dukes et al.
  • Identifies "fracking" (a natural gas drilling process that extracts natural gas from shale by using water and chemicals which could result in contaminated drinking water) as a new area of litigation where defense costs are beginning to mount.

Up until its 2002 update of "U.S. Tort Cost Trends", Towers Watson also translated annual tort costs into the following cost categories (with 2001 percentages): 1) administrative costs - 21%; 2) defense costs - 14%; 3) plaintiff attorneys -19%; 4) economic loss - 22%; and 5) non-economic loss - 24%.

Note: Towers Watson discontinued this latter portion of its analysis in 2002, according to Russ Sutter, a Tillinghast principal and actuary who directs the Towers Watson study, "primarily because we lack reliable information from plaintiff attorneys". These percentages therefore represent Towers Watson's "best estimate" in 2002.

S2KM assumptions: lacking alternative estimates of tort cost payment categories and percentages, Towers Watson's "best estimate" in 2002 for 2001 U.S. tort costs continues to represent the most reliable annual analysis of U.S. tort dollars paid to claimants and their attorneys.

Applying Towers Watson's percentages for 2001 to the results of Towers Watson's analysis of 2010 U.S. tort costs ($264.6 billion total), produces the following assumptive results: 1) administrative costs - $55.6 billion; 2) defense costs - $37.0 billion; 3) plaintiff attorneys - $50.3 billion; 4) economic loss - $58.2 billion; and 5) non-economic loss - $63.5 billion.

Utilizing both Towers Watson's 2011 update of its "U.S. Tort Cost Trends" plus S2KM's assumptions based upon Towers Watson's additional 2002 "best estimate" for 2001 produces the following assumptive results for 2010:

• Economic loss of $58.2 billion plus non-economic loss of $63.5 billion (both amounts presumably paid to claimants) equals $121.7 billion of tort-related dollars paid to claimants.
• $121.7 billion plus $50.3 billion paid to plaintiff attorneys equals $172 billion of tort-related dollars paid to plaintiffs and their attorneys.

S2KM will reference and utilize these 2010 annual assumptive "tort cost results" in subsequent blog posts while continuing to discuss the settlement planning market. For additional S2KM reporting about settlement planning, see the structured settlement wiki.

S2P2J Release 51

Publisher Law Journal Press anticipates an April 2012 distribution date for hardcopy supplements for Release 51 of "Structured Settlements and Periodic Payment Judgments" (S2P2J). Online S2P2J will also be updated April 2012 to include Release 51 materials. First published in 1986, S2P2J is co-authored and updated semi-annually by Daniel W. Hindert, Joseph J. Dehner and Patrick J. Hindert. Both the National Structured Settlement Trade Association (NSSTA) and the Society of Settlement Planners (SSP) utilize S2P2J as an educational resource for their certification programs.

Release 51 Highlights

Release 51 for "Structured Settlements and Periodic Payment Judgments" features a comprehensive Executive Life update including expanded and updated coverage for the Executive Life of New York (ELNY) liquidation proceedings now in progress. In related reporting, Release 51 also:

• Expands and updates prior reporting for life insurance insolvency procedures and state guaranty association laws;
• Offers advice to plaintiff attorneys about how to address the risk of non-payment by annuity providers; and
• Summarizes recent case developments impacting Aurora, the successor company to Executive Life Insurance Company of California (ELIC),

Release 51 also updates Medicare Secondary Payer (MSP) developments and conditional Medicare payment requirements. Contributing author Peter H. Wayne IV provides current analysis and advice about Medicare Set-Aside (MSA) arrangements in liability cases discussing new and related case law, new CMS pronouncements and new CMS field office guidance with practice tips for structured settlement and settlement planning consultants, attorneys and claim supervisors.

Release 51 expands existing coverage of structured settlement business standards and practices including analysis of the following legislation impacting settlement planners:

• The NAIC Suitability in Annuity Transactions Model Regulation;
• The NAIC Annuity Disclosure Model Regulation;
• Dodd-Frank's impact on fiduciary and suitability standards; and
• The Uniform Prudent Investor Act.

Other topics addressed in Release 51:

• Structured settlement metrics for defendants and liability insurers.
• The Treasury's final regulations for IRC section 104(a)(2) incorporating amendments resulting from the Small Business Job Protection Act of 1996.
• The new IRS Lawsuits, Awards and Settlements Audit Techniques Guide.

"Structured Settlements and Periodic Payment Judgments" is now available in both hardcopy and online versions. For summaries of prior Release Highlights, see the structured settlement wiki.

Product Suitability Standards - 1

To what professional "product suitability standards", if any, should structured settlement "consultants" be held responsible when they recommend structured settlement annuities for claimants in the context of personal injury settlements? And where should they look for guidance?

Should it matter:

• Whether the structured settlement consultant is working on behalf of the defendant or the plaintiff?
• Whether the structured settlement consultant is also a:
  • Registered Settlement Planner (RSP); or a,
  • Certified Structured Settlement Consultant (CSSC); or a,
  • Registered Representative (RR); or a,
  • Certified Financial Planner (CFP); or a,
  • Registered Investment Adviser (RIA)?
• Whether the proposed structured settlement annuity will be paid into a trust set up for the claimant as opposed to the claimant directly?

The National Structured Settlement Trade Association (NSSTA) is the largest national structured settlement professional association in the United States.  NSSTA has adopted a "Statement of Ethics and Professional Responsibility" (Code of Ethics) to provide "guiding principles" to its members and member organizations.  The Preamble to NSSTA's Code of Ethics provides:

"Implicit in the acceptance of this Statement is an obligation to act in a professionally responsible and ethical manner when providing structured settlement services."

Although Principle VI directs NSSTA members to:

"…comply with all material federal and state laws and regulations applicable to the structured settlement services that are provided",

NSSTA's Code of Ethics does not directly address product suitability standards. Nor does NSSTA's Code of Ethics include any penalties or enforcement procedures for member violations.

By comparison, the Society of Settlement Planners (SSP), whose members also sell structured settlement annuities, has adopted the "Standards of Professional Conduct For Settlement Planners" (Standards of Conduct).  Related to product suitability, Rule 5 (Conflict of Interest and Loyalty) of SSP's Standards of Conduct states in part:

"A settlement planner shall make and implement only recommendations that are appropriate for the client and consistent with the client’s objectives" (emphasis added).

In the event of a conflict between SSP's Standards of Conduct and any:

"laws, court rules, licensure requirements or other standards imposed on any regulated profession such as law, accounting, financial planning, securities trading or insurance", the SSP's members "should abide by the laws or professional standards imposed on the members discipline (emphasis added) ..."

Rule 5 also requires SSP members to obtain their client's "informed consent" which their Standards of Conduct define as:

"…agreement by a person to a proposed course of conduct after the settlement planner has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct."

The Preamble to SSP's Standards of Conduct addresses enforcement, stating in part:

"Compliance with these Rules depends upon voluntary adherence and, secondarily, upon reinforcement by peer and public opinion.....Although it is not intended that a violation of these Rules will, in itself, subject a settlement planner to civil liability to a person injured by such a violation, it is expected that these rules may be used as evidence of the conduct expected of reasonable settlement planners."

What does "appropriate" mean under the SSP Standards of Conduct? And what "laws or professional standards" could impact whether a structured settlement is appropriate for a particular injury victim?

One potential source for answers is the "Suitability in Annuity Transactions Model Regulation" (Suitability Regulation) promulgated and most recently revised in 2010 by the National Association of Insurance Commissioners (NAIC) and subsequently enacted by several states.  The purpose of the NAIC Suitability Regulation is:

“…to require insurers to establish a system to supervise recommendations and to set forth standards and procedures for recommendations to consumers that result in transactions involving annuity products so that the insurance needs and financial objectives of consumers at the time of the transaction are appropriately addressed."  However, the NAIC Suitability Regulation adds:  "Nothing herein shall be construed to create or imply a private cause of action for a violation of this regulation."

Section 6A of the NAIC Suitability Regulation provides in part:

"In recommending to a consumer the purchase of an annuity or the exchange of an annuity that results in another insurance transaction or series of insurance transactions, the insurance producer, or the insurer where no producer is involved, shall have reasonable grounds for believing that the recommendation is suitable for the consumer on the basis of the facts disclosed by the consumer as to his or her investments or other insurance products and as to his or her financial situation and needs, including the consumer's suitability information ..."

The NAIC Suitability Regulation defines "suitability information" to include: age; annual income; financial situation and needs, including financial resources used for the funding of the annuity; financial experience; financial objectives; intended use of the annuity; financial time horizon; existing assets, including investment and life insurance holdings; liquidity needs; liquid net worth; risk tolerance; and tax status; prescribes duties and penalties for insurers and insurance producers.

The NAIC Suitability Regulation applies "to any recommendation to purchase, exchange or replace an annuity made to a consumer by an insurance producer, or an insurer where no producer is involved, that results in the purchase, exchange or replacement recommended."

Significantly for structured settlements, however, Section 4 of the NAIC Suitability Regulation exempts "settlements of or assumptions of liabilities associated with personal injury litigation or any dispute or claim resolution process".

Does this exemption encompass structured settlements?

By way of explanation, the legislative history of the NAIC Suitability Regulation specifically references "structured settlements" and adds:

"A regulator pointed out that this type of contract did not generally result from a recommendation by an insurer or producer but agreed that it did not hurt to have the exemption there."

If the NAIC Suitability Regulation exempts structured settlements, why is it relevant to structured settlement consultants and/or settlement planners?

• First, some structured settlement consultants and most settlement planners also sell annuity products (example SPIAs) that are covered by the NAIC Suitability Regulation.
• Second, some states now require all licensed insurance agents to complete a one-time annuity suitability training program as a condition for selling any annuity products. NSSTA already offers qualifying training programs for its members.

• Third, some structured settlement consultants may also be licensed to sell financial securities in addition to annuity products and may therefore be held to a higher product suitability standard by their broker-dealer.

• Fourth, some structured settlement consultants and/or annuity providers may proactively decide to adopt product suitability standards regardless of legal requirements. See, for example, the SSP "appropriate" standard highlighted above. Also note: under Section 8 of the NAIC Suitability Regulation, insurers are responsible for compliance and subject to penalties for non-compliance.
• Fifth, many structured settlement competitors (examples: financial planners and settlement trustees) are held to higher, more specific product suitability standards. To improve their sales success, structured settlement consultants should understand their competitors' product suitability standards including "fiduciary" and "best interest" standards in addition to, and in contrast with, the NAIC annuity suitability standard.

In subsequent blog posts, S2KM will identify and discuss product suitability legislation and regulations, in addition to the NAIC Suitability Regulation, that could impact structured settlement consultants and settlement planners.

For additional S2KM blog posts concerning structured settlement business standards and practices, see the structured settlement wiki and Section 6.02 of "Structured Settlements and Periodic Payment Judgments" (S2P2J).

SSP and NSSTA 2011 Annual Meetings - 4

One of the notable features of the 2011 educational conferences sponsored by the Society of Settlement Planners (SSP) and the National Structured Settlement Trade Association (NSSTA) was how relatively few speakers focused on traditional structured settlement issues.

Of those who did, some offered external perspectives on structured settlements (attorneys, judges, financial planners, unions). In addition, NSSTA's Legal Committee provided an update on structured settlement legal issues.

Most of the other SSP and NSSTA 2011 educational speakers addressed structured settlements in the context of either:

• Peripheral topics such as: strength of life companies; state guaranty associations; Executive Life of New York (ELNY); internet marketing; certification programs; and the sale of structured settlement payment rights; or
• Settlement planning topics such as: Medicare set-asides (MSAs); special needs trusts (SNTs); 468B qualified settlement funds (QSFs); taxation (income and estate) of damages; lien resolution; non-qualified products; and allocation of medical expenses.

Two SSP presentations were also noteworthy for providing both a general understanding of settlement planning and the role of structured settlements as a core component of settlement planning:

• Kevin Urbatsch and Michele Fuller - "Working with a Special Needs Attorney";
• Jack Meligan - "Dissecting a Settlement Plan".

Urbatsch and Fuller, special needs attorneys and members of the Academy of Special Needs Planners (ASNP), addressed a variety of settlement planning topics:

• What is a settlement plan?
• What types of injury victims require settlement planning?
• What professionals should comprise a settlement planning team?
• What special needs issues should a settlement plan address?
• In addition to Medicare, Medicaid and Social Security, what government programs should a settlement plan consider?
• What benefits do these various government programs provide?
• Why are damage allocations important for settlement planning?
• Who is, and who is not, qualified to make damage allocations?
• What are the disadvantages of, and alternatives to, special needs trusts (SNTs)?
• How does health care reform impact settlement planning, Medicaid and SNTs?
• Why are 468B Qualified Settlement Funds (QSFs) important for settlement planning?

Meligan's discussion focused on a case-specific settlement plan. Meligan's recommended planning considerations included: "better quality of life"; new care facility; medications and therapy; estate planning; whether an SNT is appropriate; and whether a Medicare set-aside (MSA) is necessary. His proposed settlement plan recommended specific products and product and service providers for:

• A structured settlement payable into a SNT.
• An MSA funded in part with a structured settlement.
• Resolution of Medicaid and Medicare liens.
• A Treasury bill money market account.
• A "laddered" certificate of deposit portfolio.
• Investment in silver coins to address inflation.
• A will plus consideration of estate taxes.
• Prescription medications.
• Family evaluation to assist with life style changes.

S2KM comments about structured settlements and settlement planning:

• The future of structured settlements depends upon whether, how, when and by whom structured settlements are integrated into settlement planning.
• Settlement planning requires and deserves greater educational attention - by SSP and NSSTA as well as by special needs attorney associations.
• The SSP discussions led by Urbatsch, Fuller and Meligan provided a good introduction to many settlement planning issues.
• If NSSTA continues to study settlement planning (or settlement consulting), it might be valuable to review and compare:
  • SSP's "Standards of Professional Conduct for Settlement Planners" with NSSTA's "Code of Ethics";
  • SSP's "Registered Settlement Planner" (RSP) certification program with NSSTA's "Certified Structured Settlement Consultant" (CSSC) program;
  • SSP's 2011 educational agenda with NSSTA's 2011 educational agenda.
• New settlement planning standards need to be identified and established. For example: definitions and vocabulary; knowledge requirements; professional planning team composition; roles and responsibilities; individual and integrated work product; product recommendation criteria; licensing and certification; business practices including compensation disclosure, conflicts of interest and informed consent; documentation; and financing products and mechanisms.
• QSFs and structured settlements can improve settlement planning and therefore should be considered in every complex personal injury case.

S2KM comments about Meligan's sample settlement plan:

• At least until someone else presents a personal injury settlement plan featuring structured settlements in an educational forum, Meligan's plan represents the industry standard.
• It would be valuable to study and compare settlement plans developed by different professionals (trustees, special needs attorneys, and financial planners) for the same case example.
• Every settlement plan recommending a structured settlement should:
  • Justify why structured settlements are appropriate (product suitability) and more appropriate than comparable alternatives products - for example: SPIAs and indexed annuities.
  • Include some tax analysis to determine whether "tax-free" products are needed or justified.
  • Justify recommended amounts allocated to purchase structured settlements. Among the most frequent and severe settlement planning criticisms of structured settlements:
    • Single product structured settlement agents have an inherent conflict of interest that should disqualify them from allocating settlement proceeds;
    • Structured settlement agents invariably over-structure cases which limits planning options and increases the likelihood of future factoring transactions.
  • Disclose compensation (including shared compensation) from all recommended products subject to the recipient's informed consent.
  • Reference IRC section 5891 and the applicable state structured settlement protection statute(s).
  • Include a comparison of projected revenues from all sources and projected expenses.

For additional S2KM reporting about:

• SSP and NSSTA 2011 Annual Meetings - see the structured settlement wiki;
• Structured Settlements and Settlement Planning - see this earlier S2KM blog post.

 

SSP and NSSTA 2011 Annual Meetings - 2

This blog post continues S2KM's discussion of the 2011 annual conferences of the Society of Settlement Planners (SSP) and the National Structured Settlement Trade Association (NSSTA) with a strategic perspective. A prior S2KM blog post identified speakers and topics featured by SSP and NSSTA. Subsequent S2KM blog posts will summarize and provide commentary about selected speaker presentations.

SSP's conference, open to members and non-members, addressed two general topics: "Special Needs Settlement Planning" and "Practice Improvement: Marketing and New Products". NSSTA's conference, for members only, celebrated NSSTA's 25th anniversary. It also included a NSSTA business meeting with reports from immediate Past-President Michael Kelly, new President Dan Finn, Executive Director Eric Vaughn, Assistant Executive Director Peter Arnold and the Chairpersons of NSSTA's several committees.

One of the highlights of NSSTA's 2011 conference was the honoring of NSSTA's past presidents. David Ringler, NSSTA's first president, spoke briefly at the conference and re-stated his original vision for NSSTA:

"Although we do need to constantly be on the watch for legislative change, I still believe having a place where everyone and anyone can sit down with each other and discuss the issues and viewpoints regardless of beliefs is the most important reason for NSSTA. I have called it a common “talk table”, although I agree that is not exactly a very elegant term. If we can continue this tradition, there is no problem we cannot overcome."

Many industry participants, including some NSSTA members, question whether NSSTA has lost sight of this original purpose and tradition. Does NSSTA continue to represent "a place where everyone and anyone can sit down with each other and discuss [structured settlement] issues and viewpoints regardless of beliefs"? The answer, unfortunately, is "no".

For the past several years, NSSTA's leadership has superimposed a strict political litmus test for membership as well as for topics and speakers at its educational conferences. As one result, structured settlement industry participants with alternative issues, viewpoints, beliefs and educational interests have founded two other national structured settlement associations: the National Association of Settlement Purchasers (NASP) in 1996 and SSP in 2000.

Fortunately for NSSTA members and the structured settlement industry, based upon its 2011 conference, NSSTA appears to be expanding the scope of its educational programs to address important but controversial industry topics such as IRC 468B Qualified Settlement Funds, IRC 5891 and state structured settlement protection statutes. The educational programs offered by both NSSTA and SSP also increasingly discuss three fundamental transitions reshaping the structured settlement industry:

• From structured settlements to settlement planning;
• From a singular, illiquid, and non-assignable product to multiple products with greater flexibility to address changing needs and circumstances of injury victims;
• From traditional (pre-Internet) to web-based business models, processes and skill sets.

With the structured settlement industry facing these and other challenges, including aging leadership, declining structured settlement annuity sales, anticipated legislative changes plus an increasingly complex legal and regulatory business environment, where is the strategic vision and what are the strategic priorities for NSSTA and SSP?

NSSTA President Dan Finn and Executive Director Eric Vaughn identified the following:

• NSSTA challenges:
  • Promote the expanded use of structured settlements
  • Expand the structured settlement market
  • Protect structured settlement annuitants
  • Defend IRC sections 104(a) and 130
  • Enhance the Certified Structured Settlement Consultant (CSSC) program
  • Unify the structured settlement industry
• NSSTA objectives
  • Expand IRC section 104 (a)(2) to include wrongful imprisonment and sexual abuse cases
  • Expand government use of structured settlements
  • Promote structuring of MSAs in liability cases
  • Promote the structuring of Social Security disability payments
  • Promote the professionalism of structured settlements

SSP President Jack Meligan prioritized three objectives:

• Improve SSP's marketing to plaintiff attorneys
• Create an SSP lobbying presence
• Enhance the Registered Settlement Planner (RSP) certification program

Two of NSSTA's featured speakers, Jim Morris, President, Chairman and CEO of Pacific Life Insurance Company, and William T. Robinson lll, President-Elect of the American Bar Association (ABA), added important and positive assessments for structured settlements.

Morris accentuated the current financial strength of U.S. life insurance companies and explained why structured settlement annuities represent an excellent strategic product for life companies. As corollaries to Morris' presentation:

• NSSTA announced that two highly rated annuity providers, Mutual of Omaha and Berkshire Hathaway, have re-entered the structured settlement market; and
• Thomas Ronce and Craig Ulman clarified the life and health guaranty association system and how that system applies to structured settlements.

Robinson praised structured settlements as "professional and dignified solutions" for injury victims based upon his first-hand experience as a litigation attorney. Structured settlements represent "state of the art" tools for all attorneys to consider when negotiating and resolving personal injury cases according to Robinson. In his capacity as President-Elect of the ABA: Robinson also:

• Spotlighted the current funding crisis facing state courts; and
• Suggested the ABA and NSSTA should identify shared interests and lobbying opportunities.

For S2KM's reporting and commentary about past SSP and NSSTA conferences, see S2KM's structured settlement wiki.

SSP and NSSTA 2011 Annual Meetings - 1

This blog post begins S2KM's reporting and outlines results from the 2011 annual meetings of the Society of Settlement Planners (SSP - May 15-17) and the National Structured Settlement Trade Association (NSSTA - May 18-20).

Elections

• NSSTA
  • President - Dan Finn
  • New Directors - Tom Donahue; Christine Logan; Kevin Silo; Mike Wostoupal
• SSP
  • President - Jack Meligan
  • New Directors - Tony Alfieri; Tim Denehy; Charles Schell; Michelle Whitmore.

Honors - NSSTA

• President's Award - Betty Gregware
• Leadership Award - Toni Warbington
• CSSC Designation Certificates
• NSSTA Past Presidents - honoring NSSTA's 25th Anniversary

Educational Programs - speakers by topic with recommended related resources from "Structured Settlements and Periodic Payment Judgments" (S2P2J), S2KM wikis and prior S2KM blog posts.

Legislative Update

• NSSTA - Eric Vaughn: Washington Update
  
• SSP - Roy Franco: HR 1063
  

Government Benefits

• NSSTA
  • MSA Panel -Toni Warbington; Doug Brand; David Korch; David Hayes
  • Special Needs Trusts - Jay Sangerman
• SSP
  • Liability MSAs - Jason Lazarus; Roy Franco; Mark Pololizio; Doug Shaw
  • Liens Panel - Roy Franco; Tevra Johnson
• Recommended resources
  • S2P2J Chapter 15 - "Government Benefits and Structured Settlements"
  • S2 wiki - "Government Benefits"

Taxation

• NSSTA: 468B QSF Funds - Martin Jacobson
• SSP
  • 468B QSF Funds - Robert Wood
  • Taxation of Damages - Robert Wood
  • Medical Expense and Estate Tax Issues - Jeremy Babener
• Recommended resources
  • S2P2J Chapter 2 - "Taxation of Damages"
  • S2P2J Section 3.08B - "Section 468B Settlement Funds"
  • S2 public policy wiki pages featuring: Robert Wood and Jeremy Babener

Stakeholder Perspectives

• NSSTA
  • Attorneys - William Robinson lll, President-Elect of the American Bar Association
  • Legal Committee Update (including secondary market) - Peter Vodola; Amy Ravitz; Kathy Scanlon
  • Financial Planners - Laura Tarbox
  • Judges - Peter Vodola, Edward Burke, Stephen Denton
  • Unions - Michael Rott
• SSP
  • Special Needs Attorneys - Kevin Urbatsch; Michele Fuller
  • Plaintiff Attorneys - Jay Fisher
• Recommended resources
  • S2P2J Chapter 4 - "Defense Counsel"
  • S2P2J Chapter 5 - "Plaintiff Counsel"
  • S2P2J Chapter 6 - "Case Preparation"
  • S2P2J Section 16.05 - "Judicial Review of Transfer Applications"
  • S2 wiki - "Secondary Market"
  • S2KM blog - "Ceron v. Henderson"

Marketing

• NSSTA: Business Communications - LuAnn Reeb
• SSP
  • Marketing to Personal Injury Attorneys - Joe Didier
  • Electronic Media and Social Networking - Mark Wahlstrom
• Recommended resources
  • S2 wiki - "S2 and KM"
  • Web 2.0 for Lawyers wiki

Practice Improvement and New Products

• NSSTA: CSSC Continuing Education Online - Karen Meyers; Kathy Moghadas
• SSP
  • Dissecting a Settlement Plan - Jack Meligan; Joseph Tombs
  • Non-qualified Assignments - Brian Michael
  • Indexed Annuities - Rick Miller
  • Re-cycling Structured Settlement Payment Rights - Anthony Prieto; Tim Denehy
• Recommended resources
  • S2P2J Section 3.06A - "Non-Qualified Assignments"
  • S2 wiki - "Re-thinking Structured Settlements"
  • S2 wiki - "Settlement Consulting"
  • S2 wiki - "Business Standards and Practices"
  • S2 wiki - "Spencer v. Hartford"
  • S2KM blog - "Online S2P2J" 

Strength of Life Companies

• NSSTA
  • Strength of Life Insurance Companies - Jim Morris, Chairman, President and CEO of Pacific Life Insurance Company
  • State Guarantee Associations - Tom Ronce; Craig Ulman
  • ELNY Update - Len Blonder; Randy Dyer; Dan Finn; Craig Ulman

• Recommended resources
  • S2P2J Section 3.05[9] - "Life Insurance Guaranty Associations"
  • S2P2J Section 3.05[10] - "Executive Life Insolvency"
  • S2KM blog - "Executive Life of New York"

For S2KM reporting and analysis of prior SSP and NSSTA meetings, see S2KM's structured settlement wiki.

Business Standards and Practices - 3

This S2KM blog post summarizes the emerging business and professional models that are competing with the traditional structured settlement models. It continues S2KM's series analyzing structured settlement business standards and practices.

• Business Standards and Practices-1 highlights historical events that helped to develop traditional structured settlement business and professional models. 
• Business Standards and Practices-2 addresses two strategic issues:
  • What are the traditional structured settlement business and professional models?
  • What problems have traditional structured settlement models created that have restricted industry growth?
• Subsequent S2KM blog posts will address differences between the new structured settlement business standards and practices and the business standards and practices associated with traditional structured settlement models.

The traditional structured settlement "claim management" business model and "annuity broker" professional model are being challenged by a more comprehensive and customer-centric "settlement planning" model. Settlement planning, sometimes referred to as "special needs settlement planning" or "settlement consulting", proposes a different set of business standards and practices than traditional structured settlements. Although structured settlement "annuity brokers" participate in the settlement planning market, other product and service providers also participate. Individually or collectively, all of these professional participants may be referred to as personal injury or special needs "settlement planners" or alternatively as "settlement consultants".

The Society of Settlement Planners (SSP) has become the preeminent architect of and advocate for the settlement planning business model. In 2008, SSP adopted and published its "Standards of Professional Conduct for Settlement Planners". The Preamble (subtitled: "A Settlement Planner's Responsibilities") to SSP's Standards of Professional Conduct incorporates the following descriptions of settlement planners:

• "A settlement planner is a representative of a person participating in the design, negotiation and implementation of a settlement or satisfaction of a judgment for the benefit of a person claiming a legal entitlement to an award of damages or other compensation."
• "A settlement planner may represent a plaintiff, a defendant, an insurer, a guardian ad litem, an heir of a claimant, an attorney, or another person participating in the settlement process."
• "Settlement planners may provide advice and other services to their clients concerning claim valuation, negotiation strategy, the determination of rated ages based upon impaired life expectancy, life care planning, ..., allocation of proceeds, taxable and non-taxable periodic payments, structured settlements, [Medicaid and Medicare preservation], investments, irrevocable trusts, assessment of a plan's financial risk, and estate liquidity for tax planning.
• "....[T]o the extent permitted by these rules, [settlement planners] may provide advice and assistance to payees in connection with the factoring of a structured settlement plan."
• "Settlement planners may also play other roles ...such as a lawyer representing a claimant or obligor, a financial planner, an annuity broker, or a sales agent for an issuer of an annuity or provider of trust-based investment management products."

Although the settlement planning market encompasses the structured settlement market, it is substantially larger and more complex. Based on market surveys, estimates of the total annual U.S. market for potential personal injury settlement planning products exceed $160 billion (source: Towers, Perrin Annual Updates of U.S. Tort Cost Trends) compared with a current annual primary structured settlement annuity market of less than $6 billion.

Because the settlement planning market is emerging and its definition is complex with multiple professional participants, settlement planning education, certification and business models are still evolving. Settlement planning business models are also subject to change based upon continuing legal, technology and product developments.

Among professional primary market structured settlement participants, both SSP and the National Structured Settlement Trade Association (NSSTA) offer educational programs featuring settlement planning components. SSP's annual educational conference is open to non-SSP members and SSP encourages attendance by non-SSP settlement planners. NSSTA's educational conferences are restricted to NSSTA members and focus more narrowly on structured settlement topics.

Beginning in 2007, SSP has offered the only settlement planning certification program, the Registered Settlement Planner (RSP). NSSTA's Certified Structured Settlement Consultant (CSSC) program includes settlement planning components. Associations composed of other settlement planning professionals, including special needs attorneys, Medicare set-aside professionals, life care planners and structured settlement transfer companies, offer settlement planning and structured settlement presentations as part of their educational programs.

How does the emerging "settlement planning" business model differ from the traditional structured settlement "claim management" model? From a structured settlement perspective, the settlement planning business model is more claimant-controlled and customer-centric and subject to greater supervision than the traditional structured settlement claim management business model. Here are some of the developing characteristics:

• IRC 468B Qualified Settlement Funds represent the standard funding model for complex cases;
• Multiple settlement funding product alternatives exist including structured settlement annuities;
• Funding product selection and court approval are determined by "best interest", "suitability" and/or "prudent man" standards;
• Settlement planners offer insurance and non-insurance products and services, requiring additional licenses, training and credentials, to satisfy legal requirements and to meet competitive qualification standards;
• Structured settlements are increasingly:
  • Integrated with other government benefits;
  • Payable into trusts or custodial accounts which include other financial products; and
  • Construed as a separate asset class when measuring their interactive effects on an integrated, comprehensive settlement plan;
• Personal injury claimants have the right to:
  • Select their own structured settlement and/or settlement planning consultants, agents, brokers and product providers;
  • Full disclosure and written informed consent concerning:
    • Product and service provider compensation, fees and conflicts of interest;
    • Structured settlement laws including case-specific state protection statutes.

For comparable characteristics of the traditional structured settlement business model, see Business Standards and Practices-2.

For S2KM's continuing analysis of structured settlement business standards and practices, see S2KM's structured settlement wiki.

Business Standards and Practices - 2

A prior S2KM blog post (Business Standards and Practices-1) asserted that structured settlement business standards and practices must improve before the industry can achieve its public policy and revenue potential. The prior post also highlighted historical events that help explain the development of traditional structured settlement business and professional models. This post continues S2KM analysis of traditional and transitioning structured settlement business and professional models and their related business standards and practices.

Before the structured settlement industry can improve and grow, the primary market must address these strategic issues:

• What are the traditional structured settlement business and professional models?
• What problems have traditional structured settlement models created that have restricted industry growth?
• What new business and professional models are competing with traditional structured settlement models?
• How will the business standards and practices of these new models differ from traditional structured settlement models?

The traditional primary market structured settlement business model is a "claim management model" including some or all of the following characteristics:

• IRC section 130 Qualified Assignments as the standard funding model;
• Single product (annuity) predominates;
• No requirement to define injury victim (customer) "best interests" or structured settlement product "suitability";
• Defendant "approved" structured settlement agents;
• Defendant "approved" structured settlement annuity providers;
• Defendant "right of last refusal" to match funding alternatives with affiliated annuity provider quotes;
• Defendant "right" to deny structured settlements to injury victims;
• Defendant strategies to appropriate the structured settlement tax benefit to save costs and/or generate profits;
• Opposition to single claimant 468B Qualified Settlement Funds;
• Failure to fully inform injury victims about IRC section 5891, settlement transfers or case-specific structured settlement protection statutes;
• Failure to promote "full disclosure" and "informed consent" of structured settlement compensation and/or conflicts of interest;
• Misrepresentations including (but not limited to) the "cost" and/or "value" of structured settlements.

The traditional structured settlement "professional" typically refers to himself (or herself) as a "structured settlement broker" or "structured settlement consultant". By background, he or she generally is a life insurance agent or insurance claims representative licensed to sell life insurance and typically sells one product: a single premium fixed payment life insurance annuity.

"Advanced training" for those structured settlement broker/consultant/agents who are members of NSSTA ("America's largest association of structured settlement professionals") may include a one-time one weekend "certification" program (CSSC) at the University of Notre Dame plus continuing education credits at NSSTA-sponsored education conferences. NSSTA's Code of Ethics (a Statement of Ethics and Professional Responsibility) was approved by NSSTA in 1997 "to provide guiding principles to its members and member organizations".

For many structured settlement stakeholders, including some NSSTA members and many structured settlement recipients, the problems with the traditional structured settlement business and professional models are apparent if not obvious:

• For example, NSSTA sponsored a Broker Relations Initiative beginning in 2006 to improve the reputation and public image of structured settlements by establishing more effective broker to broker communication and understanding. Despite many featured presentations and progress reports, however, the Broker Relations Initiative has not yet produced any final report or noticeable industry changes.
• During NSSTA's 2009 Winter Meeting, NSSTA member and speaker Joseph DiGangi addressed problems resulting from the structured settlement industry's traditional "annuity broker" business model. These problems, according to DiGangi, include a stagnant market, negative perceptions of structured settlement participant roles and value, a limited knowledge base and knowledge resources as well as a single product offering. DiGangi proposed an alternative "consultant" business model, which he termed "settlement consulting", with multiple products and services providing added value.
• During NSSTA's 2010 Annual Meeting, featured speaker Dan Clark highlighted NSSTA's stagnating revenue growth. As a remedy for structured settlement industry problems, Clark challenged NSSTA to change from within. According to Clark, "to improve industry performance, NSSTA must discuss both sides of every issue and do what is right."
• DiGangi's proposal and Clark's admonition create challenges that NSSTA historically has been unwilling to acknowledge or address. For example, during NSSTA's 2009 Winter Meeting, featured speaker Rev. Oliver Williams challenged the NSSTA audience to identify structured settlement business conduct that caused "shocked disbelief" among NSSTA members. Noone mentioned Macomber v. Travelers or Spencer v. Hartford or allegations by structured settlement recipients of fraud, Rico violations, misrepresentations, and rebating by primary market participants. Instead, the NSSTA members identified "structured settlement factoring" and how factoring companies have "stolen" the structured settlement brand.
• Staying focused on NSSTA, "shocked disbelief" and "structured settlement factoring", what should be surprising is how NSSTA has attempted to ignore (from their business practice and responsibility perspective) and simultaneously demonize the secondary structured settlement market. Consider, for example, the NSSTA website. If you want to "Learn More" about structured settlements:
  • NSSTA encourages you "to contact a structured settlement broker or life insurance company in your area".
  • However, if someone has offered to purchase your structured settlement payments, NSSTA advises you to contact someone else - "a trusted attorney" or "the office of your state's attorney general" - adding that "advocates for consumers and the disabled have publicly called attention to the practices of firms engaged in the purchase of structured settlement payments".
  • NSSTA's identification of structured settlement tax rules highlights IRC 104(a)(2) and 130 while omitting IRC 5891 - which includes the only Federal tax definition for a structured settlement.
• Consider also NSSTA's Code of Ethics and Professional Responsibility, which provides the following guiding principles for NSSTA member companies, their employees and individual members: integrity, fidelity, honesty, candor, competence, faithfulness, fairness, disclosure, due diligence, knowledge, skills, honesty, dignity, courtesy, professionalism and compliance with applicable federal and state laws.
• How do NSSTA's "guiding principles" square with:
  • Allegations of primary market illegal activities by structured settlement recipients in the Macomber v. Travelers and Spencer v. Hartford class action lawsuits;
  • A stagnant primary structured settlement market with negative stakeholder perceptions of participants' roles and value, a limited knowledge base and resources plus a single product offering; and/or
  • Peripheral markets such as special needs attorneys, life care planners, Medicare set-aside professionals and the structured settlement secondary market that are growing?
• The answer is they don't square. A fundamental mismatch exists between NSSTA's Code of Ethics and Professional Responsibility and traditional structured settlement business practices and standards. The reasons include:
  • NSSTA's Code of Ethics and Professional Responsibility does not contain any enforcement procedures and NSSTA has made no attempt to enforce its Code of Ethics and Professional Responsibility.
  • NSSTA adopted its Code of Ethics and Professional Responsibility in 1997. More recent structured settlement laws and related market developments have substantially changed the structured settlement market. NSSTA's Code is outdated and largely irrelevant for the transitioning structured settlement market.
  • The traditional structured settlement "claim management" business model and "annuity broker" professional model include flaws and conflicts as outlined above. Those flaws and conflicts are being exposed and punished in class action lawsuits.

For S2KM's continuing analysis of structured settlement business standards and practices, see S2KM's structured settlement wiki.

Business Standards and Practices - 1

For the structured settlement industry to achieve its public policy and revenue potential, business standards and practices must improve. This blog post, which begins a new S2KM series, highlights historical developments which help define the business standards and practices of the current structured settlement industry.

Periodic Payment Settlement Act of 1982 - This Federal legislation amended IRC section 104(a)(2) (clarifying an exclusion for "periodic payments") and added IRC section 130 (introducing and defining "qualified assignments" and "qualified funding assets").

NSSTA (1985) - A pioneering group of structured settlement agents and life companies formed the National Structured Settlement Trade Association (NSSTA) which became the first, and remains the largest, structured settlement professional association.

First Settlement Transfer (1986) - James Lokey completed the first transfer of structured settlement payment rights thereby launching the structured settlement secondary market. A number of companies subsequently responded to this market development to create a "gray market" allowing and encouraging structured settlement recipients to liquidate part or all of their future payment rights.

Revenue Procedure 93-34 (1993) - Regulations issued by the U.S. Treasury became effective defining a new type of IRC 468B fund ("Qualified Settlement Fund") providing an efficient dispute resolution technique for defendants and a safe harbor for plaintiffs who need time to resolve their own settlement planning issues prior to deciding upon any specific form of distribution including structured settlements.

NSSTA CSSC Program (1994) - NSSTA originated a training and certification program at the University of Notre Dame leading to a designation for qualifying persons as Certified Structured Settlement Consultants (CSSC).

Weil Settlement (1996) - The plaintiff in this lawsuit argued that, as a result of an anti-competitive conspiracy among certain structured settlement agents, annuity providers and NSSTA, structured settlement annuity providers marketed exclusively through agents who represented defendants and refused to appoint agents who represented plaintiffs or their attorneys. The confidential settlement of the Weil lawsuit coincided with a change in industry business practices whereby structured settlement annuity providers began to appoint agents representing plaintiffs and allowing agents representing defendants and plaintiffs to share commissions.

NASP (1996) - A group of companies specializing in structured settlement transfers created the National Association of Settlement Purchasers (NASP) which became the first and only trade association specializing in the structured settlement secondary market.

Structured Settlement Protection Statutes (1997-present) - Beginning with Illinois in 1997, nearly all states have enacted some form of structured settlement protection statute with many such statutes, since 2000, based upon the Model State Structured Settlement Protection Act which was also adopted by the National Conference of Insurance Legislators in 2004. These state laws require structured settlement transfers to receive advanced state court approval.

NSSTA Code of Ethics (1997) - NSSTA adopted and published its Statement of Ethics and Professional Responsibility "to provide guiding principles to its members and member organizations". Implicit in the acceptance of this Statement, according to NSSTA, "is an obligation to act in a professionally responsible and ethical manner when providing structured settlement services".

NY Attorney General Investigation (1999) - The New York Attorney General launched an investigation of J.G. Wentworth, a leading structured settlement transfer company, and entered into a settlement in 1999 limiting discounts on J.G. Wentworth's New York transactions to no more than 25%.

Victims of Terrorism Tax Relief Act of 2001 - Among other provisions, this legislation added IRC section 5891 ("Structured Settlement Factoring Transactions") to Subtitle E of the Internal Revenue Code and resulted from a political compromise between NSSTA and NASP.

SSP (2001) - Dissatisfied with what they considered NSSTA's continuing defense bias, a group of structured settlement agents formed the Society of Settlement Planners (SSP), a national non-profit education and public policy association for structured settlement professionals who advocate "the injury victim's right to choose settlement planning advisers and financial and guarantee providers".

Grillo case (2001) - A Texas district court entered a $1,600,000 judgment against plaintiff attorneys based upon allegations by their prior clients that a medical malpractice case settlement "contained no language which required at least one defendant or its liability insurer to promise a fixed and determinable periodic payment which would be tax free to the claimant".

California Attorney General's Study (2004) - Prepared for the California legislature, this study surveyed hundreds of California transfers between 2000 and 2003. For a summary of the results, see "Transfers of Structured Settlement Payment Rights - What Judges Should Know about Structured Settlement Protection Acts", by Daniel Hindert and Craig Ulman.

NAIC Compensation Disclosure (2004) - The National Association of Insurance Commissioners (NAIC) adopted a Compensation Disclosure Amendment to its Producer Licensing Model Act. The Disclosure Amendment neither mentions nor excludes structured settlements.

Saltzburg and Chemerinsky Opinion Letters (2006) - First presented at the ATLA 2006 Winter Meeting, two legal opinion letters written by law professors Stephen Saltzburg and Erwin Chemerinsky reach similar conclusions:

• Experts, including structured settlement experts, have a fiduciary duty to their clients.
• Plaintiff experts have a conflict of interest if they are paid by someone other than the plaintiff without disclosure to and consent by the plaintiff.
• Plaintiff attorneys have a duty to disclose this conflict of interest by structured settlement experts to their clients.

Macomber v. Travelers (2007) - Settled on undisclosed terms, this class action lawsuit alleged that Travelers lowered the cost of structured settlements by 2% without informing plaintiffs (shortchanging) by paying its approved structured settlement agents a 2% commission and retaining a 2% commission for itself (rebating). Coincidental with this settlement, Travelers changed its structured settlement business practices and its affiliated life company stopped selling structured settlement annuities.

SSP RSP program (2007) - SSP launched a Registered Settlement Planner (RSP) professional certification program in affiliation with Texas Tech University including an educational component; submission and review of a comprehensive personal injury settlement plan; experience requirements; continuing education; and a code of ethics.

NSSTA Broker Relations Initiative (2007) - Consultant Lynn Courier introduced the first draft of a proposed "Standards of Professional Conduct" for structured settlement consultants developed by the NSSTA-sponsored Broker Relations Initiative (BRI) during the NSSTA 2007 Fall Meeting. To date, NSSTA has not adopted any additional standards of professional conduct beyond its 1997 Code of Ethics.

Rapid Settlements (2007) - Rapid Settlements, a Texas factoring company, failed in a series of transfer cases to successfully utilize arbitration clauses in its attempt to bypass state structured settlement protection statutes.

Fresno County Factoring Cases (2009) - In Henderson v. Scioteco, a California appellate court ruled favorably for 321 Henderson Receivables, a J.G. Wentworth affiliate, reversing earlier opinions of a California superior court in 11 factoring cases consolidated for appeal. The appellate court ruling allowed Henderson to amend the transfer petitions at issue to correct any errors prior to any new hearing on the petitions and additionally held that public policy supports state court approved structured factoring transactions.

Suitability in Annuity Transactions Model Regulation (2010) - The NAIC adopted this Model Regulation "to require insurers to establish a system to supervise recommendations and to set forth standards and procedures for recommendations to consumers that result in transaction involving annuity products so that the insurance needs and financial objectives of consumers at the time of the transaction are appropriately addressed." Significantly for structured settlements, exemptions from the Model Regulation include: "settlements of or assumptions of liabilities associated with personal injury litigation or any dispute or claim resolution process."

Spencer v. Hartford (2010) - A U.S. district judge in Connecticut approved a $72.5 million class action settlement resulting from plaintiff allegations (denied by Hartford) that Hartford and its attorneys, brokers and agents violated the Racketeer Influenced and Corrupt Organizations Act (RICO) and committed common law fraud in structuring its settlements. Hartford's affiliated life company stopped selling structured settlement annuities in 2009.

For more detailed information about these structured settlement business standards and practices developments, see "Structured Settlements and Periodic Payment Judgments" co-authored by Daniel Hindert, Joseph Dehner and Patrick Hindert.