Beyond Structured Settlements

Liability Insurers' ELNY Motion Denied

Without further explanation, Judge John Galasso has denied a Motion by liability insurers, including Travelers, Fireman's Fund and Hartford, asking the Judge to "clarify and/or correct" his August 16, 2012 Executive Life of New York (ELNY) Memorandum Decision insofar as the Memorandum Decision "caused confusion or mistake" concerning responsibilities of those liability insurers to make up shortfalls on ELNY annuities. (see Addendum below)

The ELNY Memorandum Decision states in relevant part: "certain insurance companies such as Travelers, the Fireman's Fund Companies and Hartford have assured the Court that they will make up the difference to those identified shortfall payees for any settlement obligation where they purchased an ELNY annuity on behalf of an injured party."

In their June 14, 2012 Motion, attorneys representing those liability insurers, as well as Jefferson Insurance Company, Allianz Global Risks US Insurance Company dba Allianz Global Corporate and Specialty North America, John Hancock Property and Casualty Insurance Company and John Hancock Indemnity Company, asked the Court to "amend its decision to omit what the Court likely intended as an aside, or background, which is not material to the Court's approval" of the ELNY Liquidation Plan.

Their Motion had attempted to distinguish two types of structured settlement funding alternatives: "buy and hold" vs. qualified assignments. The Motion maintained that "at no time" did the liability insurers "undertake liability following qualified assignments - liability was extinguished pursuant to the qualified assignment arrangements."

The Motion further attempted to clarify statements made during the ELNY Liquidation hearings by attorneys representing liability insurers including Fireman's Fund attorney Peter Vodola and Traveler's attorney Craig Ulman. (see Addendum below)

According to the Motion, Vodola's promise on behalf of Fireman's Fund that structured settlement shortfall payees "will receive a hundred percent of their benefits regardless of what happens here" was specifically limited to ELNY annuitants "who are entitled to payments under annuities owned by Fireman's Fund."

Similarly, the Motion sought to clarify Ulman's testimony which provided in part: "l can't speak for any but Travelers but they will in fact be covering the shortfalls under their structured settlements. So that the payees will receive the same number of dollars that they are -- were scheduled to receive eventually." Ulman further stated: "The fact is, their obligations are what they are and they will not be affected by the status of the plan." (see Addendum below)

As S2KM has previously written, the legal rights and responsibilities of ELNY qualified assignments represents a critical issue that may subsequently be litigated by the ELNY structured settlement shortfall victims. The Motion suggested that all qualified assignments release all defendants and liability insurers from future liability for promised periodic payments and that annuity ownership determines liability.

Those "suggestions" and/or "assumptions", however, are not necessarily or universally true. For example:

• IRC section 130, which defines a "qualified assignment", does not address whether the assignor's duty is discharged as a result of a qualified assignment.
• IRC section 130 does include requirements which must be met to successfully create a qualified assignment.
• The Monarch Capital case demonstrates some judges apply "creative" legal analysis to protect structured settlement payees following the bankruptcy of a qualified structured settlement assignee.

In subsequent blog posts, S2KM will review IRC section 130 history and requirements and summarize, in the context of ELNY structured settlement shortfall payments, relevant sections of the Restatement (Second) of Law of Contracts addressing:

• Assignment of Rights
• Delegation of Duties
• Delegation vs. Novation
• Disclaimer by a Beneficiary
• Misrepresentation and Voidable Contracts

For S2KM's complete coverage of the ELNY liquidation, see the structured settlement wiki.

ADDENDUM (July 29, 2012) - Please note two corrections to the above report:

1. Although Judge Galasso's Memorandum Decision specifically mentions Travelers, Travelers had nothing to do with the Motion "to clarify and/or correct" the Memorandum Decision. Travelers was "not a party to [the Motion] and learned about it only after it was filed" according to Craig Ulman, Travelers' attorney.
   
2. Although Ulman's testimony, as quoted above, appears in the ELNY liquidation hearing transcript, the Motion "to clarify and/or correct" does not mention Ulman's testimony at the hearing.  Instead, Ulman's hearing testimony, as quoted by S2KM above, appears in the "Affirmation of Edward S. Stone in Opposition to Motions to Clarify and/or Correct the Court's Memorandum Decision."

The following related ELNY documents are accessible on the structured settlement wiki:

• Memorandum Decision
• Motion to Clarify and/or Correct
• Affirmation in Opposition
• Reply in Support
• Decision denying the Motion
• Craig Ulman Testimony from the ELNY Liquidation Hearing Transcript

ELNY Liquidation Hearing - 7

Day 10 of the Executive Life of New York (ELNY) Liquidation Hearing was consumed by the closing summations of attorneys representing Objectors to the ELNY Restructuring Agreement proposed by the Superintendent of the New York State Department of Financial Services (Superintendent), as Receiver for ELNY. The Objectors included: ELNY structured settlement shortfall payees, ELNY policyholders and at least one structured settlement factoring company.

Attorney Megha Charalambides, speaking on behalf of her shortfall victim clients, proposed to presiding Judge John M. Galasso that he appoint a "Special Master" to meet with representatives of all parties for the purpose of considering possible alternatives to the Superintendent's proposed plan. If an alternative plan materialized by a specified deadline, the Judge could consider it. Otherwise, he could approve the Superintendent's plan. Judge Galasso did not immediately respond to Charalambides' proposal.

Representing Travelers, attorney Craig Ulman confirmed his client was prepared to make whole any ELNY-related structured settlement payment obligations funded on a "buy and hold" basis and that Travelers had already sent out notices to payees under such ELNY annuity contracts. On "cross-summation" attorney Edward Stone pointed out that Travelers is already legally obligated to make those payments and that Travelers' offer apparently does not apply to ELNY structured settlement payment obligations Travelers funded using a "Qualified Assignment".

Note: This prior S2KM blog post explains the difference between buy and hold and Qualified Assignment structured settlement funding. The problem for most, if not all, of the ELNY structured settlement shortfall victims with Qualified Assignment funding is that First Executive Corporation (FEC), the assignee/owner, collapsed in 1991 and no longer exists. This prior S2KM blog post provides a background summary of FEC's history.

Judge Galasso denied two motions by attorney Stone during his closing summation without offering explanations:

• Stone moved for a mistrial (which Judge Galasso re-characterized as a motion for a misorder) on the grounds that his clients' property was being taken without due process.
• Stone also moved for a 30 day stay of hearing to allow structured settlement shortfall victims to develop and present an alternative ELNY restructuring plan.

Closing summations continue on Thursday. For S2KM's complete reporting about the ELNY Liquidation Hearing, see the structured settlement wiki.

NSSTA 2011 Education Meeting

The National Structured Settlement Trade Association (NSSTA) hosted one of its best-ever educational programs November 2-4, 2011 in Austin, Texas. The conference primarily showcased NSSTA members and NSSTA member executives and encompassed a variety of important industry topics.

Speakers and topics:

NSSTA President Dan Finn - Finn summarized NSSTA's current projects, emphasized NSSTA's improved structured settlement marketing and announced the 2012 NSSTA Annual Meeting which will take place in Washington, D.C. and feature Congressmen Dave Camp and Paul Ryan as Keynote Speakers.

NSSTA Executive Director Eric Vaughn - In addition to reviewing the 112th Congress and Super Committee, Vaughn discussed the following NSSTA challenges and priorities:

• Protect IRC sections 104(a)(2) and 130.
• Defend structured settlements.
• Promote the expanded use of structured settlements.
• Expand the markets for structured settlements.
• Enhance the CSSC designation.
• Provide state court judicial education about structured settlements.

AIG Chief Economist Ardanvan Mobasheri - Mobasheri's economic overview highlighted China's emerging leadership, outlined a "very healthy non-financial business world" and predicted low interest rates for the foreseeable future.

American General Life President Mary Jane Fortin - Describing AIG as "a strong, stable and resilient company dedicated to keeping our promises", Fortin dispelled several "myths" about AIG, summarized AIG's recovery and expressed optimism about the future of life insurance industry and structured settlements.

John McCulloch and Michael Miller - Reprising NSSTA "Tax Posse", McCulloch and Miller introduced the new IRS audit guide for lawsuits, awards and settlements and reviewed recent tax cases addressing employment, factoring and Qualified Settlement Fund issues.

Peter Vodola, Stephen Harris and Amy Ravitz - The co-chairpersons of NSSTA's Legal Committee participated in two separate panels moderated by James Ebel and Michael Kelly and discussed non-tax cases and issues including state structured settlement protection statutes, issues arising from transfer petitions and minors statutes and settlements.

Len Blonder and NSSTA General Counsel Craig Ulman - Blonder and Ulman reported the status of the Executive Life of New York (ELNY) liquidation, discussed the consequences for structured settlements and reviewed hypothetical case examples from the proposed ELNY Restructuring Agreement.

Karen Meyers, LeAnne Sprague, Doug Brand and Kathy Moghadas - In addition to discussing changes to the CSSC designation that will require annual CE credits, NSSTA sponsored a special four hour annuity education session designed to meet the requirements of the new state annuity transaction suitability laws.

CNA Commercial Liability Claims Vice President James Martin - Championing structured settlements as an "important competitive advantage" for liability insurers, Martin also emphasized the importance of linking structured settlements and structured settlement sales to claim department goals and metrics.

Ringler Radio Broadcaster Larry Cohen - When announced co-interviwer Mark Wahlstrom proved a "no show", Cohen glibly volleyed Eric Vaughn toughest questions. Three memorable Cohen quotes: "a lot of a little is a lot"; "vision without execution is hallucination"; and (applying his grandfather's wisdom to Executive Life's annuity rates ) "there is something wrong with this tuna fish."

Liberty Life Chief Underwriter Kevin Smith - Speaking about "Life Company Operating Metrics", Smith pointed out the dearth of structured settlement metrics and announced a collaborative project among multiple NSSTA life company members to develop a preliminary set of structured settlement operating metrics.

Attorney William C Chriss - Author of the new book "The Noble Lawyer", Chriss discussed legal and structured settlement ethics. Among his observations while discussing NSSTA's Code of Ethics:

• "We cultivate beliefs that justify our behaviors, not the other way around.
• "Unconscious bias, as opposed to intentional venality, cannot be deterred by criminal laws or post hoc sanctions.
• "The more people involved, the easier it is to defuse moral responsibility."

Congratulations to NSSTA's speakers and leaders (especially Education Chairpersons Toni Warbington and Don Engels as well as Finn, Vaughn and Associate Director Peter Arnold) for substantially upgrading NSSTA's educational program.

For S2KM reports about prior conferences of NSSTA and other structured settlement and settlement planning professional associations, see the structured settlement wiki.

SSP and NSSTA 2011 Annual Meetings - 7

Fulfilling the promise to pay future periodic payments has been the primary mission, and a cornerstone for success, of the United States structured settlement industry for more than 30 years.

With the exception of Executive Life Insurance Company of California, which collapsed in 1991 and resulted in some individuals receiving somewhat less than 100% of their payments, all structured settlement recipients, or the factoring companies and/or investors who purchased their payment rights, have to this date received their promised future periodic payments in full.

What happens if and when a structured settlement annuity provider is financially unable to meet its periodic payment obligations?

In the United States, the regulation of insurance and insurer insolvency is governed by state law. Insurance companies are expressly excluded as debtors under the Federal Bankruptcy Code. For structured settlements, however, the Federal Bankruptcy Code could apply if a non-insurance qualified assignee entered bankruptcy.

Most state insurance laws provide for the Commissioner of Insurance of the state where an insurance company is domiciled to:

• Determine that an insurer should be placed in liquidation.
• Petition a state court to enter an order of liquidation.
• Serve as receiver or liquidator when an insurer is placed in liquidation.
• The liquidator's role is to wind up the insurer's business under court supervision.
• In New York, the New York Liquidation Bureau (NYLB) manages insurance company liquidations as well as conservatorships and rehabilitations.

Since 1971, when the National Association of Insurance Commissioners first promulgated the Life and Health Insurance Guaranty Association Model Act (Model Act), state life and health guaranty associations have provided a safety net to protect consumers from some of the risks resulting from the insolvency of a life or health insurance company.

Every state, plus the District of Columbia and Puerto Rico, currently has a life and health guaranty association. All of these guaranty associations are members of the National Organization of Life & Health Insurance Guaranty Associations (NOLHGA).

NOLHGA was founded in 1983 and operates as a not-for-profit corporation. The primary mission of NOLGA and its members, who are separate from but work closely with state insurance regulators, is to ensure that consumers receive (at a minimum) a level of financial protection as prescribed by state statute when a life or health insurance company fails.

Perhaps anticipating the possible insolvency of Executive Life Insurance Company of New York (ELNY), the National Structured Settlement Trade Association (NSSTA) provided a timely and valuable educational discussion about state life and health guaranty associations featuring Thomas Ronce and Craig Ulman during its 2011 Annual Meeting.

In his NSSTA presentation, Ronce explained how the state life and health guaranty structure differs from FDIC protection because of the non-uniform state-based provisions, lack of pre-funding, and the nature of the guaranty itself. Ronce reviewed the history of the guaranty associations and also discussed:

• Guaranty association coverage issues.
• Powers and duties of guaranty associations.
• How assessments are calculated.
• Collections and tax offsets.
• NOLHGA's role generally and in multi-state insolvencies.
• NOLHGA's Insolvency Task Forces.

Ulman focused his discussion of guaranty association coverage on "Issues, Pitfalls and Developments Affecting Structured Settlements". Among the issues:

• Guaranty association coverage limits - with more than half the states providing $250,000 or less.
• Owner-based coverage vs. payee based coverage - with most states providing the later.
• The NAIC Model Act subrogation provisions (enacted in 27 states) which specifically address and impact structured settlements.

As potential pitfalls for structured settlements, Ulman highlighted general and state-specific coverage exclusions as well as timing issues which could determine whether and when a state guaranty statute applies to a structured settlement recipient.

As significant, related developments, Ulman identified several enacted or proposed amendments to state guaranty statutes:

• Replacing owner-based coverage with payee-based coverage.
• Increasing coverage limits from $100,000 to $250,000.
• Adopting subrogation provisions based on § 8.K.(3) of the NAIC Model Act.
• Relaxing or eliminating the prohibition on advertising the availability of Guaranty Association coverage.
• Reducing or eliminating state tax offsets for Guaranty Association assessments.

For additional information about structured settlement annuity company insolvencies and state insurance guaranty associations, see sections 3.05 and 5.04 of "Structured Settlements and Periodic Payment Judgments" (S2P2J).

For S2KM's complete reporting about the SSP and NSSTA 2011 Annual Meetings, see the structured settlement wiki.

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 - 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.

SSP and NSSTA 2010 Annual Meetings - 3

Among several headlines resulting from the SSP and NSSTA 2010 Annual Meetings, "leadership changes" is most important.

The National Structured Settlement Trade Association (NSSTA) re-introduced its lobbyist, Eric Vaughn, as NSSTA's new Executive Director effective July 1, 2010. Vaughn follows Joseph Ricci of Smith Bucklin who succeeded Randy Dyer in 2008. NSSTA also named Peter Arnold, formerly NSSTA's marketing consultant, as Associate Executive Director. Hogan & Hartson (now Hogan Lovells) continues as NSSTA's legal counsel with Craig Ulman and John Stanton serving as primary legal advisers.

NSSTA elected five new members to its Board of Directors and introduced Michael Kelly as NSSTA's new President. The newly-elected NSSTA Directors are:

• Joseph Barnett
• Len Blonder
• Randy Dyer
• James Ebel
• John Machir

The Society of Settlement Planners (SSP) named Jason Lazarus as its President for 2010-2011 and Charles Schell as Vice President.

For additional S2KM reporting about SSP and NSSTA, see S2KM's structured settlement wiki and these earlier 2010 S2KM blog posts: 

• SSP and NSSTA 2010 Annual Meetings - 1 - for a complete list of speakers and topics;
• SSP and NSSTA 2010 Annual Meetings - 2 - for a preliminary S2KM strategic orientation.

NSSTA 2009 Fall Educational Conference

Meeting at the Mandalay Bay Hotel in Las Vegas on October 15 and 16, the NSSTA 2009 Fall Educational Conference provided a potpourri of perspectives on the central topic of structured settlements.

Although lacking a unifying theme and failing to provide noteworthy handout materials, the conference did offer a general industry overview and did address several important industry developments without encouraging or generating meaningful discussion or detailed inquiry.

The general overview featured structured settlement perspectives from selected industry stakeholders:

• Plaintiff attorneys - Neil Galatz and Jeffrey Mitchell;
• Defense attorney - Steve Jaffe;
• Special needs attorney - James O'Reilly (with NSSTA member Thomas Spratt);
• Life company executive - Joseph Barnet;
• Annuity agents (discussing mediation) - Tony Robinson; Alice Frisbee; Kathleen Osler; and Traci Kaas;
• Attorney and annuity agent (discussing history, myths and opportunities) - Karen Meyers;
• Congresswoman Shelley Berkley.

Industry developments featured:

• NSSTA General Counsel Craig Ulman;
• NSSTA lobbyist Eric Vaughn;
• NSSTA Legal Committee representatives - Peter Vodola; Ilana Hanau; Michael Miller; and Mark Alpert.

The most important industry developments discussed in Las Vegas:

• Warnings from Vaughn and Congresswoman Berkley about anticipated federal tax reform in 2010;
• Vaughn's report that some federal health care reform proposals include tort reform and periodic payment of judgments;
• Ulman's update about the increasingly precarious financial condition of Executive Life of New York;
• Alpert's summary of PLR 121876-08 permitting a tax-free "restructuring" of periodic payments;
• Hanau's summary of the Henderson v. Sioteco case where a California appellate court reversed earlier Fresno County trial court decisions and declared that public policy now supports state court approved factoring transactions.
• Vodola's summary of California's new structured settlement protection statute (SB 510) which includes a detailed definition for "best interest".

From a critical perspective, NSSTA's 2009 Fall Educational Conference represented a series of "missed opportunities".

Missed opportunity #1 - Karen Meyers, who co-developed and annually presents NSSTA's "Certified Structured Settlement Consultant" (CSSC) program, addressed a NSSTA educational program for the first time in several years - and didn't talk about the CSSC program.

Missed opportunity #2 - Meyers spoke instead about structured settlement myths - yet failed to address the most fundamental and controversial NSSTA myths including "squandering injury victims" (see: "Dissipation Studies") and "how structured settlements enable injury victims to live free of reliance on government assistance" (see: "Structured Settlement Credo")

Missed opportunity #3 - NSSTA's educational program failed to acknowledge, respond to, or apparently understand, two recent strategic challenges which question the focus and scope of NSSTA education:

• Internal challenge - Joseph DiGangi's "Settlement Consulting" presentation at the NSSTA 2009 Winter Meeting;
• External challenge - The Society of Settlement Planners (SSP) Registered Settlement Planner Certification Program.

Missed opportunity #4 - related to missed opportunity #3: NSSTA's educational programs continue to ignore the strategic relationship among structured settlements, financial planning and life care planning.

Missed opportunity #5 - although NSSTA's legal committee has successfully expanded the scope of NSSTA's structured settlement legal education (from "Tax Posse" to "All Things Considered"), their programs tend to be repetitive (e.g. "Contracts 101") and fail to translate current legal developments into broader topical presentations.

Suggested future legal committee educational topics:

• What NSSTA members need to know (and tell their clients) about IRC 5891, state protection statutes and structured settlement factoring transactions;
• What NSSTA members need to know (and tell their clients) about IRC 468B qualified settlement funds;
• Comparative business standards and practices for various structured settlement stakeholders and "competitors" - insurance agents; financial securities salespersons; attorneys; trustees.
• Transactional analysis - what does a structured settlement look like in the context of 468B qualified settlement funds; special needs trusts; Medicare set-aside arrangements; and secondary market transfers?
• Integrating annuities with settlement trusts - how do integrated products impact traditional structured settlement planning, documentation and education?

Many structured settlement leaders no longer attend NSSTA educational conferences - especially those leaders who are defining the future of the structured settlement industry. When those industry leaders do attend NSSTA conferences, they attend primarily for networking opportunities or committee meetings - not for the educational programs.

With some exceptions, NSSTA's educational programs are no longer educational. They are mundane, repetitive and suitable primarily for persons new to the industry. Controversial subjects do not appear on the program - or they are circumscribed to avoid controversy. Debate is discouraged. Speakers rarely face tough questions - or provide handout materials.

Perhaps it is time for NSSTA to re-think structured settlements and structured settlement education. What will it take to attract a new generation of structured settlement leaders to join and participate in NSSTA? What will it take to re-engage the industry's best and brightest professionals in NSSTA's educational programs? The NSSTA Fall 2009 educational conference in Las Vegas highlighted those issues without providing any answers.

For prior S2KM reports about NSSTA educational programs, see S2KM's structured settlement wiki.

Structured Settlement 2009 Strategic Analysis

S2KM has begun a mid-year 2009 strategic analysis of the structured settlement industry. This analysis includes attending and reporting about 2009 structured settlement professional stakeholder meetings plus continuing conversations with structured settlement industry leaders.

To organize and publish S2KM's findings and analysis, S2KM is developing, and plans to publish and update, a related public wiki titled "Structured Settlements 2009". Here is a preview of this S2KM public wiki home page.

Purposes of S2KM's Structured Settlements 2009 wiki

• Provide S2KM with a dedicated online resource to identify, capture, organize and publish 2009 structured settlement strategic analysis.
• Demonstrate how blogs and wikis can interact to improve strategic analysis and learning.
• Encourage structured settlement knowledge leaders and professional associations to endorse, encourage and participate in strategic industry analysis.
• Help all structured settlement stakeholders to better understand, improve and grow structured settlements.

Table of Contents - includes references to related 2009 conference presentations; subject to continuing wiki updates:

• S2KM primary analytic resources - S2KM blog reporting for:
  • 2009 structured settlement stakeholder meetings - the Table of Contents incorporates and features educational discussions from the following conferences:
    
    • NSSTA 2009 Winter Meeting
    • ASNP 2009 Annual Meeting
    • SSP 2009 Annual Meeting
    • NSSTA 2009 Annual Meeting
  • Structured settlement professional stakeholder association prior year meetings
  • Related topics and knowledge leaders:
    
    • Settlement consulting;
    • Tim Nay Interview.
• S2KM's transitional perspective - structured settlements are undergoing two primary transitions:
  • From claim management to settlement consulting:
    • NSSTA: Settlement Consulting - Joseph DiGangi
    • SSP: Settlement Planning Industry Update - Patrick Hindert.
    • SSP - State of the Art Settlement Planning - Joseph Tombs
    • NSSTA: Looking Forward - Chris Diamantis and Dan Durbin.
  • From historic communication, learning and work processing to Internet-based models:
    • NSSTA:Web 2.0 - Patrick Hindert.
• Public policy - no 2009 stakeholder association discussions.
• Legislation and regulations
  • Existing
    • Federal
      • SSP: Tax Panel - Richard Risk; Sylvius von Saucken; Peter Wayne.
    • State
      • SSP: Judicial Approval of Minors Settlements - Phillip McCrury.
      • NSSTA: Exemptions for Structured Settlement Payments - Craig Ulman.
  • Proposed - no 2009 stakeholder association discussions.
    • Federal
    • State
  • Political strategy
    • NSSTA: Federal Entitlement Programs - Andrew Imparato.
    • NSSTA: Washington Reports - Eric Vaughn.
    • SSP: AAJ Strategy - John Bowman.
    • NSSTA: Federal and State Issues - Len Blonder.
    • NSSTA political speakers:
      • Senator Richard Durbin (D) from Illinois;
      • Senator Charles Grassley (R) from Iowa;
      • Congressman Charles Rangle (D) from New York;
      • Congressman Kendrick Meek (D) from Florida;
      • Congressman James Langevin (D) from Rhode Island;
      • Congressman Joseph Crowley (D) from New York;
      • Congressman Dave Camp (R) from Michigan;
      • Congressman Brian Higgins (D) from New York;
      • Congresswoman Allyson Schwartz (D) from Pennsylvania;
      • Congressman Joseph Courtney (D) from Connecticut;
      • Plus the Chiefs of Staff for four congressmen.
• Case law
  • SSP: Litigation and Legislative Update - Anthony Alfieri.
  • NSSTA: Spencer v. Hartford - Michael Miller.
  • NSSTA: Fresno County Factoring Cases - Illana Hanau.
• Primary and secondary markets
  • NSSTA: Secondary Market Update - Michael Miller and Illana Hanau.
• Government benefits
  • NSSTA: Federal Entitlement Programs - Andrew Imparato.
  • ASNP: Medicare Secondary Payer Compliance - Mark Popolizio.
  • ASNP:Lien Resolution Strategies - William Browning; Mark Popolizio; Sylvius von Saucken.
  • SSP: MMSEA Section 111 - Mark Popolizio.
  • NSSTA: Medicare Panel - Roy Franco; Mark Popolizio; David Korch; Rafael Gonzoles.
  • NSSTA: Medicaid Panel - John McCulloch; Timothy O'Driscoll; Dennis McAndrews
• Structured settlement economics
  • ASNP: Structured Settlement Annuities - Jack Meligan and Michele Whitmore.
  • SSP: Life Insurance Insolvencies - Eric Nordman.
  • NSSTA: Financial Strength Ratings - William Pargeans.
• Structured settlement funding products
  • NSSTA: 468B QSFs - Henry Strong, William Winslow, James Klapps.
  • ASNP: Structured Settlement Annuities - Jack Meligan and Michele Whitmore.
  • ASNP: 468B QSFs - Richard Risk and Jason Lazurus.
  • SSP: Settlement Trusts - Christi Fried.
  • SSP: Settlement Trust Software - David Eichenbaum.
• Transactional analysis
  • ASNP: Anatomy of a SNSP Case - Frank Johns, Kevin Urbatsch, Patrick Hindert.
• Stakeholder associations
  • NSSTA (2), SSP and ASNP 2009 meetings.
• Ethics
  • NSSTA: Business Ethics - Father Oliver Williams.
  • NSSTA: Business Ethics - Mike Jones.
• Standards
  • SSP: Registered Settlement Planner - Joseph Tombs.
• Business models
  • Claim management
    • NSSTA: Plaintiff and Defense Brokers - Ronald Sullivan, James Early, Roger Bernstein, Bruce DeBacher, Michael Goodman.
    • SSP:Structured Settlement Insolvencies - Randy Dyer.
    • SSP: Growing Structured Settlements - Randy Dyer.
    • SSP: In-House Structured Settlement Programs - Kevin Mack.
    • NSSTA: Minnesota Bridge Collapse - Jerry Lothrop.
  • Settlement consulting
    • NSSTA: Settlement Consulting - Joseph DiGangi.
    • ASNP: Integrating SNSP with an Elder law Practice - Tim Nay and Sandy Conley.
    • ASNP: Marketing to the Trial Bar - Frank Johns, Jason Lazurus, Kevin Urbatsch.
    • SSP: State of the Art Settlement Planning - Joseph Tombs.