Beyond Structured Settlements

S2P2J Release 57 Highlights

The United States structured settlement market has been in existence for more than 35 years and continues to expand its scope, complexity and importance within the context of personal injury settlement planning.

Since it was first published in 1986, "Structured Settlements and Periodic Payment Judgments" (S2P2J), has provided structured settlement stakeholders with an authoritative reference guide, consisting of 16 chapters with extensive footnotes and Appendix documents, to help them understand issues and fashion settlements and judgments utilizing periodic payments. Both the National Structured Settlement Trade Association (NSSTA) and the Society of Settlement Planners (SSP) have utilized S2P2J as an educational resource for their certification programs.

Co-authored and updated semi-annually by Daniel W. Hindert, Joseph J. Dehner and Patrick J. Hindert, S2P2J now features an online version as well as the traditional hardcopy. Online S2P2J includes a search feature and download capability as well as link features to access individual book sections, appendices, footnotes, cases and statutes.

Publisher Law Journal Press anticipates a March 2015 distribution date for hardcopy supplements for S2P2J Release 57 with online S2P2J subcribers receiving their update simultaneously with no additional subscription charge. Competent professionals confronted by structured settlement issues should have access to an up-to-date copy (or the online version) of this indispensable source book.

Release 57 Highlights - Release 57 will feature new, updated and/or expanded sections addressing the following structured settlement topics:

• WCMSAs - Release 57 re-positions and expands S2P2J's extensive summary of the new CMS rules for workers compensation Medicare set-asides, the fastest growing segment of the structured settlement primary market. Regulatory rules for liability MSAs remain essentially unchanged following the withdrawl by CMS on August 8, 2014 of it the liability MSA-related NPRM it had earlier submitted to the Office of Management and Budget.
• Indexed Annuities - PLR 143928-13 highlights the potential importance of indexed annuities and annuity riders as structured settlement funding alternatives. Release 57 features a new section explaining indexed annuities, differentiating variable annuities and summarizing the related PLR.
• Commutation Riders - PLR 143928-13 also provided favorable tax treatment for a commutation rider pursuant to a Notice of Hardship Conversion as a potential alternative to factoring transactions. This PLR justified an expansion in Release 57 of S2P2J's current section discussing commutations.
• Non-qualified Assignments - Most non-qualified assignments depend upon off-shore assignment companies which raise tax and security issues for participants. Release 57 expands S2P2P's analysis of non-qualified assignments to address these issues.
• CLM Advisors Surveys - Release 57 summarizes results from two surveys commissioned by NSSTA to determine the value claims executives and adjustors place on structured settlements and structured settlement consultants. The results and related metrics are generally favorable and arguably provide a valuable marketing blueprint for defense brokers.
• ABLE Accounts - Release 57 features a new section describing ABLE Accounts, a tax-preferenced funding option authorized by the Achieving a Better Life Experience Act (ABLE Act) of 2014. Although some structured settlement consultants view ABLE Accounts as a competitive product, others see opportunities to fund ABLE accounts using structured settlements.
• Insurance Regulation - States historically have regulated insurance in the United States. As a result of the 2008 global financial crisis, however, new federal and international insurance regulatory agencies now exist which are targeting some of the largest structured settlement annuity providers among other financial and insurance companies. Release 57 adds a new section to introduce and explain these new regulatory developments and entities.
• ELNY and Reliance - The recent ELNY and Reliance liquidations have each impacted thousands of structured settlement recipients. Although judicial solutions have been fashioned, litigation continues - as least involving some ELNY shortfall payees. Release 57 updates S2P2J's extensive coverage of the ELNY and Reliance liquidations.
• Role of Plaintiff Attorneys - As structure settlements and personal injury settlement planning have become more complex, and plaintiff attorneys increasingly require the services of other settlement planning professionals, plaintiff attorneys should continue to perform certain essential structured settlement and settlement planning roles. Release 57 identifies and discusses those roles and provides additional related advice for plaintiff attorneys.
• Secondary Market Update - The continuing expansion of the secondary market has generated controversy and litigation as well as legislative reform and changing business practices. S2P2J continues to track these developments in expanding chapter 16 titled "Transfers of Structured Settlement Payment Rights". Release 57 highlights include "anti-assignment" issues in Illinois originating with the Brenston case and the market "chaos" some secondary market participant see occurring as the result of the Washington Square v. RSL Funding case.
• IRC 104(a)(2) Treasury Regulations - Recent U.S. Treasury Regulations for IRC 104(a)(2) relating to the exclusion from gross income for amounts received on account of personal physical injuries or physical sickness make two primary changes to the current regulations which Release 57 summarizes in the context of S2P2J more extensive analysis in Chapter 2 of "Taxation of Damages Received by the Claimant".

For related S2KM blog reporting about structured settlement 2014 developments, see:

• Primary market
• Secondary market
• Settlement planning
• ELNY and Reliance

 

Structured Settlements 2014 - ELNY and Reliance

The Executive Life of New York (ELNY) liquidation, which occurred on April 16, 2012 represented the dominant structured settlement story of 2011, 2012 and 2013 and one of the most important developments in the history of the United States structured settlement industry.

Related follow-up litigation continued during 2014. Individual ELNY shortfall payees filed class action lawsuits against various structured settlement brokers. Other ELNY shortfall payees and their attorneys lost their appeal of a Contempt Order.

Class Action Lawsuits

Separate (but nearly identical) class action lawsuits were filed in Florida and Oregon during 2014 on behalf of ELNY shortfall victims against named and unnamed structured settlement brokers. In the Florida case, against EPS Settlement Group (EPS) and various brokers, a federal judge granted defendants' Motion to Dismiss the plaintiffs' claims with prejudice on December 17, 2014. The Oregon case, which remains unresolved, names Ringler Associates Incorporated (Ringler), Paul Hoffman (as the individual agent who brokered structured settlement annuities for the named plaintiffs) and John Does 1-100 as defendants.

Note: A prior and separate class action lawsuit filed in New York in 2012 by ELNY shortfall victims against Benjamin M. Lawsky, Superintendent of Financial Services of the State of New York, Metropolitan Life Insurance Company (MetLife) and Credit Suisse Group, AG (Credit Suisse) as defendants was voluntarily dismissed in 2013 without prejudice.

Oregon Class Action

The 2014 Oregon class action Complaint was filed in U.S. District Court and alleges Ringler, Hoffman and John Does 1-100 violated state statutes and their alleged duty of care to ELNY shortfall victims whose structured settlements were funded with qualified assignments and who resided in states where ELNY was not licensed to sell insurance when their settlements were consummated.

The John Does 1-100 "represent those individual insurance brokers who, as employees and/or agents of Ringler, its affiliates, or predecessor companies, brokered the sales of the SSAs at issue in this case, of which members of the proposed class were beneficiaries." The complaint further states "that with proper discovery into the matter these Defendants can be identified, and the complaint can be amended at a later date to include the individual names of these Defendants."

The Complaint against defendants Ringler et al. (Defendants) identifies two causes of action:

• Negligence - failing to disclose facts about ELNY's deteriorating financial condition.
• State statutory violation - prohibiting persons from assisting unlicensed insurers transact business.

Although the negligence counts do not state specific amounts of damages, the statutory violation counts claim "Plaintiffs and Statutory Subclass members are entitled to damages for the fulI amount of their unpaid claims pursuant to the State Statutes."

Defendants filed a Motion to Dismiss on June 26, 2014 plus a subsequent Request for Judicial Notice in Support of their Motion. On December 5, 2014 a Magistrate issued:

• Opinion and Order - granting in part and denying in part Defendants' Request for Judicial Notice.
• Findings and Recommendations (to be referred under advisement to a district judge) - that Defendants’ Motion to Dismiss should be granted in part as to Defendants’ alleged continuing duty to inform plaintiffs that their coverage may be threatened due to ELNY’s declining financial condition and otherwise should be denied. Note: Although the Magistrates' Findings and Recommendations identifies December 22, 2014 as the due date for any objections, S2KM has been informed that Defendants requested and received a scheduling extension.

ELNY Contempt Order

In response to the 2012 New York class action lawsuit, Judge John Galasso issued a Contempt Order on January 25, 2013. He also imposed a $5000 fine and threatened additional fines plus imprisonment of legal counsel if the ELNY structured settlement shortfall payees did not dismiss their Federal action which they did (without prejudice) on February 7, 2013.

The ELNY shortfall payees who filed the New York class action and their attorneys appealed Judge Galasso's Contempt Order which was argued before the Supreme Court of the State of New York Appellate Division Second Judicial Department on October 3, 2014. On November 5, 2014, the Court issued an Order dismissing the appeal by the shortfall payees and affirming the Contempt Order as to their attorneys.

Reliance Liquidation

Reliance Insurance Company was declared insolvent in 2001 and the Pennsylvania Insurance Commissioner was appointed as Liquidator. The Reliance Estate, however, remained open and its assets, until November 4, 2013, included approximately 3,400 structured settlements of which approximately 3093 involved annuities issued by United Pacific Life Insurance Company, a former Reliance subsidiary which Reliance sold in 1993 and which is now known as Genworth Life Insurance Company.

Pennsylvania Commonwealth Court Judge Bonnie Brigance Leadbetter signed an Order on November 4, 2013 approving a Transfer and Assumption Agreement whereby Reliance will transfer all Reliance-owned structured settlement annuity contracts and corresponding payment obligations issued by Genworth Life Insurance Company to a new corporation, the Genworth Annuity Service Corporation.

At one time a major provider of structured settlement annuities, Genworth and its life insurance affiliates have subsequently received financial downgrades by various rating agencies. As of this blog posting, for example, Standard & Poors rates Genworth Life Insurance Company as BBB+ which qualifies as "high yield" or "non-investment grade" - the same "junk bond" category that characterized ELNY's investments before it entered rehabilitation in 1991.

Conclusion

In its recent SEC filings, JGWPT Holdings, Inc. warns potential investors for its structured settlement securitizations about investment risks including "the insolvency or downgrade of a material number of structured settlement issuers".

Should structured settlement recipients receive similar warnings about the potential (or actual) financial deterioration of their structured settlement funding entity(s)?

Various ELNY lawsuits, including the Oregon class action case summarized above, suggest (at least indirectly) these types of related questions:

• What is the scope of post-settlement responsibilities, if any, for structured settlement brokers and/or settlement planners?
• Should a structured settlement broker (defense or plaintiff) or settlement planner be legally responsible for warning structured settlement recipients if and when an annuity provider or assignee experiences a deteriorating financial condition?
• What about the annuity provider or assignee itself?
• If any such legal responsibilities exist, what criteria would define a deteriorating financial condition?

For prior S2KM summaries of ELNY and Reliance with additional informational links, see:

• Structured Settlements 2013 - ELNY and Reliance.
• Structured Settlements 2012 - Executive Life of New York.
• Structured Settlements 2011 - Executive Life of New York

For additional S2KM blog posts summarizing 2014 structured settlement developments (primary market; secondary market; settlement planning), see the structured settlement wiki.

2014 Educational Conferences

Personal injury settlement planning conferences will start early in 2014 when the National Alliance of Medicare Set-Aside Professionals (NAMSAP) hosts a Regional Meeting in Miami, Florida on January 10.

Here is a preliminary listing of 2014 educational conferences and events which historically have addressed personal injury settlement planning and structured settlement issues, some of which limit attendance to members while others are open to non-members:

• January 10 - NAMSAP Miami Regional Meeting - open to non-members.
• February 8-12 - American Association for Justice (AAJ) Winter Meeting - members only.
• February 11-13 - National Structured Settlement Trade Association (NSSTA) Structures 101 - members only.
• March 18 - American Association of People with Disabilities (AAPD) Leadership Gala - open to non-members.
• March 27-29 - Academy of Special Needs Planners (ASNP) Annual Conference - open to non-members.
• April 1-3 - NSSTA Annual Conference - members only.
• April 27-29 - Society of Settlement Planners (SSP) Annual Conference - open to non-members.
• May 8-9 - NAMSAP Annual Meeting - open to non-members.
• May 15-17 - National Academy of Elder Law Attorneys (NAELA) Annual Meeting - members only.
• July 26-30 - AAJ Annual Meeting - members only.
• November 4-7 - National Association of Settlement Purchasers (NASP) Annual Conference - open to non-members.

One of the issues common to all of these associations' members and clients will be the impact of the Patient Protection and Affordable Care Act (ACA), the most important provisions of which (including the individual mandate and pre-existing injury coverage) became effective January 1, 2014.

The following S2KM blog posts address ACA issues that should concern settlement planning and structured settlement professionals - and hopefully will be discussed during their 2014 educational conferences:

• Impact of Health Care Reform - highlighting articles and authors featured in the Spring 2011 Issue of NAELA Journal.
• Medicare Cost-Savings Components - review of Spring 2013 NAELA Journal article written by Alfred J. Chiplin Jr. and Bethany J. Lilly.
• Impact on Personal Injury Damage Awards - review of research paper written by Joshua Congdon-Hohman and Victor A. Matheson.
• Impact on the Collateral Source Rule - review of law review articles by Rebecca Levenson and Ann Levin.

For background reporting about significant 2013 structured settlement and settlement planning developments, see these S2KM blog posts:

• Primary Market
• Settlement Planning
• Secondary Market
• ELNY and Reliance Liquidations

For historic S2KM reporting about structured settlement and settlement planning professional association educational conferences, see the structured settlement wiki.

Structured Settlements 2013 - ELNY and Reliance

Structured settlements are supposed to provide economic security for people with serious injuries and disabilities - to help them rebuild their lives and, in many cases, to achieve special lifetime accomplishments. Instead of an all-cash personal injury settlement, structured settlement recipients accept a promise of future periodic payments.

What happens, if and when, that promise is broken? What happens when a structured settlement funding company, and the regulators and guaranty system responsible for protecting the structured settlement recipients, fail to make and/or insure full payment?

ELNY Liquidation

These questions are highlighted by the Executive Life of New York (ELNY) liquidation - the dominant structured settlement story of 2012 and 2013 and one of the most important developments in the history of the United States structured settlement industry.

The story of ELNY, as well as its affiliate Executive Life of California (ELIC), and their parent company, First Capital Corporation (FEC), is long and complex. For background of events prior to ELNY's 1991 receivership, S2KM recommends Gary Schulte's 1992 book "The Fall of First Executive".  For an Executive Life timeline, see the structured settlement wiki.

Significantly, neither the 1991 ELNY Rehabilitation Order nor the 1992 Order approving the ELNY Rehabilitation Plan declared ELNY to be insolvent.

Following 22 years of "Rehabilitation" supervised by various New York State Superintendents of Insurance and Financial Services, as Receivers, ELNY was officially liquidated August 8, 2013 pursuant to an Order of Liquidation signed by Nassau County New York State Supreme Court Judge John M. Galasso on April 16, 2012.

As part of his Liquidation Order, Judge Galasso also approved a Restructuring Agreement, as proposed by ELNY's Receiver and NOLHGA, whereby ELNY's remaining assets and ongoing liabilities have now been transferred to a successor company, Guaranty Associations Benefit Company (GABC), a not-for-profit Washington D.C.-based captive insurance company.

ELNY Shortfall Payees

GABC published two versions of a final Schedule 1.15 on its website in November 2013. Among the significant details:

• Thirty-seven (37%) percent of all remaining ELNY (now GABC) structured settlement annuities (SSAs) will experience shortfalls.
• SSAs represent ninety-eight (98%) percent of total ELNY shortfall annuities.
• The total percentage of each ELNY SSA contract value "protected" by ELNY's remaining assets, state guaranty fund payments plus additional enhancements varies from 31% to 100% depending upon the individual contract.

In a 2013 blog post titled "An ELNY Nightmare", S2KM profiled Glenn Arensdorf, one of the ELNY structured settlement victims. For profiles of five additional ELNY structured settlement shortfall payees, see "The Complete ELNY Saga - 21 Years of Mismanagement, Corruption, Broken Promises and Shattered Lives", the lead article in a comprehensive ELNY analysis published in 2012 by LifeHealthPro.

Faced with significant payment reductions resulting from ELNY's liquidation and restructuring agreement, ELNLY's structured settlement shortfall payees were left with three options:

1. Accept their payment reductions under the ELNY Restructuring Agreement and do nothing; or,
2. Appeal Judge Galasso's Order and ask the Appellate Court to send ELNY's Receiver back to drawing board; or,
3. Bring a separate legal action against the Receiver personally for bad faith conduct, breach of fiduciary duty and fraudulent concealment or waste.

Several ELNY structured settlement shortfall payees chose Options 2 and 3.

Option 2 failed. The Appellate Division of the Supreme Court of the State of New York, Second Department denied the ELNY shortfall payees' appeal of Judge Galasso's Order on February 6, 2013. New York State Court of Appeals denied a subsequent motion by ELNY shortfall payees for Leave to Appeal the Second Department decision on May 3, 2013.

Option 3 remains unresolved.

• Class Action Lawsuit - Several ELNY structured settlement shortfall payees pursued Option 3 by filing a federal class action lawsuit November 8, 2012 in the U.S. District Court for the Southern District of New York against the ELNY Receiver (New York Superintendent of Financial Services Benjamin Lawsky) in his personal capacity.
• Receiver's Response - In response, the Receiver filed a motion December 7, 2012 asking the Liquidation Court (Judge Galasso) to find the shortfall payees in contempt for violating the injunction provision of the ELNY Liquidation Order.
• Contempt Order - Judge Galasso issued a Contempt Order on January 25, 2013. He also imposed a $5000 fine and threatened additional fines plus imprisonment of legal counsel if the ELNY structured settlement shortfall payees did not dismiss their Federal action which they did (without prejudice) on February 7, 2013.
• Bottom Line - So long as Judge Galasso's Contempt Order and continuing threat of additional fines and imprisonment of legal counsel remain in effect, ELNY structured settlement shortfall payees are effectively barred from pursuing Federal legal action against ELNY's Receiver for alleged mismanagement of ELNY's assets during ELNY's 22 year Rehabilitation.
• Shortfall Payee's Appeal - ELNY's shortfall payees are currently pursuing an appeal challenging "each and every part" of Judge Galasso's January 25, 2013 Contempt Order as a necessary step before re-filing their Federal action against the Receiver and his agents.
• Appellate Issues - The appellate brief filed on behalf of the ELNY shortfall payees addresses three legal issues:
  • Did the ELNY Liquidation Court exceed it subject matter jurisdiction or otherwise err by interfering with shortfall payees' constitutional right to bring suit against the Receiver in Federal court?
  • Did the ELNY Liquidation Court err in holding the shortfall payees in contempt for violating its injunctive Order when the order does not clearly and unequivocally bar personal capacity suits against the Receiver?
  • Did the ELNY Liquidation Court err in holding that the shortfall payees conceded the Order barred personal capacity lawsuits by appealing the order and using this alleged concession as the basis to hold the shortfall payees in contempt?

Reliance Liquidation

Reliance Insurance Company was declared insolvent in 2001 and the Pennsylvania Insurance Commissioner was appointed as Liquidator. The Reliance Estate, however, remains open and its assets, until November 4, 2013, included approximately 3,400 structured settlements of which approximately 3093 involve annuities issued by United Pacific Life Insurance Company, a former Reliance subsidiary which Reliance sold in 1993 and which is now known as Genworth Life Insurance Company.

Pennsylvania Commonwealth Court Judge Bonnie Brigance Leadbetter signed an Order on November 4, 2013 approving a Transfer and Assumption Agreement whereby Reliance will transfer all Reliance-owned structured settlement annuity contracts and corresponding payment obligations issued by Genworth Life Insurance Company to a new corporation, the Genworth Annuity Service Corporation.

For S2KM's complete reporting about the ELNY liquidation, see the structured settlement wiki.

For additional S2KM 2013 annual reports, see:

• Part 1 - Primary market.
• Part 2 - Settlement planning.
• Part 3 - Secondary market.

Structured Settlements 2013 - Primary Market

The U.S. structured settlement industry in 2013 continued to define itself into three related markets (primary, secondary and settlement planning) with the liquidations of Executive Life Insurance Company of New York (ELNY) and Reliance Insurance Company representing important industry storylines.

This blog post reviews 2013 non-ELNY and non-Reliance primary market developments - focusing on structured settlement annuity sales. Subsequent S2KM blog posts will address structured settlement developments for the 2) settlement planning and 3) secondary markets and summarize 4) ELNY and Reliance-related events.

Primary Market Premium

Primary market structured settlement annuity premium and the number of structured cases have increased slightly during 2013 compared with 2012 based upon third quarter industry results compiled by Melissa Evola. Projected 2013 annual premium totals, however, will fall substantially short of the historic 12 month industry high ($6,226,578,725 in 2008) after consistently averaging close to $6 billion annually from 2001-2007.

Evola reports 2013 third quarter primary market annuity premium of $3,736,499,370 resulting from 19,656 cases ($190,094 per case average). Comparable third quarter results for:

• 2012 - $3,565,368,323 premium from 18,706 cases ($190,600 per case).
• 2008 - $4,429,915,586 premium from 25,545 cases ($173,416 per case).

Adding these 2013 third quarter results to historic U.S. structured settlement totals, S2KM estimates the following primary market metrics from 1976 thru September 2013:

• Total annuity premium: $137.4 billion.
• Total structured settlement cases: 790,000.
• Average annuity premium: $174,000.

Individual Annuity Provider Results

Although overall 2013 third quarter results do not differ significantly from 2012, individual company production has changed dramatically per Evola's report. Berkshire Hathaway, which re-entered the market in 2011 following a multi-year hiatus, has assumed primary market leadership. Berkshire Hathaway generated $1,034,199,209 of structured settlement annuity premium (28% of the industry total) during the first nine months of 2013.

Berkshire Hathaway's structured settlement annuity premium and market share since 2011:

• 2011 - $116,458,245 annual premium (2% market share)
  • 1st - $4,976,847
  • 2nd - $11,311,378
  • 3rd - $39,880,339
  • 4th - $60,289,681
• 2012 - $824,962,720 annual premium (17% market share)
  • 1st - $97,187,721
  • 2nd - $193,222,438
  • 3rd - $181,111,553
  • 4th - $353,441,008
• 2013 - $1,034,199,209 nine months premium (28% market share)
  • 1st - $339,325,403
  • 2nd - $340,049,486
  • 3rd - $354,824,320
  • 4th - ?

With announced departures of Allstate and John Hancock during 2013, the U.S. structured settlement market now consists of eight annuity providers. Nine month 2013 sales results for other structured settlement annuity providers (per Evola's report) plus the rounded increase (+) or decrease (-) from comparable 2012 results:

• Pacific Life - $600,146,000 (- $13 million)
• MetLife - $564,000,000 (+ $57 million)
• Amgen/USL - $434,691,262 (+ $25 million)
• Liberty Life - $409,286,609 (+ $118 million)
• Prudential Life - $372,700,000 (- $124 million)
• New York Life - $192,317,226 (- $75 million)
• Mutual of Omaha - $50,407,140 (+ $8 million)

Non-Qualified Assignments

Non-qualified assignments represent transfers of periodic payment obligations that do not meet the requirements of IRC section 130. Unlike qualified assignees, non-qualified assignees are subject to income tax on the amount they receive from whatever entity assigns (or more accurately "delegates") periodic payment obligations to assignees who purchase annuities to fund obligations for claimants who do not qualify for tax exclusions under IRC section 104(a)(1) or (2) - such as employment discrimination cases or deferred attorney fees. 

Despite projections of a large and growing market, only two structured settlement annuity providers (AmGen and Liberty) currently offer non-qualified assignments. Nine month 2013 non-qualified assignment sales of $124,287,610 have declined more than $19 million compared with comparable 2012 sales totals according to Evola's report.

Growing the Primary Market

Many industry observers view the United States structured settlement primary market as a strategic, underperforming segment of the larger personal injury settlement planning market. S2KM looked at some of the related issues in a three-part 2013 blog series titled "Growing the Primary Market"

• Part 1 - Daniel Durbin's survey of primary market leaders.
• Part 2 - NSSTA and NASP 2013 Fall Conferences.
• Part 3 - NSSTA's marketing boot camp - "What business are we in?"

S2KM supplemented this analysis with a report on the developing global insurance capital standard which poses additional challenges for structured settlement annuity providers.

For S2KM's previous annual structured settlement industry reports, see the structured settlement wiki.

GABC Publishes Final ELNY Schedule 1.15

The Guaranty Association Benefits Company (GABC), successor to liquidated Executive Life Insurance Company of New York (ELNY), has published two versions of a final liquidation date Schedule 1.15 on its website.

Among the significant details:

• Thirty-seven (37%) percent of all remaining ELNY (now GABC) structured settlement annuities (SSAs) will experience shortfalls; and
• SSAs represent ninety-eight (98%) percent of total ELNY shortfall annuities.

Prior to ELNY's liquidation, the New York Superintendent of Financial Services filed a preliminary Schedule 1.15 for the proposed ELNY Restructuring Agreement with the Supreme Court of Nassau County New York on November 7, 2011.

Judge John M. Galasso issued a Memorandum Decision April 16, 2012 declaring ELNY to be insolvent and signed a separate order: 1) approving the ELNY restructuring plan as proposed by the Superintendent and the National Organization of Life & Health Guaranty Associations (NOLHGA); 2) converting the ELNY proceeding from rehabilitation to liquidation; and 3) appointing the Superintendent as ELNY's liquidator.

Under the ELNY restructuring plan, participating state life and health guaranty associations (PGAs) and certain life insurance companies formed GABC, a new special purpose not-for-profit captive insurance company under the laws of the District of Columbia to replace ELNY once it was liquidated on August 8, 2013. The PGAs agreed to supplement the ELNY benefit payments for annuity contracts eligible for state guaranty association coverage up to the maximum allowable by their state guaranty association laws. The various participating life companies agreed to provide additional enhancements and have set up an ELNY Hardship Fund.

The final Schedule 1.15 lists all of ELNY's current annuities, with the names of the annuity owners and payees redacted. Schedule 1.15 includes additional information such as individual contract identification numbers, the proposed "uncovered amount" (shortfall) and "total percentage of contract protected" assuming contributions from state life and health insurance guaranty associations and certain supplemental enhancements.

All PGA coverage is applied on a present value basis, according to the Schedule 1.15 footnotes, which also indicate that present values were calculated as of August 8, 2013 by Towers Watson using a 4.25% discount rate. The final Schedule 1.15 provides separate annuitant IDs, beginning with an "F", when evidence exists that some or all of the payment rights under an annuity have been transferred to a factoring company.

Final Schedule 1.15 Highlights

• Schedule 1.15 lists extensive information for 9241 ELNY annuities of which:
  • 4057 (44%) are structured settlement annuities (SSAs).
  • 466 (5%) are single premium immediate annuities (SPIAs).
  • 4718 (51%) are pension annuities.
• Schedule1.15 indicates shortfalls ("uncovered amounts") will occur for 1541 current ELNY annuities - even assuming state guaranty association contributions and enhancements:
  • 1504 SSAs - Note: this number represents 98% of 1504 ELNY shortfall annuities and indicates 37% of all 4057 ELNY SSAs will experience shortfalls.
  • 29 SPIAs.
  • 8 pension annuities.
• For the 1504 Schedule 1.15 SSAs with shortfalls:
  • Factoring transactions - Part or all of 407 SSA payment rights (27% of 1504) are estimated to have been transferred in factoring transactions. Note: reliable industry sources have informed S2KM the actual number of current ELNY SSAs previously factored is considerably higher.
  • $100,000 + - 1090 SSAs (72% of 1504) have "uncovered amounts" in excess of $100,000 each on a present value (PV) basis including
  • $1,000,000 + - 249 SSAs (17% of 1504) which have "uncovered amounts" in excess of $1,000,000 PV each including
  • $5,000,000 + - 21 SSAs which have "uncovered amounts" in excess of $5,000,000 PV each.
  • The largest ELNY SSA has an "uncovered amount" of $27,463,417 PV.
• The total percentage of each ELNY SSA contract value "protected" by ELNY's remaining assets, state guaranty fund payments plus additional enhancements varies from 31% to 100% depending upon the individual contract.

These final Schedule 1.15 numbers differ from the previously published Schedule 1.15 as reported by S2KM. Possible explanations:

• More factoring transactions (407 vs.156) are included as separate line items in the final Schedule 1.15.
• Some ELNY annuity payees may have died since ELNY's August 8, 2013 liquidation date.

• Present value categories may have shifted from covered to uncovered and vice versa based on interim payouts.

• GABC's actual and/or projected investment returns and expenses (which have been reported) may be different than previously projected.

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

NASP 2013 Annual Conference - 2

Primary market representatives attending their first National Association of Settlement Purchasers (NASP) Annual Conference are typically surprised - both by the exceptional quality of the educational experience and NASP's encouragement of diverse perspectives on controversial issues which have historically divided the primary and secondary structured settlement markets.

NASP President Patricia LaBorde's keynote remarks at NASP's 2013 Annual Conference last week in Las Vegas re-inforced NASP's policy of politically unobstructed learning. "We want to hear from all structured settlement stakeholders - even if they disagree with us or don't like who we are," LaBorde stated. "We are here to listen. We are here to improve."

Consistent with these educational objectives, previous NASP speakers have included critics from the primary market such as John Darer and Jack Meligan as well as attorneys who represent annuity providers in transfer hearings such as Stephen Harris and Peter Vodola. Regular NASP educational program features also include both a Primary Market Panel and a Judicial Panel.

In addition to other speakers who highlighted and criticized specific secondary market business practices during this year's NASP conference, former NASP President Robin Shapiro provided the most comprehensive and unanticipated assessment. Shapiro's unannounced critique, which preceded, but was unrelated to, his introduction of NASP's 2013 Hamilton Award recipient Jack Kelly, will be summarized and discussed in subsequent S2KM blog posts.

NASP 2013 Speakers and Topics

• Jack Kelly - State and Federal Legislative and Regulatory Developments.
• Earl Nesbitt - Litigation Update and the Impacts of Unethical Conduct.
• Rajiv Goel - Capacity Issues in Structured Settlement Transactions.
• Boris Ziser - Financing Structured Settlement Transactions.
• Break Out Sessions
  • Avoiding Pitfalls with the Problem Payees.
  • Non-Traditional Financing of Secondary Market Transactions.
  • Maximizing Results in Front of a Tough Judge.
  • Marketing: Reaching Your Audience Without Breaking Ethical or Legal Standards.
• Edward Stone - The ELNY Saga.
• Brian Robinson and Erik Friedman - Issues in Life Contingent Transactions.
• Patrick Hindert (Moderator) and Daniel Hindert, Anthony Prieto, Jr., William Schemmel - Primary Market Panel.
• Matthew Bracy (Moderator) and Judges Nancy Allf, Carter Bise, James McCarthy - Judicial Panel.

S2KM Comments and Observations

• Sponsors - NASP conferences invariably attract more sponsors than any other conferences S2KM attends. NASP sponsors this year included Google and NBC.
• Legislation and Regulation - Secondary market legislative and regulatory developments have decreased considerably during the past couple of years. 48 states have now enacted protection acts with Oregon amending its statute during 2013.
• Case Law - Several cases decided in 2013 have the potential to significantly impact secondary market business standards and practices. "Structured Settlements and Periodic Payment Judgments" (S2P2J) will report on the following cases discussed during the NASP conference in upcoming Release 55:
  • Settlement Funding v. Cathy Brenston
  • Symetra v. Rapid Settlements
  • Hartford Life v. Estate of Solomon
  • In re: Porter
  • J.G. Wentworth Originations v. Mobley
• Brenston Case - S2KM will discuss the Brenston case, which is currently subject to a petition for review by the Illinois Supreme Court, in subsequent blog posts. A 5th District panel, sitting for the 4th District Illinois Court of Appeals, previously held that because Brenston’s settlement agreement contained an enforceable anti-assignment provision, the transfer court had a duty to enforce that provision and “it had no authority under the Act to approve” the transfer petitions.
• Special Needs Attorneys - Rajiv Goel, addressing capacity issues, was the first special needs attorney to speak at a NASP conference. At prior special needs conferences S2KM has attended, attorneys frequently criticize primary market consultants for "over structuring" and for opposing single claimant qualified settlement funds. In addition, several state Medicaid agencies are attempting to disqualify structured settlement funded special needs trusts because of the potential liquidity (resources) available via the secondary market. Primary and secondary structured settlement market participants appear to have shared interests in improving their special needs public relations and lobbying strategy.
• Marketing Restrictions - In addition to promoting the Better Business Bureau Code of Advertising, NASP's Marketing Break Out discussions highlighted compliance requirements for:
  • New Telephone Consumer Protection Act.
  • The CAN-SPAM Act.
  • Truth in Caller ID Act.
  • Section 43(A) of the Lanham Act.
• Financing Transactions - Boris Ziser's overview of secondary market financing transactions explained: 1) the changing landscape of capital markets; 2) why lenders and investors like structured settlements; 3) what is needed for a successful transaction; 4) current lender challenges; and 5) various types of lending facilities - among other topics.
• Expanding Market Segments - Separate presentations about 1) life contingent transfers and 2) the sale of structured settlement payment rights to individual investors including personal injury victims indicate both market segments are growing.
• ELNY Saga - Among ongoing ELNY developments reported by Edward Stone:
  • Although a final Schedule 1.15 has not yet been published, benefit reductions for ELNY structured settlement recipients may be 3-4% greater than originally predicted.
  • Guarantee Association Benefit Company (GABC), ELNY's D.C.- based successor insurer under NOLHGA's control, has not yet disclosed any information about the expenses association with ELNY's liquidation or the investment performance of ELNY's assets during and/or following ELNY's liquidation.
  • Despite shortfalls experienced by more than 1400 ELNY structured settlement recipients, none of the participating state Guarantee Associations paid out their full coverage amounts.
  • GABC is flagging factoring transactions which are not receiving supplemental benefits.
  • The ELNY class action lawsuit remains on hold while the appeal of Judge Galasso's contempt order is pending.
• Judicial Panel - NASP's Judicial Panel provided opportunities for both the judges and conference attendees to ask each other questions and to communicate problems they have experienced during transfer proceedings. Speaking for the panelists, Judge Bise, who attended the entire conference, stated "I have learned a lot. We would appreciate NASP continuing to educate us on transfer issues."
• Primary Market Panel - Panelist William Schemmel, legal counsel for the Western & Southern Financial Group, which owns Integrity Life among other affiliates, was one of two representatives of former primary market annuity providers attending the NASP conference. Similar to the judicial panel, Schemmel's discussion of transfer issues and problems was practical and productive without the political invective which frequently and unfortunately characterizes transfer discussions at primary market conferences.
• METLife's New Transfer Policies - Despite IRC 5891 and state protections acts, structured settlement annuity providers retain the ability to prevent payment right transfers by enforcing anti-assignment clauses in applicable settlement documents. Generally, however, for the cost of an administrative fee, structured settlement annuity providers have cooperated with factoring companies and payee/transferors since 2002 to enable court-approved transfers. During his case law update, NASP Executive Director Earl Nesbitt reported METLife has now reversed course and has begun challenging this cooperative spirit with new transfer policies prohibiting two previously existing industry standards: 1) transfers of partial payments; and 2) factoring companies assuming administrative responsibility for post-transfer payments.

Congratulations to NASP - especially NASP President Patricia LaBorde, conference chairman Ken Barnett, conference administrators Susan Barnes and Leslie Wren, and conference speakers - for continuing and upgrading the quality of NASP's annual educational conference.

For S2KM reporting about prior NASP conferences, see the structured settlement wiki.

Brief Filed in ELNY Contempt Appeal - 2

Did New York State Supreme Court Judge John M. Galasso violate the Supremacy Clause of Article VI of the United States Constitution when he ordered three Executive Life of New York (ELNY) structured settlement shortfall payees and their legal counsel in civil contempt for filing a federal class action lawsuit against ELNY's Receiver in the United States District Court Southern District of New York in violation of existing ELNY anti-lawsuit injunction orders?

This constitutional question is one of three issues the ELNY shortfall payees have raised in appealing Judge Galasso's January 25, 2013 Contempt Order , which also imposed a $5000 fine and threatened additional fines, plus imprisonment of their legal counsel, if the shortfall payees did not dismiss their Federal action - which they did (without prejudice) on February 7, 2013.

In their prior federal class action lawsuit, the shortfall payees asserted causes of action against ELNY's Receivers, in personam, for breach of fiduciary duty and fraudulent concealment, for not conducting the ELNY rehabilitation in good faith, for self-dealing, for material misstatements, and for fraudulently concealing and failing to disclose material information regarding ELNY financial status. See: ELNY allegation timeline.

S2KM's prior blog post (Part 1) about the shortfall payees' appellate brief summarized background developments resulting in the appeal of Judge Galasso's Contempt Order including the alleged statutory responsibilities of, and mismanagement by, ELNY's Receivers and the strategic options available to ELNY shortfall payees following Judge Galasso's April 16, 2012 ELNY Liquidation Order.

In his Liquidation Order, Judge Galasso found ELNY to be insolvent, approved a Restructuring Agreement proposed by ELNY's Receiver and NOLHGA, converted the ELNY proceeding from rehabilitation to liquidation and appointed the Receiver as ELNY's liquidator. The Liquidation Order also contained broad immunity and injunction provisions proposed by ELNY's Receiver. The injunction provision provided the basis for Judge Galasso's subsequent Contempt Order.

Under the ELNY Restructuring Agreement, payments to 1456 structured settlement payees will be cut by $920 million (present value) even following contributions by state life and health guaranty associations and various life insurance companies. During the hearing that proceeded the Liquidation Order, Judge Galasso refused to entertain efforts by ELNY shortfall payees and their legal counsel to determine how and why ELNY had suffered such significant losses.

This blog post highlights and summarizes the following issues raised by the ELNY shortfall payees in their appeal of Judge Galasso's Contempt Order with the New York Supreme Court, Appellate Division, Second Department which they view as a necessary step before re-filing their Federal class action.

• Did the ELNY Liquidation Court exceed it subject matter jurisdiction or otherwise err by interfering with the shortfall payees' constitutional right to bring a class action lawsuit against the ELNY Receiver in Federal court?
• Did the ELNY Liquidation Court err in holding the shortfall payees in contempt for violating its injunction order when the order does not clearly and unequivocally bar personal capacity lawsuits against the Receiver?
• Did the ELNY liquidation court err in holding that the shortfall payees conceded the order barred personal capacity lawsuits by appealing the order and using this alleged concession as the basis to hold the shortfall payees in contempt?

Constitutional Issue

The ELNY shortfall payees argue the ELNY Liquidation Court violated the Supremacy Clause of Article VI of the United States Constitution when it interfered with their federal class action lawsuit. In his order, Judge Galasso recognized he did not have authority to dismiss the federal lawsuit outright, but concluded he could punish the shortfall payees for bringing and continuing the federal action by holding them in contempt, fining them $5000, and threatening them with further fines.

To support their appeal, the ELNY shortfall payees cite two U.S. Supreme Court cases: Donovan v. City of Dallas (1964) which held "[s]tate courts are completely without power to to restrain federal court proceedings"; and General Atomic Company v. Felter (1997) which held "[a] plaintiff's right to pursue an in personam action in federal court cannot be restricted by a state court." Among other cases, they also cite Johnstown Min. Co. v. Morse (1904) in which a New York court stated: "[t]his prohibition applies whether the state court restrains the federal court proceeding directly by, for instance, ordering the federal case be dismissed, or whether that interference is indirect by compelling a party to dismiss the case by threatening or holding them in contempt."

Because Judge Galasso allegedly had no authority to enjoin their federal class action lawsuit, the ELNY shortfall payees maintain he could not properly use an injunction order to hold them and their counsel in contempt which, along with the threat of fines, effectively prevents them from pursuing their federal action. Because this issue is jurisdictional, the ELNY shortfall payees further maintain it can be raised at any time, even on appeal.

Personal Capacity Lawsuits

To be enforceable, a contempt order cannot be ambiguous and/or vague. Contrary to Judge Galasso's ruling, the shortfall payees argue the ELNY injunction does not "clearly and unequivocally" bar lawsuits that are not against ELNY assets but rather seek to collect damages from the ELNY Receiver in his personal capacity. They point out the injunctive language does not prohibit all actions against the Receiver, but only actions "with respect to this proceeding or the discharge of [his] duties under [New York] Insurance Law Article 74."

Based on New York case law and the language of Article 74, the shortfall payees argue ELNY's Receiver operated beyond his Article 74 duties because he did not "act in good faith, with care and prudence commensurate with the situation as it exist[ed] at the time." As a result, they maintain a personal capacity lawsuit is appropriate. In addition, according to the shortfall payees, barring all claims against the ELNY Receiver is inconsistent with Article 74's express purpose of protecting policyholders and payees.

Alleged Shortfall Payee Concession

In their appeal of Judge Galasso's Liquidation Order, the shortfall payees unsuccessfully asked the appellate court to either construe the injunction language narrowly or, alternatively, to reverse the Order because the injunction language violated Article 74. During the contempt proceeding, the Receiver argued the shortfall payees were judicially estopped from arguing that the injunction language should be interpreted more narrowly because of their alternative appellate argument that the language violated Article 74 by enjoining personal capacity suits. Judge Galasso agreed with the Receiver.

Judicial estoppel, according to the shortfall payee's brief, rests on the principle that "a litigant should not be permitted ... to lead a court to find a fact one way and then contend in another judicial proceeding that the same fact should be found otherwise." However, they maintain, submission of alternative legal arguments (as opposed to inconsistent factual pleadings) is not a basis for judicial estoppel. Therefore, by appealing the injunction language in the ELNY Liquidation Order, the shortfall payees argue they did not concede that the Liquidation Order barred their federal action and Judge Galasso erred in using this "concession" to hold the shortfall payees in contempt.

For S2KM's complete Executive Life reporting, see the structured settlement wiki.

Brief Filed in ELNY Contempt Order Appeal - 1

"People should know when they are conquered." - Quintus in "Gladiator"

"It ain't over till it's over." - Yogi Berra

Following 22 years of "Rehabilitation" supervised by various New York State Superintendents of Insurance and Financial Services, as Receivers, Executive Life Insurance Company of New York (ELNY) was officially liquidated August 8, 2013 pursuant to an Order of Liquidation signed by Nassau County New York State Supreme Court Judge John M. Galasso on April 16, 2012.

As part of his Liquidation Order, Judge Galasso also approved a Restructuring Agreement, as proposed by ELNY's Receiver and NOLHGA, whereby ELNY's remaining assets and ongoing liabilities have now been transferred to a successor company, Guaranty Associations Benefit Company (GABC), a not-for-profit Washington D.C.-based captive insurance company.

As a result of ELNY's liquidation and restructuring, approximately 1456 structured settlement payees will experience payment shortfalls totaling approximately $920 million (present value) following contributions from state life and health insurance guaranty associations and various life insurance companies.

ELNY Receivers' Responsibilities 

Significantly, ELNY's 1991 Rehabilitation Order did not result because of ELNY's insolvency. Instead, then New York Insurance Superintendent Salvatore Curiale's stated concern was a "run" on ELNY assets by policyholders.

Beginning with ELNY's 1991 Rehabilitation Order and continuing to ELNY's August 8, 2013 liquidation date, Superintendent Curiale and his successor New York Superintendents of Insurance and Financial Services managed ELNY's Rehabilitation (in their capacity as Receivers not regulators) with day-to-day management responsibilities assigned to their agent, the New York Liquidation Bureau (NYLB).

As ELNY's Receiver, these Superintendents undertook fiduciary responsibilities toward ELNY's policyholders and payees. Their duties, pursuant to Article 74 of New York's Insurance law, included: conducting ELNY's business, safeguarding ELNY's assets, and removing the causes and conditions that made ELNY's rehabilitation necessary.

Until December 17, 2010, however, when Judge Galasso issued an ex parte Order to Show Cause seeking an ELNY liquidation plan, ELNY's Receivers had not filed a single report with the court or made any efforts to inform policyholder or payees about ELNY's declining financial position. As of December 31, 2010, ELNY's audited financial statements show ELNY had assets of $905,945,200 compared with liabilities of $2,474,317,342, resulting in a negative surplus of $1,568,372,142.

During ELNY's March 2012 Liquidation Hearing, Judge Galasso ruled against ELNY shortfall payees' attempts to determine how and why ELNY had suffered such losses reasoning such issues were beyond the scope of the hearing. To further protect the Receiver, Judge Galasso's April 16, 2012 ELNY Liquidation Order contained immunity and injunction provisions proposed by ELNY's Receiver.

Although the Receiver represented these provisions did not immunize him from liability outside his Article 74 duties, structured settlement shortfall payees expressed concern the broad language of the immunity and injunction provisions could insulate the Receiver from liability beyond the scope of Article 74. They also believed, contrary to the Receiver's representations, that Article 74 prohibits not just bad faith conduct but also conduct without appropriate care and prudence.

ELNY Shortfall Payees' Options 

Faced with significant payment reductions resulting from ELNY's liquidation and restructuring agreement, ELNLY's structured settlement shortfall payees were left with three options:

1. Accept their payment reductions under the ELNY Restructuring Agreement and do nothing; or,
2. Appeal Judge Galasso's Order and ask the Appellate Court to send ELNY's Receiver back to drawing board; or,
3. Bring a separate legal action against the Receiver personally for bad faith conduct, breach of fiduciary duty and fraudulent concealment or waste.

The ELNY structured settlement shortfall payees chose options 2 and 3.

Option 2 failed. The Appellate Division of the Supreme Court of the State of New York, Second Department denied the ELNY shortfall payees' appeal of Judge Galasso's Order on February 6, 2013. New York State Court of Appeals denied a subsequent motion by ELNY shortfall payees for Leave to Appeal the Second Department decision on May 3, 2013.

Option 3 faces a significant judicial roadblock - a Contempt Order with the threat of fines plus imprisonment of legal counsel.

Prior to this Contempt Order, several ELNY structured settlement shortfall payees pursued Option 3 by filing a federal class action lawsuit November 8, 2012 in the U.S. District Court for the Southern District of New York against the ELNY Receiver (New York Superintendent of Financial Services Benjamin Lawsky) in his personal capacity. In response, the Receiver filed a motion December 7, 2012 asking the Liquidation Court (Judge Galasso) to find the shortfall payees in contempt for violating the injunction provision of the ELNY Liquidation Order.

Judge Galasso issued a Contempt Order on January 25, 2013. He also imposed a $5000 fine and threatened additional fines plus imprisonment of legal counsel if the ELNY structured settlement shortfall payees did not dismiss their Federal action which they did (without prejudice) on February 7, 2013. 

Bottom line: so long as Judge Galasso's Contempt Order and continuing threat of additional fines and imprisonment of legal counsel remain in effect, ELNY structured settlement shortfall payees are effectively barred from pursuing Federal legal action against ELNY's Receiver for alleged mismanagement of ELNY's assets during ELNY's 22 year Rehabilitation. 

Appeal of Contempt Order

As a result, ELNY's shortfall payees are currently pursuing an appeal challenging "each and every part" of Judge Galasso's January 25, 2013 Contempt Order as a necessary step before re-filing their Federal action against the Receiver and his agents.

On August 9, 2013, Attorney Edward Stone filed a preliminary brief with the New York Supreme Court, Appellate Division, Second Department on behalf of ELNY structured settlement shortfall payees Jeanice Dolan, Keith Vincent, Daniel Malin and their attorneys.

The appellate brief filed on behalf of the ELNY shortfall payees addresses three legal issues:

• Did the ELNY Liquidation Court exceed it subject matter jurisdiction or otherwise err by interfering with shortfall payees' constitutional right to bring suit against the Receiver in Federal court?
• Did the ELNY Liquidation Court err in holding the shortfall payees in contempt for violating its injunctive Order when the order does not clearly and unequivocally bar personal capacity suits against the Receiver?
• Did the ELNY Liquidation Court err in holding that the shortfall payees conceded the Order barred personal capacity lawsuits by appealing the order and using this alleged concession as the basis to hold the shortfall payees in contempt?

S2KM will summarize the ELNY shortfall payees' arguments for each of these issues in a subsequent blog post. For S2KM's complete ELNY reporting, see the structured settlement wiki.

S2P2J Release 54

Publisher Law Journal Press anticipates an October 2013 distribution date for hardcopy supplements for Release 54 of "Structured Settlements and Periodic Payment Judgments" (S2P2J) with online S2P2J subscribers receiving their update simultaneously at no additional charge.

Online S2P2J includes a search feature and download capability as well as link features to access individual book sections, appendices, footnotes, cases and statutes.

First published in 1986 and updated semi-annually, S2P2J is co-authored 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) have utilized S2P2J as an educational resource for their certification programs. 

Release 54 Highlights - Release 54 will feature new, updated and/or expanded sections addressing the following structured settlement topics:

• Negotiating structured settlements vs. cashing out
• Defendant disclosure issues
• Business practices of consultants
• Insurance company insolvencies
• Medicare set-aside arrangements
• Re-cycled structured settlement payment rights
• Securitization of structured settlement payment rights
• Australia structured settlement update

Negotiating Structured Settlements vs. Cashing Out - Why and when should defendants agree to structured settlements as opposed to lump sum settlements? Do defendants save money using structured settlements and, if yes, why and how? Do structured settlements result in additional costs and risks for defendants and, if yes, how do defendants reduce these costs and risks? Release 54 examines these questions in the context of existing state statutes and case law and offers recommendations for defendants when they review their traditional structured settlement policies and business practices. The recommendations include new sample structured settlement Mission and Disclosure Statements for liability insurers.

Defendant Disclosure Issues - Release 54 substantially expands and re-organizes S2P2J's existing coverage of defendant structured settlement disclosure issues. Topics addressed:

• State structured settlement protection act requirements
• Product disclosures and representations
  • Cost or Value
  • NAIC Annuity Disclosure Model Regulation
  • NAIC Suitability in Annuity Transactions Model Regulation
  • Compensation disclosure
  • "Guaranteed" payments
  • Dissipation studies
  • Public assistance
  • Annuity ownership and rights
  • Taxation
  • Financial condition of funding entities
• Conflicts of interest
• Medicaid/Medicare disclosures
• Securities issues
• Class action lawsuits vs. defendants
• Meeting professional responsibilities

Structured Settlement Consultants - Release 54 expands and updates S2P2J's coverage of structured settlement consultants to address: consultant selection criteria; structured settlement product suitability; and consultant business practice issues including laws and regulations, industry standards, commission disputes, privacy rules, and disclosure and representation requirements.

Insurance Company Insolvencies - Release 54 expands and updates S2P2J's already extensive coverage of insurance company insolvencies including state insurance guaranty associations and the most recent developments impacting Executive Life of New York [ELNY] and Reliance Insurance Company. Following ELNY's 22 years of New York State supervised "rehabilitation", S2P2J's Release 54 identifies lessons that potential structured settlement recipients and their attorneys and advisers can and should learn from the ELNY debacle.

Medicare Set-Aside Arrangements - Release 54 re-organizes and promotes S2P2J's coverage of Medicare set-aside arrangements (MSAs) with updated materials for both workers compensation (WC) MSAs and liability MSAs. These updates include an extensive summary and analysis of the structured settlement provisions in the new CMS WCMSA Reference Guide as well as conclusions and recommendations for utilizing MSAs in personal injury liability cases.

Re-cycled Structured Settlement Payment Rights - As low interest rates continue to negatively impact the primary structured settlement market, new products featuring re-cycled structured settlement payment rights have begun to proliferate as funding alternatives for personal injury periodic payment settlements. Release 54 features a new section with detailed diagrams and charts (designed by Timothy Morbach) to explain the several variations of these products. In addition, this new section compares the features of these products with traditional structured settlements and summarizes recent investor warnings about these products issued by the SEC and FINRA.

Securitization of Structured Settlement Payment Rights - S2P2J already includes a detailed Chapter 16 titled "Transfers of Structured Settlement Payment Rights" which provides comprehensive coverage of most structured settlement secondary market issues. This coverage includes: the history of the secondary market; summary and analysis of IRC section 5891 and the state structured settlement protection acts; and how judges review (or should review) transfer applications. Release 54 adds a new section, with detailed diagrams and charts (designed by Timothy Morbach), explaining how securitization of structured settlement payment rights works.

Australia Structured Settlement Update - S2P2J continues to track structured settlement developments in countries outside the United States including Canada, the United Kingdom, Continental Europe, Australia and New Zealand. Release 54 highlights a recent legislative development in Australia called “The Lifetime Care and Support Scheme” which provides treatment, rehabilitation and attendant care services to people severely injured in automobile accidents. At least one Australian structured settlement expert believes this legislative development could prevent an annuity-funded structured settlement market from developing in Australia anytime soon.

"Structured Settlements and Periodic Payment Judgments" is a complete reference work for attorneys, settlement planners, structured settlement consultants, risk managers, liability insurers, annuity providers and secondary market participants. It is available in both hardcopy and online versions which are updated semi-annually. For highlights from previous S2P2J updates, see the structured settlement wiki.