Beyond Structured Settlements

S2P2J Release 63

The United States structured settlement market has been in existence for approximately 40 years and continues to expand its scope, complexity and importance within the context of personal injury settlement planning. When structured settlements were first introduced in the United States in the late 1970s, they were viewed primarily as a defense claim management concept which was binary in nature. A settlement was either “cash” or “structure”. A “failed” structured settlement was a “cash out”. Defense brokers sold a single product – a structured settlement annuity which could be, and almost always was, combined with up front cash. Rarely, however, from a defense perspective, was a structured settlement annuity integrated with other financial products or government benefits. In fact, a fundamental public policy justification for structured settlements claimed that “structured settlements enable injury victims to live free of reliance on government assistance.”
As the U.S. structured settlement market evolved, however, a shift in control has occurred as plaintiffs and their attorneys now retain their own structured settlement advisors. From the plaintiff perspective, a structured settlement annuity looks less like an all or nothing settlement proposition and more like a strategic product that can be combined with other financial products, government benefits and trusts into comprehensive settlement plans. National associations of plaintiff structured settlement brokers (SSP), special needs attorneys (SN Alliance and ASNP), and other professionals, as well as traditional structured settlement participants (NSSTA) increasingly recognize a much larger and more complex market (personal injury settlement planning) within which structured settlement annuities represent a core strategic product.
Since it was first published in 1986, "Structured Settlements and Periodic Payment Judgments" (S2P2J), has provided structured settlement stakeholders and settlement planning professionals 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. In addition to contributing authors recognized below, the book authors acknowledge and thank the NSSTA and SSP Legal Committees for sharing case and industry updates.

Publisher Law Journal Press anticipates a March 2018 distribution date for hardcopy supplements for S2P2J Release 63 with online S2P2J subscribers 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 63 Highlights - Release 63 will feature new, updated and/or expanded sections addressing the following structured settlement topics:

• Historical Analysis - To help structured settlement stakeholders analyze the comprehensive changes impacting their industry, Release 63 adds three new subsections to Chapter 1 expanding its historical analysis of the U.S. structured settlement market including: "Historical Trends and Transitions"; "Legislative History"; and "Significant Historical Developments."
• ABLE Accounts - The "Achieving a Better Life Experience Act of 2014" (ABLE Act) created an important new option (ABLE accounts) for qualifying individuals (disabled prior to age 26) to save and accumulate money while preserving eligibility to receive means-tested government benefits. In the personal-injury context, ABLE accounts cannot be funded directly with a structured settlement, but can be funded indirectly using a special needs trust. Contributing author David Lillesand, a nationally recognized special needs legal expert, highlights Release 63 with a comprehensive introduction to ABLE accounts for structured settlement and settlement planning professionals. Among the topics attorney Lillesand addresses: 1) Federal laws and regulations - including Congressional improvements in 2017; 2) State ABLE programs; 3) ABLE accounts in practice; and 4) a comparison of special needs trusts and ABLE accounts.
• Market-based Programs - One result of settlement planning has been the development of an increasing number of products and financial vehicles directly and indirectly related to structured settlements. Contributing author Serena Fitchard introduces and explains "market-based programs" which provide periodic payments linked to the performance of an underlying investment portfolio. At one time, most industry participants assumed market-based programs did not meet IRC 130's "fixed and determinable" test. In multiple PLRs, however, the IRS has concluded that the variable nature of a payment does not preclude it from being fixed and determinable if the payment obligation is fixed at the time of settlement and the amount can be calculated pursuant to an objective formula.
• Rating Agencies - Contributing author Michael Cohen, former head of A.M. Best's U.S. Life Insurance Industry rating division, provides an extensive update in Release 63 to S2P2J's summary and analysis of financial rating agencies relevant to structured settlements. Mr. Cohen's commentary: 1) introduces new companies that provide ratings for insurers; 2) discusses the quantitative and qualitative factors rating agencies utilize when they apply their rating methodologies; and 3) emphasizes the importance of risk based capital in life insurer evaluations. He further explains why A.M. Best has two rating scales (Financial Strength Rating and Issuer Strength Rating) and how those rating scales interact.
• Non-Qualified Assignments - Release 63 continues to track developments in the non-qualified structured settlement market which features an increasing number of non-traditional product providers as well as funding options where non-U.S. companies serve as obligors. S2P2J's analysis highlights many of tax and non-tax issues that these "off-shore" products raise which structured settlement professionals should evaluate and be able to explain to clients.
• Guaranty Association Model Act - As one result of the ELNY liquidation, the NAIC updated its "Model Life and Health Insurance Association Model Act" in 2017. Release 63 addresses the sections specifically impacting structured settlements including a clarification that Guaranty Association coverage under this newest version of the Model Act does not extend to "persons" who acquire rights to receive structured settlement annuity benefits via factoring transactions or to the "rights" so acquired. Louisiana became the first state to enact the new Model Act provision specifically excluding factored benefits.
• Lanclos v. United States - To its extensive coverage of the ELNY insolvency and liquidation, Release 63 provides a summary of Lanclos v. United States, a case decided by the U.S. Court of Federal Claims in 2017, in which an ELNY shortfall victim successfully argued that the U.S. government should be held liable for the shortfall because it "guaranteed" the structured settlement payments. To support her position, the plaintiff relied on Massie v. United States, where a Federal Circuit Court relied on a plain reading of the contract terms which stated the payments were “guaranteed” and “shall be paid.” Because of this language, the Court in Massie rejected the government’s argument that it had discharged its duty under the settlement agreement by “purchasing an annuity.”
• Privacy Issues - Professional structured structured practitioners must be aware of various federal and state privacy laws that may impact the gathering and/or sharing of medical or other personal information belonging to a claimant during the course of a personal injury settlement negotiation. Release 63 continues S2P2J's coverage of these privacy laws which can include not only HIPAA and the Gramm-Leach-Bliley Act but also state legislation similar to the NAIC's Model Act entitled "Privacy of Consumer Protection and Health Information Regulation" which may apply to all entities licensed by the State Department of Insurance.
• Deferred Attorney Fees - Plaintiff attorneys who wish to defer part or all of their fees in a contingent fee case have multiple product options depending upon whether the underlying case involves non-taxable personal physical injuries. For non-taxable injury cases, most structured settlement annuity providers allow attorney fees to be structured using an IRC 130 qualified assignment even on a "stand alone" basis. Release 63 updates S2P2J's analysis of qualified assignment applications to deferred attorney fees and questions whether the Childs case on its own represents appropriate tax authority.
• Settlement Planning Practice Standards - More recent S2P2J updates have recognized the evolution of personal injury settlement planning and its strategic relationship with structured settlements. Originally composed primarily of plaintiff structured settlement brokers, the Society of Settlement Planners (SSP) has played a leading role in defining this new profession. Release 63 highlights SSP's most recent contribution, their "Settlement Planning Practice Standards," and also includes a copy of these Standards in S2P2J's Appendix.
• CMS WCMSA Reference Guide - Medicare Set-Asides (MSAs) have become an important sub-market for structured settlements. Release 63 summarizes sections applicable to structured settlements within the most recent (2017) update of the CMS Workers Compensation (WC) MSA Reference Guide. Significantly, this newest version of the Reference Guide continues to incorporate the October 15, 2004 CMS Memo that provides structured settlement annuities with an inherent cost advantage compared with lump sums for funding most WCMSAs. Every structured settlement professional should be aware of this cost advantage and be able to explain it to their clients.
• Secondary Market Business Practices - Successful cooperation between NSSTA and the National Association of Settlement Purchasers (NASP) has resulted in greater consumer protections within the Model Act and multiple state structured settlement protection statutes. Unfortunately, the conduct of some secondary market participants continues to result not only in negative national publicity but also government actions against certain factoring companies alleging fraud and other deceptive business practices. Among other additions, Release 63 summarizes two recent criminal cases involving forgeries of protection act transfer orders to S2P2J's already extensive chapter addressing "Transfers of Structured Settlement Payment Rights."

For additional coverage of historical structured settlement issues and developments, see the structured settlement wiki.

SSP/ASNP 2016 Annual Conferences

Joint overlapping educational conferences hosted by the Society of Settlement Planners (SSP) and the Academy of Special Needs Planners (ASNP) March 9-12, 2016 in Tucson, Arizona provided S2KM and other attendees an opportunity to evaluate the current status of structured settlements within the larger, more complex personal injury settlement planning market. The SSP conference also transferred association leadership from Neil Johnson to Joe Tombs with Tombs promising to maintain Johnson's leadership direction and to "pull SSP back completely from structured settlement politics."

Among S2KM's conference conclusions: Many personal injury settlement planners characterize structured settlements as a strategic product, and recognize new marketing opportunities for structured settlements resulting from recent legislation such as the Affordable Care Act and the ABLE Act . The traditional and collective structured settlement industry should similarly embrace an important opportunity to grow its premium volume in this larger, more complex, more dynamic market than it has in the past by more effectively:

• Analyzing the evolving personal injury settlement and special needs planning markets;
• Addressing concerns and issues about structured settlements identified by plaintiff and special needs attorneys; and
• Re-positioning structured settlements from a single product sale to the core component of an integrated settlement solution.

SSP TOPICS AND SPEAKERS

• Introduction - Neil Johnson
• Comprehensive Settlement Planning - Joe Tombs; Charly Schell; Joe DiGangi; Tim Denehy
• Rules that Apply to Insurance Brokers - David Childers; Jeremy Babener
• The Grillo Case - Craig and Josephine (Grillo) Sullivan
• The Mraz Case - Mark Wilson and Patrick Hindert
• Sudden Money - John Darer
• Alternative Products - Martha Hunt; John Arendt; James Creel; Chris Shumate; Michael Upchurch; Rick Miller.
• Medicare Compliance, Entitlement Planning and Lien Resolution Issues - Anthony Prieto
• Joint ASNP/SSP Session - Structured Settlements and Special Needs Trusts - Frank Johns; Joe Tombs; Jack Meligan.
• ELNY and Factoring Industry Lawsuits - Edward Stone
• Small Business Legal Strategies - Paul Valentine
• Missed Tax Opportunities at Settlement - Jeremy Babener
• Foreign Assignment Companies - Jeremy Babener
• NSSTA's Survey of Plaintiff Attorneys - Patrick Hindert
• SSP President's Statement - Joe Tombs

ASNP TOPICS AND SPEAKERS

• ABCs of Public Benefits - David Lillesand
• ABCs of Special Needs and Settlement Planning - Kevin Urbatsch and Michele Fuller
• Keynote: "Raising Special Kids" - Maureen Beyers & Michael Farrell
• SSI Update - David Lillesand
• SNTs and Retirement Benefits - Melanie Marmion
• Recent Trends in Special Needs Planning - Blaine Brockman
• Joint ASNP/SSP Session - Structured Settlements and Special Needs Trusts - Frank Johns; Joe Tombs; Jack Meligan.
• "Tricky Issues" in SNT Administration - Travis Finchum; Herb Thomas and Daniel Cutter.
• Ask the Experts Panel - Kevin Urbatsch (Moderator)

DISCLAIMERS: Because of overlapping conference schedules, S2KM was able to attend only three ASNP presentations but did receive and has reviewed all ASNP conference handouts. S2KM's Managing Director, Patrick Hindert, testified as an expert witness in the Mraz case concerning structured settlement and QSF issues on behalf of Adriana and Addison Mraz.

S2KM COMMENTS AND RECOMMENDATIONS

SSP Leadership

• In his closing message as SSP President, Neil Johnson continued to emphasize several positive themes including industry unification and increasing collaboration between SSP and NSSTA. Among Johnson's proposed solutions for industry unity: 1) recognizing and accepting product diversity; 2) focusing on client and customer service; 3) identifying and pursuing permanent shared interests without necessarily agreeing on all issues; 4) engaging all perspectives to discuss industry problems and issues; 5) improving relationships among stakeholder groups; 6) promoting and practicing settlement planning not settlement selling.
• Newly elected SSP President Joe Tombs promised to "maintain the direction of Neil Johnson's leadership and even accelerate it in every way possible." He identified the following "main themes" for SSP going forward: "to pull completely back from structured settlement “politics”, redouble our efforts at educating our members and promoting a Code of Ethics, and a membership push to quadruple our high water mark for number of members. We intend to actively encourage our members who sell structured settlement to join and to become actively engaged in NSSTA. We will continue to offer a hand of friendship and cooperation in their agenda although we will be decidedly apolitical. We will also make no attempt no manage our member’s opinions or their expressions of their opinions."
• As for structured settlements, Tombs stated: "we intend to emphasize comprehensive settlement planning which will have the natural result of de-emphasizing structured settlement annuities to some extent as we move alternatives including trusts, taxable annuities, investment accounts, etc. closer to the forefront. We will be increasingly product-neutral and more advice-driven and client-need-focused in the future." Note: despite Tombs' assertion, and perhaps somewhat counter intuitively, multiple SSP conference speakers maintained that settlement trust sales, in particular, have actually increased their sales of structured settlement annuities.
• Tombs also promised "to intensify [SSP's] efforts to stave off any further “infiltration" of our society by factoring companies and their employees. We will want to remain abreast of the goings on in that market as we have always attempted, but as a practical matter we are cutting off any new members or sponsors from that side of things."

Marketing Feedback - NSSTA Survey of Plaintiff Attorneys

• During 2014, the National Structured Settlement Trade Association (NSSTA) commissioned a three-part Structured Settlement Survey project, conducted by CLM Advisors, and previously reviewed by S2KM, of senior claims executives (Part 1), claims professionals (Part 2) and plaintiff attorneys (Part 3).
• Although NSSTA has made reports of all three surveys available to its members, and featured presentations about Part 1 and Part 2 at previous NSSTA educational conferences, NSSTA has not yet featured its Part 3 survey of plaintiff attorneys as an educational conference presentation. NSSTA has also prioritized "rejuvenating defense programs" as one of three preliminary "Growth Initiatives" with no equivalent current Growth Initiative focused specifically on plaintiff attorneys or personal injury settlement planning.
• As one SSP conference presentation, S2KM's Managing Director, Patrick Hindert, discussed S2KM's analysis of NSSTA's Part 3 Structured Settlement Survey which, in S2KM's opinion, provides valuable insights for improving structured settlement marketing and expanding and accelerating structured settlement premium growth. For example:
  1. Only 4% of the responding plaintiff attorneys viewed structured settlement consultants as adding value for negotiations and/or case evaluations separate from, or in addition to, their knowledge of structured settlements.
  2. 35% stated that structured settlement consultants fail to deliver value because they are concerned with structuring as much of a settlement as possible.
  3. 52% contact a structured settlement broker one week (possibly less) prior to a mediation.
  4. 38% make contact only after a case settles.
  5. Less than 25% are likely to have a client sign a letter acknowledging that they were exposed to the opportunity to structure a portion of their settlement before opting for an all cash settlement.
  6. Although 89% believe they "have adequate knowledge of structured settlements so that [they are] able to recognize when they would be in the best interest of an injured party...", only 28% said they suggest a structured settlement for cases involving Medicare set-asides (MSAs).
  7. Only 26% have ever structured their fees.

Settlement Planning - A Special Needs Perspective

• Most presentations by special needs attorneys at structured settlement conferences focus exclusively on special needs trusts. As one result, many structured settlement professionals fail to understand the broad and expanding scope of special needs planning - or how it impacts, overlaps with and differs from personal injury settlement planning. A similar misconception exists among special needs attorneys many of whom identify financial and insurance settlement planners exclusively with structured settlements. The title of the one joint SSP/ASNP presentation in Tucson ("Structured Settlements and Special Needs Trusts") re-enforced this misconception. Fortunately and positively, the actual presentation discussion, moderated my Jack Meligan and featuring Frank Johns and Joe Tombs, addressed a broader agenda.
• Separately, both the ASNP and SSP conferences featured multiple presentations which captured the expanding expertise of their respective members. For structured settlement professionals, S2KM found ASNP's two "Pre-Session" presentations ("The ABCs of Public Benefits" by David Lillesand and "The ABCs of Special Needs and Settlement Planning" by Kevin Urbatsch and Michele Fuller) especially informative. Also recommended for structured settlement professionals seeking a more comprehensive understanding of special needs planning: Blaine Brockman's presentation ("Recent Trends in Special Needs Planning"),
• Urbatsch and Fuller speak and write frequently about personal injury settlement planning and are recognized as leading national settlement planning experts among special needs attorneys. Their settlement planning presentations frequently discuss structured settlement "issues" - often with negative connotations and without rebuttal or explanations from structured settlement experts. What follows are structured settlement "issues" Urbatsch and Fuller identified in Tucson. In S2KM's experience: 1) many special needs attorneys agree with these issues; and 2) structured settlement proponents need to proactively respond to these issues - or risk continuing/increasing loss of potential annuity premium:
  • "Income stream is inflexible and cannot respond to emergency or major cash needs;
  • "High initial fees;
  • "Investment returns nearly always lower than what a diversified portolio would produce;
  • "Big ticket items, such as a home, cannot be easily acquired;
  • "Unscrupulous settlement planning brokers over-structuring because of high commission;
  • "Little regulatory oversight over industry – no fiduciary responsibility or licensing required to sell;
  • "Misleading statements about flexibility;
  • "How it fits into Plaintiff’s overall financial plan?

The Grillo Case

• The Grillo case, which establishes potential legal liability for plaintiff attorneys who do not advise their clients about structured settlements, was the subject of an SSP conference presentation by Craig and Josephine (Grillo) Sullivan. The Sullivans shared the remarkable life story of their daughter, Christina, the Foundation she inspired and the Texas State Statutory amendment her case helped to enact.
• For structured settlement brokers and settlement planners, the Grillo case provides a logical starting point for discussing structured settlements with plaintiff attorneys. As a point of comparison, consider response #5 above under "Marketing Feedback - NSSTA Survey of Plaintiff Attorneys."
• Another important settlement planning "takeaway" from the Sullivans' SSP presentation: both Craig and Josephine emphasized the value of Christina's original life care plan which served as a care management "roadmap" throughout Christina's life accurately predicting future needs and developments which the Sullivans would not otherwise have anticipated.
• This important observation, provided by the only care givers to appear as speakers at the combined SSP/ASNP conferences highlights an important settlement planning issue: Why do other settlement planning professionals ignore life care planners - especially considering their strategic role defining "future needs" for personal injury damage analysis, as well as future expense allocations for Medicare set-asides and Affordable Care Act coverage? For examples:
  • As leading nurse life care planner Wendie Howland stated in this 2014 S2KM interview: "I have never been asked to review a settlement plan to see how well it matches my recommendations."
  • The Urbatsch/Fuller presentation summarized above which identified multiple professionals for the "Settlement Planning Team", omitted life care planners.
  • "Comprehensive" settlement plans S2KM has reviewed typically don't include any life care plan, or other document, providing a detailed "needs analysis".
  • With the exception of the National Alliance of Medicare Set-Aside Professionals (NAMSAP), a majority of whose members are life care planners, none of the many structured settlement or settlement planning conferences S2KM has attended during the past several years has offered specific presentations addressing the topic of "needs analysis" - or, with rare exceptions, featured a life care planner as presenter.
  • Key related issues: 1) what does "needs analysis" mean in the settlement planning context? Who is qualified, if not life care planners, to provide "needs analysis" for settlement planning? What is the relationship between a life care plan prepared for trial (damage analysis) and a life care plan for settlement planning? Who, besides a life care planner, is qualified to transpose one to the other?

The Mraz Case

• The traditional objective and responsibility for plaintiff attorneys in personal injury cases has been to obtain the largest amount of compensation for their clients whether by judgment or settlement. By this standard, the law firm Lief, Cabraser, Heimann & Bernstein was notably successful in obtaining a $55 million verdict and subsequent $24 million settlement in 2009 against Chrysler in the Mraz wrongful death case.
• Settlement planning, in general, and structured settlements, more specifically, however, prioritize an additional set of objectives and responsibilities for plaintiff attorneys. As a result, when the Lief, Cabraser law firm failed to obtain a structured settlement for Addison Mraz, the minor daughter of the deceased, after her mother, Adriana Mraz, allegedly requested Lief, Cabraser to obtain a structured settlement on Addison's behalf, Adriana brought a lawsuit alleging Lief, Cabraser attorneys breached the duty of care they owed to Addison.
• On December 22, 2015, among other findings, a California trial court jury determined Lief, Cabraser attorneys did not breach the standard of care or any fiduciary duty they owed Addison Mraz. Nevertheless, unrelated to damages associated to the loss of the structured settlement, the jury awarded Addison Mraz $400,000 of fees and costs she previously paid to Lief, Cabraser. The case is currently on appeal.
• Mark Wilson, the attorney who represented Adriana and Addison Mraz in their lawsuit against Lief, Cabraser, was a featured speaker at the SSP conference. Based upon the Marz case, and regardless of what occurs on appeal, Wilson highlighted the following structured settlement responsibilities as potential duties of care for plaintiff attorneys and recommended that structured settlement professionals and settlement planners utilize CLE programs to educate plaintiff attorneys about their potential liabilities. Plaintiff attorneys should:
  • Educate themselves about structured settlement issues including how to avoid constructive receipt as well as the appropriate utilization of QSFs and non-qualified assignments.
  • Recommend competent structured settlement professionals to clients (and retain them for advice) prior to settlement negotiations.
  • Insert appropriate language in term sheets and/or settlement agreements to preserve clients' structured settlement options.
  • If and when necessary, know how to correct mistakes to preserve or re-establish their clients' structured settlement options.

Plaintiff Broker Diversification

• The most successful plaintiff structured settlement brokers appear to be diversifying their products and services. It works, according to SSP speaker Anthony Prieto, "because it changes the conversation from a marketing perspective. There are a lot more people who want to talk to me about updates in MSP compliance or lien resolution than structured settlements. You see more cases when you offer other services. You become a problem solver as opposed to a problem identifier."
• Prieto identified multiple sources of alternative revenue now available to settlement planners in 2016: alternative products (retail annuities, life insurance, managed money); trust company fees or referrals; lien resolution or verification fees or referrals; MSP compliance fees or referrals; attorney fee deferral programs; QSF referrals and administration fees.
• Although one SSP panel, discussing "Comprehensive Settlement Planning", emphasized the importance of "planning before products", another SSP panel spoke specifically about expanding opportunities for alternative (non-traditional structured settlement) settlement planning products: Martha Hunt (equity-indexed annuity riders); John Arendt (reinsurance); James Creel (settlement trusts); Michael Upchurch (rehabilitation facilities); Rick Miller (indexed annuities).
• Consistent with the themes of "diversification" and "changing the conversation", John Darer made a convincing case for "transition expertise" as a critical settlement planning skill.
• What potential professional liability issues accompany plaintiff broker product and service diversification? The SSP conference did not directly address this issue comprehensively.
  • Speaking about "ELNY and Factoring Industry Lawsuits", attorney Edward Stone asserted that the "New Normal" (i.e. personal injury settlement planning) will not work if the core product (i.e. structured settlements) does not work. Focusing specifically on structured settlements, Stone asked whether a broker (plaintiff and/or defendant) owed any duty of care - and to whom? Also whether split commission arrangements changed the analysis? Based upon ELNY, he offered several related lessons for settlement planners.
  • Insurance law expert David Childers provided SSP conference attendees with a traditional analysis of standards of care and duties of care for insurance brokers, agents and producers under Arizona law.

CONCLUSION: Personal injury settlement planning is a large, complex, dynamic marketplace within which structured settlements historically has represented a strategic, if arguably under performing, product. The traditional structured settlement industry has heretofore avoided the educational analysis and strategic association relationships necessary to help its "New Generation" membership successfully transition to the "New Normal". It remains to be seen whether, when and how successfully future industry leadership will figure out how to put old wine in new bottles. Based upon this year's joint SSP/ASNP conference (and mixing metaphors), it appears the "New Normal" train is already leaving the station with a diversified cargo of blended products and services.

For additional S2KM analysis about personal injury settlement planning, see the structured settlement wiki.

SSP 2015 Annual Conference - 1

The U.S. structured settlement industry consists of three national professional associations - the National Structured Settlement Trade Association (NSSTA), the Society of Settlement Planners (SSP) and the National Association of Settlement Purchasers (NASP) - whose political differences frequently obscure their shared existential interests and, until recently, have restricted their opportunities for mutually-beneficial collaborative education.

NSSTA's 2014 Fall Educational Conference highlighted the issues of "generational change and challenges" and served as a precursor for improved association relationships by featuring SSP President Neil Johnson and NASP President Patricia LaBorde as guest speakers.

The SSP 2015 Annual Conference, to be held March 29-31 in Las Vegas will substantially expand this new educational chapter of industry dialogue by hosting an unprecedented number of association leaders as speakers. Among the highlights will be a repeat engagement of NSSTA's 2014 "Presidents' Panel" featuring current NSSTA President Kevin Silo and SSP President Johnson. Titled "Collaboration for the Greater Good", and moderated by Patrick Hindert, this panel promises to "doubledown" on solutions for achieving industry unity.

Additional association leaders scheduled to speak at the SSP Conference:

• Eric Vaughn - NSSTA's Executive Director is expected to emphasize the shared interests of all structured settlement professionals including plaintiff and defense representatives as well primary and secondary market participants. These shared interests being the protection and preservation of IRC sections 104(a)(2) and 130 plus the future growth of the primary market.
• Earl Nesbitt - NASP's Executive Director will be joined by Rhonda Bentzen, SSP 2015 Conference Chairperson and secondary market expert, to follow-up SSP's groundbreaking 2014 secondary market panel which first opened educational dialogue between primary and secondary structured settlement professional associations.
• Jack Kelly - NASP's lobbyist, who also spoke at last year's SSP conference, will provide his perspective on political changes taking place in Washington D.C. and how they might impact structured settlements.
• Kevin Urbatsch - The National Director of the Academy of Special Needs Planners (ASNP) recently introduced and helped organize ASNP 12-part "Settlement Planning" webinar series. In Las Vegas, Urbatsch will address recent attacks by the Social Security Administration on litigation-generated special needs trusts.
• Wendie Howland - Editor of the American Association of Nurse Life Care Planning (AANLCP) Journal, Ms. Howland will discuss settlement planning from a life care planning perspective. She will highlight the increasing role of life care planners in allocating damages for Medicare set-asides (MSAs) and as a result of the Affordable Care Act. In addition, she will advise structured settlement consultants and settlement planners how to better utilize life care plans to improve their own work product.

Additional SSP speakers and topics:

• Joseph Dehner - A prominent international attorney and co-author of the legal textbook "Structured Settlements and Periodic Payments", Dehner will discuss "Off-Shore Funding Companies" and their increasing role in the structured settlement market.
• Joseph DiGangi, Shannon Fitzgerald and Phillip Kruse - this panel of experts, moderated by Patrick Hindert, will analyze the application of "fiduciary standards" to settlement planning and settlement planners. Their presentation will feature a case study, review SSP's Standards of Practice, discuss NAIC Model Regulations, consider the 2006 Saltzburg/Chemerinsky memos, and suggest best practices.
• Edward Stone - A legal representative for many Executive Life of New York short-fall victims who continues to seek restitution for his clients, Stone will offer his opinion as to whether some settlement planners remain at risk in the ongoing ELNY litigation.
• Joseph Tombs - A lawyer, certified financial planner and former SSP President who helped organize SSP's Registered Settlement Planner (RSP) certification program, Tombs will outline his recommended process for developing a settlement plan.
• Jack Meligan - Also a former SSP President as well as a recognized settlement planning expert, Meligan will provide an MSA update with his perspective on how MSAs fit into settlement planning.
• Jeremy Babener - A prodigious structured settlement author and industry tax expert who also serves as Chairman of SSP's Legal Committee, Babener will introduce SSP's new website and discuss new SSP Legal Committee initiatives.
• Bryn Poland - A leading Qualified Settlement Fund (QSF) expert, who has served as attorney, trustee and/or administrator for numerous QSFs, Ms Poland will explain how and why the multi-claimant QSF market is growing rapidly despite the single claimant pullback within the structured settlement market.

For S2KM's reporting about prior structured settlement and settlement planning professional conferences, see the structured settlement wiki.

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.

S2P2J Release 56

Publisher Law Journal Press will be distributing hard copy supplements for Release 56 of "Structured Settlements and Periodic Payment Judgments" (S2P2J) later this month with online S2P2J subscribers receiving their update automatically and simultaneously. 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 (S2KM's Managing Director). 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.

Highlights from Recent S2P2J Updates

Release 56 

• Practice tips for minimizing the risk of an IRS settlement challenge.
• Updated summary of lessons learned from the Executive Life Insurance of New York (ELNY) insolvency.
• Periodic payment reinsurance as an alternative means of funding structured settlements.

Release 55 

• Risks of using off-shore companies to fund qualified assignments.
• Meeting professional responsibilities for product disclosures.
• Subrogation rights impacting structured settlements.
• Choice of law provisions for attorney compensation.
• Medicaid liens and the 2013 Bipartisan Budget Act.
• How the Brenston case impacts transfer applications.
• Document drafting for anti-assignment restrictions.
• Vermont's structured settlement protection act amendments.

Release 54 

• New considerations for negotiating structured settlements vs. cashing out.
• Defendant disclosure issues.
• Business practice update for consultants.
• Insurance company insolvencies - ELNY and Reliance.
• Medicare set-aside developments.
• Re-cycled structured settlement payment rights.
• Securitization of structured settlement payment rights.
• Australia structured settlement update.

ELNY Class Actions vs. Brokers

Two years after Judge John Galasso signed an Order of Liquidation and approved the Restructuring Agreement for Executive Life of New York (ELNY), separate (but nearly identical) class action lawsuits have been filed in Florida and Oregon on behalf of ELNY shortfall victims against named and unnamed structured settlement brokers.

The complaints allege these brokers 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 Florida case names EPS Settlement Group (EPS), John Cantwell and John Does 1-100 as defendants. The Oregon case names Ringler Associates Incorporated (Ringler), Paul Hoffman and John Does 1-100 as defendants. The respective complaints identify Cantwell and Hoffman as the individual agents who brokered structured settlement annuities for the named plaintiffs.

In each case, the John Does 1-100 "represent those individual insurance brokers who, as employees and/or agents of [the named brokerage company], 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."

Each 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 complaints in both cases identify as plaintiff attorneys Taus, Cebulash & Landau and Berger & Montague.  The Florida complaint also names Scott R. Shepherd and the Oregon complaint also names Arthur C. Johnson as plaintiff attorneys.

Each complaint 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."

As one state statutory example, the Oregon complaint cites Alaska Statute 2l -33.037:

• "A person may not directly or indirectly act as agent for, or otherwise represent, assist, or aid on behalf of another, a nonadmitted insurer in the transaction of insurance in this state.
• "If the nonadmitted insurer fails to pay a claim or loss within the provisions of the insurance contract, a person who assisted or in any manner aided directly or indirectly in the procurement of the insurance contract, shall be liable to the insured for the full amount under the provisions of the insurance contract."

The complaints allege that ELNY was never authorized to transact insurance in Alabama, Alaska, Arkansas, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Kansas, Kentucky, Massachusetts, Minnesota, Missouri, Montana, New Mexico, North Carolina, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas, Washington, Wisconsin, and Wyoming.

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, in his non-regulatory capacity as ELNY's Receiver, including predecessor ELNY Receivers (Rehabilitator), Metropolitan Life Insurance Company (MetLife) and Credit Suisse Group, AG (Credit Suisse) as defendants was voluntarily dismissed in 2013 without prejudice.

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

SSP 2014 Annual Meeting

"Unification not polarization!" Society of Settlement Planners (SSP) President Neil Johnson espoused this principle in his keynote address as the theme for SSP's 2014 Annual Meeting and Educational Conference.

Current industry polarization as identified by Johnson, and discussed by other SSP conference speakers, arguably encompasses:

• Plaintiff vs. defense structured settlement brokers.
• Primary vs. secondary structured settlement markets.
• Structured settlements vs. settlement planning.
• Settlement annuities vs. settlement trusts.
• Settlement planning vs. special needs planning.

Johnson's SSP keynote speech also highlighted and proposed solutions for industry polarization: 1) recognizing and accepting product diversity; 2) focusing on client and customer service; 3) identifying and pursuing permanent shared interests without necessarily agreeing on all issues; 4) engaging all perspectives to discuss industry problems and issues; 5) improving relationships among stakeholder groups; 6) promoting and practicing settlement planning not settlement selling.

Johnson, and subsequent SSP speakers, addressed one of the most diverse gatherings ever of structured settlement and settlement planning industry leaders. Speakers and attendees included members of NSSTA, NASP, NAMSAP, ASNP, SNA, NAELA and SSP as well as lien resolution experts, mass tort administrators, life care planners, settlement trustees, annuity providers and bloggers.

Except for Johnson as SSP's President, speakers expressed personal opinions and did not appear as representatives of other professional associations.

SPEAKERS - By Category and Listed Alphabetically

• Settlement Planners / Structured Settlement Broker/Agents - Michael Goodman; Donald McNay; Joseph Tombs.
• Structured Settlement Attorneys - Jeremy Babener; Stephen Harris; Patrick Hindert; Earl Nesbitt; Edward Stone.
• Product Providers - Daniel Durbin; David Hickey.
• Special Needs Attorneys - Michele Fuller; Kevin Urbatsch.
• Medicare Set-Aside (MSA) Experts - Christine Melancon; Sally Stalcup.
• Lobbyist - Jack Kelly.
• Social Media - Megan Hargroder.
• Customer Service - Bruce Loeffler.

S2KM Comments

Settlement Planning - S2KM has written previously (see: AAJ 2014 Winter Meeting) about expanding products and services offered by plaintiff structured settlement brokers. Joe Tombs' SSP presentation expanded this list and proposed a "fiduciary standard" for settlement planners. For personal injury settlement planning to emerge as a recognized profession, however, SSP (and/or other settlement planning participants) needs to address these fundamental questions:

• Which professionals and professional skill sets are needed to construct a settlement plan?
• What professional work product results in a settlement plan?
• What are the standard components of, and documentation for, a settlement plan?
• How much does it cost (professional fees, commissions, etc) to produce a settlement plan?
• What would a settlement planning "fiduciary standard" mean in terms of: "best interest", "full disclosure" and "informed consent"?
• What settlement planning licensing and e&o coverage are necessary and applicable to protect customers?
• Which professional associations include "settlement planners" and what certification programs do they offer?
• What settlement planning business models currently exist?

Industry Unification - SSP's 2014 conference represents a strategic milestone and challenge for future educational programs sponsored by structured settlement and settlement planning professional associations.

• SSP spotlighted structured settlement and settlement planning polarization as the foremost industry problem.
• SSP President Neil Johnson proposed sensible solutions which other SSP speakers echoed and effectively endorsed.
• Without endorsing specific speakers or topics, SSP's conference agenda addressed critical and divisive industry issues - and featured speakers offering alternative perspectives.
• SSP conference speakers and attendees represented an unprecedented gathering of settlement planning industry leaders.

Industry Game Changers - Speaker Michele Fuller's list of settlement planning "game changers" did not mention Executive Life of New York (ELNY) or the structured settlement secondary market - two divisive issues of continuing importance addressed by other SSP speakers (Edward Stone and the secondary market panel, respectively). Her Top-10 list, however, provides a baseline for future discussions among industry associations and participants:

1. Affordable Care Act.
2. Lien resolution statutory and regulatory developments.
3. Federal recognition of same-sex marriages.
4. Wrongful death caps determined unconstitutional.
5. State and federal tax reform.
6. Potential reductions in social security benefits.
7. MSAs in liability cases.
8. Settlement planning goes cyber.
9. Increasing need for Qualified Settlement Funds.
10. Increasing number of persons with disabilities.

Congratulations to SSP, and especially conference chairperson Rhonda Bentzen, for maintaining SSP's noteworthy quality standards for its annual educational programs.

For S2KM reporting about prior educational conferences sponsored by SSP and other structured settlement and settlement planning associations, 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.