Beyond Structured Settlements

NASP 2014 Annual Conference

The National Association of Settlement Purchasers (NASP) celebrated its 10th annual conference November 5-6, 2014 in San Antonio, Texas with record attendance, recognition of past accomplishments and a clear existential message from its president Patricia LaBorde: "NASP exists to insure there will be a secondary structured settlement market for at least the NEXT 10 years".

NASP's 2014 educational conference followed by one week an historic NSSTA conference, which featured, for the first time, the presidents of NASP (LaBorde) and SSP (Neil Johnson) as speakers. LaBorde acknowledged this development in her opening NASP remarks stating: "we want to hear NSSTA's criticism and for the first time, they appear to want to hear ours." She expressed surprise and concern, however, about how little NSSTA members appear to understand about the secondary market including several basic misconceptions.

To underscore both NASP's "survival" theme and the need for improved education about the secondary market, LaBorde added: "there are some forces working against us right now and we need to remain diligent so our customers (structured settlement recipients who sell payment rights to NASP member companies) continue to have access to liquidity."

NASP lobbyist Jack Kelly and Executive Director Earl Nesbitt addressed some of NASP's challenges in their presentations providing legislative and case law updates respectively.

Legislative Update

Kelly reviewed structured settlement protection statute activities in Florida, Wisconsin, Minnesota, Louisiana, and Mississippi and declared NASP's 2014 state legislative lobbying a success. Kelly highlighted Florida and Wisconsin as states where NASP and NSSTA could collaborate to improve existing legislation. At the federal level, Kelly addressed H.R. 3897 and the July 23, 2014 "Consumer Protection for People with Disabilities" Congressional symposium which included a panel discussion about "factoring structured settlements".

Echoing LaBorde's comments about NSSTA, Kelly expressed his concern about "fact vs fiction" as to what happens and what benefits transfers provide for structured settlement recipients who experience unexpected or unaddressed financial needs. Emphasizing "no secondary market transaction can occur without a primary market transaction", Kelly criticized any development or activity that causes Congress to relook at IRC 130 and 104(a)(2). Speaking the morning after the 2014 election, Kelly labeled the Republican victory a political "tsunami" and the odds on new tax legislation in 2015 as a "toss up".

Case Law Update

For the uninitiated, Nesbitt prefaced his secondary market case law summary with several applicable "lessons": if you don't pay a seller the agreed amount, you will have trouble; courts take the "best interest" standard seriously; sometimes the prudent action is to dismiss a proposed transfer and move on; if you don't get what you want, don't move to another court or arbitration; words in a contract matter and words in a court order matter more; although rare in Texas, sometimes it rains (it did in San Antonio) and sometimes RSL Funding (formerly Rapid Settlements) wins cases.

Washington Square v. RSL

Among several significant cases, Nesbitt gave top billing to Washington Square v. RSL Funding wherein transfer company Washington Square (aka Imperial) sued transfer company RSL Funding in Texas for tortious interference with a transfer agreement that had not yet been approved in a final court order. The Court of Appeals of Texas, Fourteenth District, held:

• RSL was “justified” in interfering with Imperial’s proposed transfer agreement prior to court approval because obtaining a better price was in the seller's "best interest".
• Transfer agreements that have not received court approval are not enforceable on public policy grounds and therefore cannot justify legal actions for tortious interference with existing contracts.

Acknowledging this case represents a "big win" for RSL, Nesbitt also predicted "chaos" for the secondary market as rival transfer companies increasingly search court records and seek to outbid other transfer companies who are awaiting court approvals. Subsequent NASP panels of transfer attorneys and judges, as well as sidebar discussions with angry representatives of companies outbid by competitors, confirmed Nesbitt prediction and suggested a strategic marketing shift is already occurring among transfer companies.

Brenston Case

In a separate presentation, Nesbitt reviewed the Peachtree Settlement Funding v. Brenston case and its case law "progeny". In the Brenston case, the Illinois Supreme Court in December 2013 denied Peachtree's petition for review of an Illinois Appellate Court decision which found multiple Peachtree-Brenston transfer orders, which Illinois Circuit Courts had approved in accordance with the Illinois transfer statute, to be void ab initio because:

• Peachtree did not file all settlement documents with the transfer court.
• Peachtree concealed "by omission" the existence of anti-assignment provisions which the Appellate Court found "material".
• The conduct of Peachtree and it's attorney amounted to an "affirmative falsehood and a fraud upon the trial court".

An Amicus curiae brief filed by NASP with the Illinois Supreme Court stated: "Without the certainty and finality of a court order, there is no viable secondary market.... Because every structured settlement contains boilerplate language that purports to limit or restrict assignability, every Illinois court approved transfer could be subject to challenge at any time."

As NASP predicted, the denial of Peachtree's petition for review was quickly followed by Sanders v. JGWPT Holdings, a class action lawsuit, accusing JGWPT Holdings, Inc., several affiliate companies including J.G. Wentworth and Peachtree Settlement Funding, and Illinois attorney Brian Mack, of violating the Illinois Consumer Fraud and Deceptive Business Practice Act (ICFA). The case has since been removed to the Federal Court in the Southern District of Illinois with that court expected to rule on various motions and petitions in February 2015.

As a result of Brenston, according to Nesbitt:

• Many Illinois structured settlement recipients lack liquidity options because many transfer companies are avoiding the state.
• Some transfers continue to be completed in Illinois when all interested parties agree to waive existing anti-assignment language.
• Some annuity providers, however, will not waive anti-assignment provisions in Illinois cases while others evaluate them on a case-by-case basis.
• Attorneys for some annuity providers are citing Brenston to challenge transfers in other states.

Discounted PV and Applicable Federal Rate

The NCOIL State Structured Settlement Protection Model Act, which NSSTA and NASP have agreed to support, contains a definition for "discounted present value" linked to "the most recently published Applicable Federal Rate for determining the present value of an annuity, as issued by the United States Internal Revenue Service." This rate is generally higher than, and unrelated to, the discount rate actually incorporated into most structured settlement transfers. Nesbitt concluded his conference presentations with a detailed critique of NCOIL's discounted PV definition and explained why NASP believes this definition confuses rather than informs state judges.

Additional Presentations

NASP's conference featured two additional individual presentations.

Former NSSTA Deputy Executive Director Peter Arnold predicted future integration of the primary and secondary structured settlement markets. To support his prediction, Arnold reviewed NSSTA's historic attitude toward "factoring transactions." Arnold also highlighted NSSTA membership qualifications which currently prohibit members from "actively soliciting and promoting structured settlement factoring transactions to individuals who are receiving periodic payments under structured settlements."

Pery Krinsky, an ethics-based defense attorney who serves as Chairman of the Committee on Professional Discipline of the N.Y. County Lawyers' Association, spoke about legal ethics issues. He did not mention Paris & Chaiken, a New York law firm accused of falsifying court orders approving structured settlement transfers, which has reportedly retained Krinsky as outside ethics counsel for assistance with these cases.

Panel Discussions and Breakout Sessions

NASP's 2014 conference included four panel discussions and four breakout sessions (see listings below). Panel highlights and issues addressed:

• Drafting Transfer Agreements - Assigned payments vs. assigned payment rights; clients vs. sellers or annuitants relating to transfer company fiduciary responsibilities; representations and warranties; holdbacks and deductions; limited powers of attorney; testamentary agreements; arbitration provisions.
• Primary Market - NSSTA Fall conference; MSA market; primary market surveys; impact of Affordable Care Act; ELNY update; PLR-143928-13 and "hardship conversions"; settlement planning developments; re-cycled structured settlements; Bipartisan Budget Act of 2013; provider company departures; primary/secondary cooperation opportunities; best and worst business practices; annuity provider issues with transfer companies.
• Responding to Insurer Transfer Objections - Confirming his company's "good relationship" with transfer companies, Madis Smit of State Farm highlighted several insurer issues: unanticipated costs of reviewing 15 to 20 transfers per week; inadequate notice (need at least seven days); difficulty in locating some requested settlement documents; split payment problems resulting from insurer technology limitations; "three touches" constitute an insurer ideal (petition; order; notice of approval). Additional issues discussed: proposed documents from insurers that do not meet state-specific requirements; protecting public information in case filings.
• Judicial Panel - "Best interest" considerations; multiple transactions; common mistakes by petitioners; privacy issues; discount rates; independent professional advisors. The judges also were encouraged to identify questions for the audience - and did so. All three judges expressed a need and interest for additional education about the secondary market.

Alexander Hamilton Award

NASP honored James Lokey as the 2014 recipient of its Alexander Hamilton Award. Lokey completed the first transfer of structured settlement payment rights in 1986 thereby launching the secondary market. NASP has bestowed its Alexander Hamilton Award seven times "to distinguished individuals who have supported and defended the right to free alienability of property rights." NASP considers this right to be its own cornerstone and the foundation of the structured settlement factoring business.

Topics and Speakers

• Welcome Remarks - Patricia LaBorde.
• Legislative and Regulatory Developments - Jack Kelly.
• Legislative Update - Earl Nesbitt.
• Drafting Transfer Agreements - Jason Sutherland and Brian Mack.
• Hamilton Award - James Lokey.
• Integration of Primary and Secondary Markets - Peter Arnold.
• Primary Market Panel - Patrick Hindert (Moderator), Daniel Durbin, Medora Marisseau, Mark Wahlstrom.
• Ethics Issues - Pery Krinsky.
• Responding to Insurer Transfer Objections - Michael Damore (Moderator), John Shafai, John Mott, Michael Green, Steven Mastrantonio, Madis Smit.
• Break Out Sessions
  • Preparing vs.Coaching a Problem Payee - Laryssa Korduba and Elyse Strickland.
  • Addressing Judicial Concerns - Roger Dunaway and Andrew Hillman.
  • Life Contingent Issues - Michael Fasano and Dan Bonner.
  • Bankruptcy Issues - Michael Damore and Adam Zoldessy.
• Illinois Litigation and Discounted Present Value - Earl Nesbitt.
• Judicial Panel - Matthew Bracy (Moderator), Judges Lynne Parker, Patricia Summe, Travis Francis.

For S2KM reports of additional 2014 educational conferences plus eight of the nine prior NASP conferences, see the structured settlement wiki.

SSP 2013 Annual Meeting

Since it was founded in 2001, the Society of Settlement Planners (SSP) has defined itself as an alternative to the National Structured Settlement Trade Association (NSSTA); and defined its membership as more than plaintiff structured settlement brokers. The resulting settlement planning business model features:

• Structured settlement annuities as a core funding product, but not as a singular funding vehicle or product, for personal injury settlement plans; and
• Settlement planners, as "claimant centric", multi-professional, advisers who collaborate as a team and offer injury victims and plaintiff attorneys complementary knowledge, skill sets and work product.

To support and expand this settlement planning business model, SSP has developed and promoted:

• Standards of Professional Conduct for Settlement Planners;
• The Registry of Settlement Planners certification program; and
• Annual educational conferences.

To improve and grow both the structured settlement and settlement planning markets, SSP President Charles Schell has proposed the following strategy:

• "Study and improve our business standards and practices.
• "Develop "customer centric" solutions that help injury victims.
• "Build collaborative business models by focusing on shared interests."

SSP recently announced the agenda for its 2013 Educational Conference which will take place May 5-7 in Las Vegas. Featured topics and speakers, organized by S2KM-suggested categories:

Motivation, Marketing and Perspective

• The Art of Significance - Dan Clark
• Overcoming Objections and Managing Opportunities - Frank Maguire
• Life Lessons from the Lottery - Don McNay

Affordable Care Act (ACA)

• Impact on Personal Injury Settlements, Structured Settlements and Special Needs Trusts - Thomas Begley
• ACA Panel - Thomas Begley; Pi-Yi Mayo; Karen Meyers

 Qualified Settlement Funds

• Update - Pi-Yi Mayo
• Panel - Pi-Yi Mayo; Don McNay; Andy Cook; Mark Wahlstrom.

 Settlement Planning Team

• Partnering with Ancillary Service Providers - Anthony Prieto; Dave Place
• Professional MSA Administration - Don Batchelor
• Tax issues - Jeremy Babener
• Partnering with Investment Professionals - Victor Wilkerson
• Working with Benefit Expert Attorneys - Peter Wayne

 Government Benefit Issues

• MSA Allocation Process - Michael Greco
• Social Security Disability Benefits - Omar Ortega and Kip Daniels
• Spend Downs - Kristen Behrens; Thomas Begley
• How to Fix the MSA Program - Doug Shaw

 Settlement Trusts

• Settlement Trusts - Karen Meyers
• Funeral Trusts - Scott Leonardi
• Pooled Trusts - Jason Lazarus

Settlement Planning Products

• Long-term Care Insurance - John Darer
• Guaranteed Index Annuities - David Salko and John O'Connell
• Defined Benefit Plans for Plaintiff Attorneys - Rosendo Zepeda, Jr.

 Related S2KM Resources:

• Spring 2013 Educational Conferences
• SSP 2012 Annual Meeting
• Settlement Planning in 2012
• Alternative Business Models
• ASNP 2013 Annual Meeting

Structured Settlements in 2012 - 1

The U.S. structured settlement industry in 2012 increasingly defined itself into three related markets (the primary, secondary and settlement planning markets) with the liquidation of Executive Life Insurance Company of New York (ELNY) representing the dominant industry storyline.

This blog post highlights 2012 non-ELNY structured settlement developments for the primary market. Subsequent S2KM blog posts will highlight structured settlement developments for the 2) settlement planning and 3) structured settlement secondary markets and summarize 4) ELNY-related events.

Primary Market

The primary structured settlement market in 2012 was characterized by continuing sales declines including the departure of two annuity providers (Hartford and Symetra). As reported by Melissa Evola and "Structured Settlements and Periodic Payment Judgments" (S2P2J), annual structured settlement annuity premium reached an historic high in 2008 ($6,226,578,725) after consistently averaging close to $6 billion annually from 2001-2007.

The 2011 structured settlement annuity premium total of $4,974,710,838 represented an approximate 10 percent decline from 2010 and an approximate 20 percent decline from 2008. And based upon reported third quarter 2012 numbers, this year's structured settlement annuity numbers could be even lower.

Through the end of September 2012, reported nine month structured settlement annuity premium totaled $3,570,584,333 compared with 2011 ($3,638,466,321) and 2008 ($4,429,915,586) figures for similar nine month results. The comparable nine month case totals for these years: 2012 (18,701 cases); 2011 (21,846 cases); and 2008 (25,545 cases).

Many structured settlement industry participants attribute declining sales to low interest rates including future forecasts by the Federal Reserve. Market yields on U.S. Treasury securities at 30 year constant maturity peaked at 13.45 percent in 1981. Here are several historic average annual rates for 30 year Treasury securities (source: U.S. Department of the Treasury):

• 2012 (as of December 21) - 2.93%
• 2011 - 3.91%
• 2010 - 4.25%
• 2009 - 4.08%
• 2008 - 4.28%
• 2007 - 4.84%
• 2000 - 5.94%
• 1990 - 8.61%
• 1980 - 11.27%

Critics of the primary structured settlement market attribute the continuing sales decline to a broader set of factors. For example, speaking at the 2012 National Association of Settlement Purchasers (NASP) conference, Mark Wahlstrom described 2012 as "another bad year for the primary market". He characterized declines in primary market annuity premium as a "negative trend that will eventually impact the secondary market" and identified the following causes:

• The structured settlement is an insular, closed community with aging leadership and a shrinking sales force.
• Structured settlement annuity providers, and most brokers, lack marketing and innovation skills.
• Primary market participants are intimidated by the Internet.
• Instead of offering customer solutions, the primary market continues to sell a single product.
• With historically low interest rates, that product produces a zero return when you consider inflation.
• The primary market has not responded strategically to tort reform and increasing competition from other professionals.
• By continuing their "factoring wars", the primary market has missed opportunities to cooperate with the secondary market.
• The ELNY liquidation means the primary market can no longer claim all structured settlement recipients have received 100% of their payments.

Perhaps the most positive 2012 development for the primary structured settlement industry was the remarkable business turnaround of American International Group, Inc. (AIG). Four years following its $182 billion financial bailout of AIG, the United States Department of Treasury and the Federal Reserve sold almost all of their remaining AIG ownership interest during 2012, which at one time reached 92 percent, and achieved a net positive investment return of $22.7 billion.

AIG's significant role in the U.S. structured settlement market, and the impact of AIG's 2008 financial collapse, are apparent from annual AIG structured settlement annuity premium results (compiled by Melissa Evola) with AIG's estimated annual share of the U.S. structured settlement annuity market in parentheses.

• 2002 - $1.179 billion (19%)
• 2003 - $1.195 billion (20%)
• 2004 - $1.221 billion (20%)
• 2005 - $1.316 billion (21%)
• 2006 - $1.463 billion (24%)
• 2007 - $1.468 billion (24%)
• 2008 - $1.454 billion (23%)
• 2009 - $0.429 billion (8%)
• 2010 - $0.499 billion (9%)
• 2011 - $0.395 billion (11%)

For the first three quarters of 2012, based upon Evola's reporting, AIG (Amgen/AILife) sold $409,213,518 of total structured settlement premium representing 11 percent of total U.S. structured settlement annuity premium ($3,570,584,333) for the same period. 

Additional post in S2KM's blog series: "Structured Settlements in 2012":

• Part 1 - Primary market

• Part 2 - Settlement planning

• Part 3 - Secondary market

• Part 4 - Executive Life of New York

NASP 2012 Annual Conference - 3

The National Association of Settlement Purchasers (NASP) hosted its 8th annual educational conference October 16-19, 2012 in New Orleans with a record number of attendees consisting of transfer company executives and staff, in-house and outside legal counsel, investors, service providers and, for the first time, primary market participants.

NASP President Matthew Bracy set the conference theme by challenging speakers and attendees to continue to improve the structured settlement secondary market: "We have some of the brightest minds in the country assembled here to discuss the status of this industry and how to improve what we do. And, as is our habit, we have invited people who might have critical things to say about how we are doing and what we can do better. Improvement can only come from the honest and sometimes harsh assessment of outside critics."

One of those critics was keynote speaker Jan Schlictmann who called out "cash now" advertizing as a "primitive denomination". Schlichtmann's broader message echoed Bracy's theme of bettering oneself through self-criticism and the need for higher industry goals. "It is not just who we serve that matters, but how we serve", Schlictmann stated. Schlictmann reviewed his client experience with structured settlements and acknowledged a personal paradigm shift resulting from recent industry developments including low interest rates and the ELNY liquidation.

The Judges Panel has become a regular and popular feature of NASP educational conferences. Moderator Earl Nesbitt encouraged this year's panel members, Judge Patricia Wise, Chancery Court Judge, Hinds County, Mississippi and Judge Dean Lum, Superior Court for King County, Washington, to share their concerns about structured settlement transfers and their advice for transfer company representatives and attorneys. Selected highlights:

• Judge Wise: "We (Mississippi judges) have a good relationship with transfer attorneys. I don't look at transfers as inherently good or bad. I don't have any preconceived notion whether to approve or disapprove."
• Judge Lum: "It is not my job to talk someone into or out of a transfer. Judges, however, think about the worst case scenario - a recipient who has just turned 18. The closer to this worst case scenario, the more scrutiny a person receives."
• Judge Wise: "What judges are looking for is credibility and what structured settlement payees say they will do with the funds. We do focus on whether prior transfers have occurred. Also, the older the payee, the more likely they have the ability to make a good decision."
• Judge Lum: "Attorneys should prepare the structured settlement payee for his or her court appearance - how to dress and behave; how the best interest test applies; what the impact will be on dependents."
• Judge Lum: "We have a saying in King County: 'there is no party like ex parte'. In unopposed cases, people try to run things by you. Its kind of like the wild west. In unopposed cases, it is important for attorneys to go the extra mile. Your reputation matters. There are two degrees of separation in the legal profession."

Another regular and popular feature of NASP educational conferences are the small group break out sessions. The individual breakout sessions S2KM attended addressed participants' state-specific experience with:

• Court Approval Issues - judicial negotiation of discount rates; the meaning of full disclosure; statutory history of the "best interest" test; independent professional advisor qualifications and fees; transfer application exhibits; and the importance of judicial education.
• Underwriting Issues - annuity provider transfer requirements; "applicable state laws" requirements; judgment creditor issues including bankruptcy and child support; annuity provider administrative fees; and problems related to incompetent payees, identity theft and relatives or friends coercing payees.

The NASP conference doubled down on underwriting issues with an informative presentation about "Life Contingent Transactions" by NASP President-elect Patricia LaBorde. LaBorde, who also served as Chairperson for the 2012 NASP conference and was credited with upgrading the NASP website, discussed the two paths for funding life contingent transactions:

• Purchasing a life insurance policy to hedge against the risk of an early annuitant death; or
• Evaluating the risk and pricing the risk into the transaction.

Jack Kelly, a federal lobbyist who assisted NASP in securing enactment of IRC 5891 in 2002, provided a Legislative Update. Kelly summarized NASP's 2012 involvement with legislative proposals in Vermont, Minnesota and New Hampshire. Vermont, in 2012, became the 48th state to enact a structured settlement protection statute. The new Vermont statute is generally based upon the NCOIL Model Act with some variations related to independent professional advisors, notice requirements for certain state agencies and the required court appearance by the structured settlement payee.

Earl Nesbitt, NASP's Executive Director and General Counsel, presented the 2012 Litigation Update. Among several important court decisions, Nesbitt highlighted the Stone Street v. McClendon case which he characterized as an "important victory" for NASP and the structured settlement industry in general. In McClendon, a Louisiana state court found that Travelers Insurance and MetLife had no grounds for withholding payments following a valid transfer of payment rights pursuant to the Louisiana structured settlement protection statute. The court ordered MetLife to pay interest from the date the payments were originally due. Note: S2KM will publish a more detailed review of the McClendon case in a subsequent blog post.

Attorney Joseph Feltes' 2012 NASP presentation titled "Privacy Issues in Structured Settlement Transactions (Part 2)" supplemented his 2011 NASP presentation on the use and disclosure of confidential information by transfer companies. This year, Feltes discussed privacy issues related to electronic and digital communications, especially Internet-based communications. Among other issues, Feltes highlighted: cyber-bullying; the increase in defamation cases; the blurred boundaries between public and private communications; FTC blog rules requiring disclosures of paid endorsements; social media policy and practices; limits on constitutional rights; cloud technology issues; and the importance of company Internet policies.

In his "Primary Market Update", Mark Wahlstrom emphasized why the primary and secondary structured settlement markets are part of the same business. He called the primary market "the secondary market's best friend" despite the primary market's criticism of, and "needless obstacles" for, the secondary market. As one example of "needless obstacles", Wahlstrom mentioned Chartis for aggressively promoting an anti-factoring pledge among its structured settlement brokers.

Wahlstrom described 2012 as "another bad year for the primary market". He characterized declines in primary market annuity premium as a "negative trend that will eventually impact the secondary market" and identified the following causes:

• The structured settlement is an insular, closed community with aging leadership and a shrinking sales force.
• Structured settlement annuity providers, and most brokers, lack marketing and innovation skills.
• Primary market participants are intimidated by the Internet.
• Instead of offering customer solutions, the primary market continues to sell a single product.
• With historically low interest rates, that product produces a zero return when you consider inflation.
• The primary market has not responded strategically to tort reform and increasing competition from other professionals.
• By continuing their "factoring wars", the primary market has missed opportunities to cooperate with the secondary market.
• The ELNY liquidation means the primary market can no longer claim all structured settlement recipients have received 100% of their payments.

Kira Brereton, an attorney who specializes in asset-backed securitizations, provided a comprehensive introduction to "Financing Structured Settlements". Her presentation: reviewed a typical transaction structure; provided a market overview including legal and regulatory developments; summarized rating agency considerations; discussed split payment issues; addressed the creditworthiness of insurers backing the collateral pools; considered bankruptcy and receivership issues; and highlighted relevant securities laws and regulations including the Investment Company Act of 1940, private placements, Dodd-Frank and Regulation AB 2.0.

Elizabeth Yingling, a securities law expert, discussed "Implications of Federal and States Securities Laws on Structured Settlements". She addressed fundamental issues such as: What statutes govern securities? What is a "security"? What is an "investment contract"? and How do promotional materials impact the analysis? In addition, Yingling offered a detailed analysis of the "Howey test" and provided practical tips.

Alexander Hamilton Award

NASP also named S2KM blog author, Patrick Hindert, as the 2012 recipient of its Alexander Hamilton Award. NASP has bestowed this award five times "to distinguished individuals who have supported and defended the right to free alienability of property rights. This right is the corner stone of NASP and the foundation of the structured settlement factoring business." Previous Alexander Hamilton Award recipients:

• State Senator Alan Sanborn of Michigan.
• U.S. Representative Eric Cantor of Virginia.
• State Representative Van Tran of California.
• Earl S. Nesbitt, Esq., of Texas.

In announcing the 2012 award, NASP President Matt Bracy stated: "Hindert was chosen to receive this award based upon his longstanding support of the factoring business and option. In particular, his position as a founder and leader in the primary structured settlement business, who early on recognized the legitimacy and value of the secondary market, led to this honor."

For complete S2KM reporting on NASP conferences plus other structured settlement and settlement planning conferences, see the structured settlement wiki.

NASP 2012 Annual Conference - 1

The National Association of Settlement Purchasers (NASP) will host its 2012 Annual Conference October 16-19 in New Orleans. For the first time in NASP's history, conference registration will be open to persons who are not NASP members or affiliated attorneys.

Speakers and Topics

• Matt Bracy - Welcoming Remarks
• Jack Kelley - Legislative and Regulatory Developments at State and Federal Level
• Earl Nesbitt - Litigation Update
• Joseph Feltes - Privacy Issues in Structured Settlement Transactions
• Jan Schlictmann - Keynote Address
• Mark Wahlstrom - Executive Life of New York Rehabilitation and Other Issues Facing the Primary Structured Settlement Market
• Kira Brereton - Financing Structured Settlement Transactions
• Patricia LaBorde - Issues in Life Contingent Transactions
• Elizabeth L. Yingling - The Application of the Securities Laws to the Sale of Structured Settlement Purchasing Transactions
• The Judges' Panel - How Judges Interpret the Best Interest Standard and Other Concerns in Structured Settlement Transfers
  

  • Judge Patricia D. Wise, Chancery Court Judge, Hinds County Mississippi

  • Judge Dean S. Lum, Superior Court for King County, Washington

• Breakout Session One - Practical and Ethical Issues Facing Transfer in Obtaining Court Approval of Structured Settlement Transactions
• Breakout Session Two - Issues in Underwriting Structured Settlement Transactions

S2KM Reporting for Prior NASP Conferences

• 2011 NASP Conference
  
  • Part 1 - speakers and topics
  • Part 2 - S2KM's primary and secondary market perspective
• NSSTA and NASP 2010 Educational Conferences
  • Part 1 - industry issues
  • Part 2 - discussion topics
  • Part 3 - "protect and preserve" vs. "improve and grow"
  • Part 4 - strategic questions
• 2009 NASP Conference
  
  • Part 1 - a listing of educational issues and participants
  • Part 2 - a summary of the educational discussions
  • Part 3 - a closer look at the strategic discussions
• 2008 NASP Conference
  
  • Part 1 - Speakers and topics
  • Part 2 - Panel discussion: structured settlement industry issues
  • Part 3 - Panel discussion: how to improve and grow the structured settlement market
• 2007 NASP Conference - see related NASP 2007 educational wiki
• 2006 NASP Conference
  
  • Part 1 - Speakers and Highlights
  • Part 2 - Primary and Secondary Market Introductions
  • Overview of the Structured Settlement Market
  • How the Primary Market Views Factoring

SSP 2012 Annual Meeting - 1

The French author and poet Victor Hugo has been translated and quoted as saying: "There is nothing more powerful than an idea whose time has come."

Has the time come for "settlement planning" to be recognized as a powerful idea deserving professional study and status in the United States? Recent conferences, including the Society of Settlement Planners (SSP) 2012 Annual Meeting, suggest that settlement planning is becoming both an important profession and an alternative business model for the structured settlement industry.

As a foundation for professional status, SSP has previously developed the Registered Settlement Planner (RSP) Program and adopted Standards of Professional Conduct. The 2012 Annual Meeting, held April 30 - May 1 in Las Vegas, featured presentations by leading settlement planning practitioners and subject matters experts. In addition, several product providers introduced insurance and financial products to complement the traditional structured settlement annuity.

What is settlement planning? Joseph Tombs, a former SSP President and co-founder of the RSP program, defines settlement planning as "... a profession helping recipients of settlement proceeds use those proceeds to achieve post-loss goals and transition successfully to post-settlement financial life."

What is a settlement planner? The SSP Standards of Professional Conduct define "settlement planner" as "... a representative who provides advice and other services to a person participating in the design, negotiation or implementation of a settlement or satisfaction of judgment for the benefit of a person claiming a legal entitlement to an award of damages or other compensation."

SSP conference Keynote Speaker Michael Ellsberg, author of "The Power of Eye Contact" and "The Education of Millionaires", discussed how to "Invest in Your Own Human Capital".

Settlement Planning Practitioners and Subject Matter Experts and Topics:

• 2011 SSP President Jack Meligan - SSP Accomplishments
• 2012 SSP President Charles Schell - SSP Goals
• Joseph DiGangi - Reinventing the Settlement Industry
• Douglas Shaw - Medicare Liens
• Robert Wood - Tax Update
• Jeremy Babener - Settlement Agreements and IRS Challenges
• Karen Meyers - Suitability Standards
• Patrick Hindert - Settlement Planning Business Models
• David Higgins - Litigation Rollover Accounts
• Jason Lazurus - Liability MSAs
• Frank Maguire - Overcoming Stalled Markets
• Mark Wahlstrom - Market Trends and Challenges
• Daniel Hindert - The ELNY Liquidation
• Richard Risk - History of Settlement Planning
• Dan Alverez - Lien Resolution
• Joseph Tombs - The RSP Program

Settlement Planning Product Providers

• Wesley Cosgriff - Secured Futures Trust
• John Woolway - Vantage Investment Partners
• Robert Noack - Aequitas Capital Management
• Christi Fried - Continental Trust Services
• Paul Hansen - Morgan Stanley Smith Barney
• Major General James W. Comstock (ret.) - Alternative Design Insurance Services
• Anthony Prieto - Synergy Settlement Services
• James Creel - First Capital Surety & Trust Co.
• Robert Burney - Integrity Financial, Inc.
• Mal Deener - Symetra Life Insurance Company (on behalf of Berkshire Hathaway Life Insurance and National Indemnity)

In subsequent blog posts, S2KM will review selected SSP conference topics. For S2KM reporting of prior SSP meetings, see the structured settlement wiki.

NSSTA 2011 Education Meeting

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

Speakers and topics:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Structured Settlement Metrics - 6

The online "Claims Journal" features an October 31, 2011 article (Claims Journal article) written by Denise Johnson titled "The Benefits of Using Structured Settlements in Claims Negotiations".

The Claims Journal article promotes the National Structured Settlement Trade Association (NSSTA) and incorporates structure-friendly quotes from NSSTA President Dan Finn, Chartis Vice President Ismael Acevedo and Jim Martin, CNA Vice President Commercial Liability Claims. Martin is also scheduled to speak this week at NSSTA's 2011 Fall Meeting in Austin, Texas on the topic of "Structured Settlements from a P&C Company's Point of View".

The Claims Journal article predictably provides a defense perspective of structured settlements based upon traditional (claim management) business models and business practices. For a summary of traditional structured settlement business model characteristics and the problems these business models create, see this prior S2KM blog post. For a discussion of traditional structured settlement business standards and practices, see "Structured Settlements and Periodic Payment Judgments" (S2P2J) section 6.02 [3].

The intended audience for the Claims Journal article can be assumed to be liability insurer claims personnel (executives, managers and adjustors) and perhaps also their outside litigation counsel. This intended audience therefore overlaps and includes members of the Council on Litigation Management (CLM).

CLM recently sponsored a National Litigation Management Study (CLM study) that highlighted structured settlements as the "most penetrated external initiative" among 30 litigation-related service areas analyzed based upon interviews with leading litigation management executives. Among the CLM study's key findings: "Litigation executives are not happy with the metrics and analytics available to them."

What stands out in the Claims Journal article, especially in the context of the CLM study's assertion about the need for improved metrics and analytics, are several statements about the benefits of structured settlements and the questionable rationale (or lack thereof) provided for such benefits. Structured settlement stakeholders have a history of promoting unsubstantiated and/or false statements. Two infamous examples:

• Injury victims squander lump sums. Nine out of 10 lump sum recipients squander the entire amount within five years.
• Structured settlements enable injury victims to live free of reliance on government assistance.

Here are three examples of unsubstantiated and/or misleading statements from the Claims Journal article:

• The Claims Journal article: "At zero expense to the carrier ..... structured settlements are a powerful tool claims personnel can use when resolving claims."
• Finn: structured settlement consultants represent a "free resource to claims departments ...and even prepare settlement documents." (see correction below)
• Acevedo: structured settlement consultants: "understand the tax code and how to generate the benefits in the settlement context relative to the tax code,”

What is wrong with these statements?

One assumption appears to be that because "structured settlement consultants" are agents of, and paid commissions by, annuity providers, structured settlements generate "zero expense" for liability insurers. This assumption represents a non sequitur. It fails to consider the time and cost required for multiple claims adjustors and outside legal counsel to review multiple structured settlement proposals generated by structured settlement consultants or the related meetings and telephone conversations.

How should the structured settlement industry, liability insurers and the legal profession react to statements that structured settlement consultants "prepare settlement documents" and "understand the tax code and how to generated the benefits in the settlement context relative to the tax code"?

To quote the title from one of Mark Wahlstrom's blog posts: "Structured settlement brokers drafting settlement documents. Are you guys nuts?" In other words, does a routine structured settlement business practice that presumably saves expenses for liability insurers (life insurance agents drafting personal injury settlement documents) represent the unauthorized practice of law?

And exactly how are structured settlement consultants (life insurance agents) qualified, legally and/or educationally to "understand the tax code" and generate settlement benefits relative to the tax code? Especially when, to quote the Claims Journal article, the "tax-free" structured settlement option "has been applied to employment, personal injury, construction defect, directors & officers’ liability, and even copyright infringement claims."

Consider another misleading or unsubstantiated statement from the Claims Journal article - Martin describing how defendants can utilize a structured settlement to resolve a disagreement over the cost of a life care plan: “So, if the plaintiff believes it’s ‘x’ and the defense says no it is only going to cost ‘y’, that issue can be taken off the table for the plaintiff by investing the ‘y’ number which will pay out the ‘x’ number they claim they need for the remainder of their lives."

What is wrong with this statement?

First, it appears that Martin's "x" represents both the plaintiff's present value number and the expected payout which confuses his example. Second, in today's low interest rate environment, Martin's structured settlement example won't accomplish his defense objective unless the case involves a substantial age rating, which the Claims Journal article never mentions.

Consider a 10 year old female with a normal life expectancy of approximately 69 years (to age 79) whose life care plan projects:

• Annual medical costs of $10,000 for life;
• A present value cost of approximately $690,000 (assuming a 5% discount and 5% inflationary growth rate) to pay
• A projected $5,500,000 of total lifetime medical costs.

The cost of a structured settlement annuity to pay $10,000 per year increasing at 5% per year (without any age rating and with or without a guaranty period) is approximately $1,100,000 compared with the plaintiff's present value figure of $690,000 for the same projected damages. How does a structured settlement help Mr. Martin and CNA in this case? In non-age rated cases, with today's low interest rates, structured settlements generally will not help defendants argue or defend damages.

Related questions the Claims Journal article does not adequately address:

• Why does CNA "flag claims for structures when they exceed $50,000 in exposure to our insured and involve bodily injury?"
• What is CNA's expense resulting from its claim adjustors and outside legal counsel reviewing structured settlement proposals for those cases?
• What is CNA's success ratio for resolving those cases with structured settlements?
• How exactly can structured settlements "help drive the total claim outcome for [CNA's] claim operations"?
• Does CNA reduce its claims costs using structured settlements? And if yes, how?

In another questionable statement, Martin maintains: "there are three things claimants seek in a settlement: 1) financial security; 2) guaranteed income; and 3) instructions on how to take advantage of any tax benefits." What about "qualifying for or maintaining government benefits" (Social Security; Medicaid; Medicare)? Is Martin's omission merely inadvertent or does it echo the false declaration that "structured settlements enable injury victims to live free of reliance on government assistance"?

For defendants and liability insurers who believe that structured settlements represent "good public policy" and who want to encourage its appropriate application for suitable injury victims and their dependents, it is time to re-think traditional structured settlement business models and practices. Despite (or perhaps because of) its faults, the Claims Journal article promoting structured settlements provides a valuable starting point for any such re-evaluation.

S2KM's "Structured Settlement Metrics" series is featured on the structured settlement wiki.

CORRECTION (November 7, 2011) - This blog post includes the following quote from Denise Johnson's Claims Journal article that S2KM incorrectly attributes to Dan Finn: structured settlement consultants represent a "free resource to claims departments ...and even prepare settlement documents." S2KM apologizes to Dan Finn.

SSP and NSSTA 2011 Annual Meetings - 6

Both the Society of Settlement Planners (SSP) and the National Structured Settlement Trade Association (NSSTA) featured internet experts as part of their 2011 educational programs.

SSP's speakers, Mark Wahlstrom and Joe Didier, focused primarily on internet marketing and recommended expanded business use of web-based social media tools such as podcasts, blogs, Facebook, Twitter and Linkedin. Wahlstrom offered one especially insightful and negative cultural observation about the structured settlement industry as it attempts to transition from pre-internet to web-based business models, processes and skill sets: "We do not share ideas well in our industry."

NSSTA's speaker, LuAnn Reeb, also discussed internet marketing and social media tools in the context of "business communications today". Her emphasis, however, was more on the importance of learning web-based skill sets and how web-based conversations are replacing traditional one-directional marketing techniques.

How far structured settlement stakeholders must still go to successfully transition their business to the Internet was summed up humorously by one SSP wag who asked speaker Didier at the conclusion of his presentation: "So, are you saying that this Internet thing is really important?"

Assuming the answer is "yes", neither SSP nor NSSTA has articulated any identifiable learning strategy to help members transition from pre-internet to web-based business models, processes and skill sets. At best, their 2011 educational programs will encourage some members to sign-up for Linkedin, Twitter, or Facebook.

S2KM comments and recommendations:

• The structured settlement and settlement planning industries currently function primarily using old (pre-internet) business models, rules, skill sets, tools and culture.
• Web-based business activity introduces new business rules, creates new business models and culture, and requires new skill sets and tools.
• In the words of Kevin Kelly, an internet business pioneer: “as innovation accelerates, abandoning the highly successful in order to escape from its eventual obsolescence becomes the most difficult and yet most essential task.”
• Lectures represent an ineffective teaching method for learning Internet skill sets and tools.
• To help their members accelerate and improve their business transition to the internet, SSP and NSSTA could:
  • Place a greater educational priority on helping members understand the Internet business environment and learn web-based skill sets and tools.
  • Sponsor related workshops utilizing appropriate educational venues. See, for example, The METS Center.
  • Begin utilizing web-based tools (other than email and listserves) to improve committee functions and teach committee members how to collaborate online.
  • Encourage more members to publish, read and subscribe to online blogs, podcasts and wikis.
  • Expand (or create) references in Wikipedia for "structured settlement", "settlement planning" and related vocabulary.
• Advice for structured settlement and settlement planning stakeholders who consider themselves knowledge workers and want to successfully transition their knowledge and work processes to the internet - with or without assistance from SSP and NSSTA:
  • Learn more about web 2.0 and web-based knowledge management (KM).
  • Identify (inventory and/or map) your personal and collaborative (company; industry) knowledge.
  • Learn how to capture your knowledge in formats you can publish and share online (publicly and/or privately).
  • Identify and connect with online knowledge leaders and resources for structured settlements and/or settlement planning.
  • Learn more about web-based organizational concepts such as personal KM, social networks, communities of practice (COPs) and folksonomies.
  • Learn to utilize web-based cultural best practices such as knowledge sharing and continuous learning.

For visual examples of how one company captures structured settlement knowledge, see this Flickr page created by The Settlement Services Group (TSSG). Click on individual diagrams to enlarge.

For complete S2KM reporting about the SSP and NSSTA 2011 annual meetings, see the structured settlement wiki.

SSP and NSSTA 2011 Annual Meetings - 1

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

Elections

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

Honors - NSSTA

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

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

Legislative Update

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

Government Benefits

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

Taxation

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

Stakeholder Perspectives

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

Marketing

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

Practice Improvement and New Products

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

Strength of Life Companies

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

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

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