Beyond Structured Settlements

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.

NSSTA 2015 Fall Conference

Although the National Structured Settlement Trade Association (NSSTA) did not promote a specific theme for its 2015 Fall Educational Conference, one of the speakers succinctly captured the program's overall purpose and accomplishment when he described NSSTA's new Industry Growth Initiative as "changing the focus of our future."

Industry Growth Initiative

NSSTA's website description of its Industry Growth Initiative highlights "a significant decline in production since its peak at $6.3 Billion in 2008" and asserts "we do an excellent job protecting our industry" before announcing that "this year we want all NSSTA members to focus their time, energy and resources on new opportunities to expand the use of structured settlements-to grow our industry."

NSSTA President Michael Goodman utilized his Opening Conference Comments in Phoenix (as well as a preconference interview with S2KM) to describe the status and organizational structure of the NSSTA Industry Growth Initiative.

"My first priority as President of NSSTA," Goodman stated, "is to identify growth opportunities for the structured settlement industry. First, we asked all NSSTA members to submit ideas for growth at [email protected]. . Second, I tried to put together a NSSTA Growth Committee consisting of a highly talented cross section of industry leaders with diverse perspectives. Third, the Committee evaluated all of the 28 (to date) NSSTA member growth proposals and selected three for NSSTA Board of Directors approval to develop immediate implementation plans with success metrics."

Goodman introduced the NSSTA Growth Committee members including co-Chairmen William Goodman, Sean Coleman, John McCulloch and John Arendt. Speaking for the Committee, Coleman enthused: "I love our change of focus. Historically, NSSTA has been reactive, dodging bullets. The Growth Initiative redirects our mindset and focus. It encourages us to become proactive. The Growth Committee has already surpassed by highest expectations."

Goodman and the Committee co-Chairmen identified the following three NSSTA Growth Initiatives already selected and approved:

• Rejuvenate Defense Programs (including casualty insurers, commercial insureds and TPAs) - Originally the prime movers for structured settlements, many defense insurers have reduced or completely abandoned their structured settlement programs citing a variety of reasons. Beginning with three target carriers, the Committee plans to analyze the causes, and ultimately revitalize the programs, to create new prototype defense program models. Note: NSSTA recently commissioned surveys of Senior Claims Executives; and front line Claims Professionals which S2KM summarized and evaluated in prior blog posts.
• Amend the Federal Employee Compensation Act (FECA) - FECA, which provides workers compensation like benefits for federal workers, currently does not permit structured settlements. With payouts totally approximately $4.5 billion per year, FECA represent an attractive potential market for structured settlements with administrative cost savings being one justification for a legislative amendment. Based upon preliminary interviews, the Growth Committee believes FECA stakeholders view structured settlements favorably. The Committee is gathering statistical data to support its proposal and building grassroots support.
• Convertible Deferred Lump Sums - As a sales response to "low interest rates", the Growth Committee is proposing a new structured settlement feature. As envisioned, the convertible deferred lump sum would allow a structured settlement recipient to select a future lump sum that would automatically convert on its payment date into a series of predetermined periodic payments payable at whatever annuity rates offered at the time of conversion by the issuing life company. A Canadian broker attending the NSSTA conference stated that at least one Canadian life company already offers this structured settlement product feature. The Committee anticipates whichever annuity provider introduces this product feature in the U.S. will probably also seek an IRS private letter ruling.
• Note: NSSTA's Growth Committee identified a fourth preliminary initiative (Dissipation Study) - to confirm that injury victims squander lump sums. However, this initiative is currently on hold. For background, see this 2009 S2KM review of Jeremy Babener's legal research paper analyzing historic dissipation studies.

Factoring Update

Goodman also addressed the state of the structured settlement industry including a "factoring update". As part of this report, Goodman confirmed that NSSTA and the National Association of Settlement Purchasers (NASP) have agreed to cooperate legislatively in several states to seek the following consumer protection amendments for state structured settlement protection statutes:

• No forum shopping.
• Payee required to attend hearing.
• Stricter application of approval requirements.
• Advanced notice of transfer.
• Required disclosure of prior transfers.

Supporting this cooperative initiative, NSSTA has begun offering its members a new Judicial Education Training Seminar - taught in Phoenix by John McCulloch and Stephen Harris. Goodman also announced he will be a featured speaker at NASP's 2015 Annual Conference next week in Las Vegas - the first serving NSSTA President to do so. Perhaps anticipating his NASP appearance, and cognizant of the recent Washington Post article ("a perfect storm for factoring"), Goodman advised the NSSTA Conference attendees: "Factoring is not a zero sum game. What is bad for them is not always good for us."

Additional Conference Presentations

Many structured settlement participants believe control of the primary structured settlement market, and future market growth, have shifted from the defense to plaintiff attorneys and their injury victim clients. Although NSSTA has been slow to embrace plaintiff-focused personal injury settlement planning, NSSTA's Fall Conference included two presentation featuring plaintiff representatives:

• A Trial Lawyer Panel - moderated by Ryan Garrison with plaintiff attorneys Julio Zapata and Francisco Gutierrez; plus
• An introduction to the National Association of Trial Lawyers Executives (NATLE) by Gayle Bennett, Deputy Director of the New Mexico Trial Lawyers Association.

Both plaintiff presentations emphasized opportunities to expand the market for structured attorney fees. Both plaintiff attorneys expressed a preference for advisors who are "knowledgeable not just about structured settlements but also other investment vehicles."

In addition to the Judicial Education Training session mentioned above, three other NSSTA presentations addressed educational issues and programs:

• Best Practices for Structured Settlement Case Resolution - During her excellent review of structured settlement fundamentals, Betty Gregware expressed serious concern about the general quality of structured settlement documentation and the need to increase competence across the industry.
• Professional Broker Education - Gregware, Melissa Price and Debbie Sink introduced a new educational program NSSTA is developing primarily for individuals who are new to the structured settlement industry. They also provided an administrative overview of "NSSTA University" whereby NSSTA partners with members to secure CE credits for member-sponsored educational seminars for insurance claims departments or law firms.
• MSSC Paper Presentation - Mal Deener moderated a panel featuring Trish Fairhurst, Richard Carroll and other members of the first graduating class of NSSTA's new Masters Structured Settlement Consultant (MSSC) professional designation. Each MSSC graduate is required to submit a paper and these papers will be published on NSSTA's website. NSSTA will offer its next MSSC program beginning April 27, in conjunction with its Certified Structured Settlement Consultant (CSSC) program, at the University of Notre Dame

Separate from, but related to, NSSTA Growth Initiative, NSSTA's Board of Directors has appointed a Special Needs Attorney Task Force to develop strategic relationships with special needs attorney professional associations and to identify collaborative marketing opportunities with special needs attorneys more generally. NSSTA member Carola Davis and Special Needs Alliance attorney Patty Sitchler initiated a NSSTA presentation/discussion in Phoenix which hopefully will continue and expand to the benefit of both professional communities.

A critical factor, both challenge and opportunity, for growing the primary structured settlement market concerns succession planning. What new generation of distributors, or distribution channel(s), or business models, will emerge (and when) to replace and build upon the accomplishments of the pioneering generation (now in their 60s and 70s) who originated the structured settlement market in the late 1970s? NSSTA's Fall Conference featured two presentations addressing these issues:

• Succession Planning - Presenter Jim Early looked at the succession issue primarily from the point of view of the individual producer. Among his observations: "nepotism works in the structured settlement industry" and "a lack of capital has prevented the primary market from bringing in and training new people."
• Diversity Discussion - Angel Viera and Stacy McCall offered a convincing case for promoting greater diversity among new structured settlement professionals as a key component for future growth. Their presentation included and elicited several thought-provoking observations including: 1) "From a demographic perspective, our industry should mirror the people we serve" and 2) "Our industry suffers from a lack of diversity of thinking. Where do we find new voices and perspectives?"

Lifetime payments represent a valuable, optional structured settlement benefit which can be further enhanced from a pricing perspective when rated ages are applicable. Kevin Puckett and Ken Kiefer expounded on these important issues during their presentation about Mortality, Morbidity & Rated Ages.

NSSTA members Susan Clark and Robert Caples introduced Arnie Begler and Scott Henry, representing Pipitone Group, NSSTA's new public relations firm, and together they discussed NSSTA's Communications Program. Because journalists, as well as their readers, frequently confuse the primary and secondary structured settlement markets, Pipitone's "first test" was responding to the aforesaid Washington Post article. Pipitone's stated assignment is "to find the best communications practices and bring them to NSSTA" which will include designing a new NSSTA website. Among NSSTA's priorities, and Pipitone's challenges, will be attempting to reclaim the "structured settlement" brand inclusive of Google searches which currently are dominated by secondary market companies.

NSSTA Executive Director Eric Vaughn concluded NSSTA's Fall Conference with a Government Relations Update - his characteristically insightful and energizing overview of structured settlement legislative and regulatory activities. Among other accomplishments, Vaughn was recently named Vice Chairman of the American Association of People with Disabilities (AAPD).

Other recent NSSTA-related S2KM blog posts:

• Michael Goodman Interview
• NSSTA Marketing Surveys
  • Senior Claim Executives
  • Claim Professionals
  • Plaintiff Attorneys
• NSSTA 2015 Structures 202 Conference
• NSSTA 2015 Annual Conference

NSSTA Marketing Surveys - Plaintiff Attorneys

The National Structured Settlement Trade Association (NSSTA) has previously announced an "Industry Growth Initiative" - "designed to identify opportunities to expand the use of structured settlements and bring those opportunities to the structured settlement marketplace" - which appears to focus multiple growth-oriented goals NSSTA president Michael Goodman identified during NSSTA's 2015 Annual Meeting.

Although the first progress report for its Growth Initiative will not occur until NSSTA's 2015 Fall Educational Meeting, expanded use by traditional stakeholders represents one logical priority - a priority which NSSTA highlighted during 2014 by commissioning CLM Advisors to conduct a three-part survey of senior claims executives (Part 1); front line claims professionals (Part 2); and plaintiff attorneys (Part 3).

S2KM has previously reviewed Part 1 and Part 2 of NSSTA's structured settlement survey - the results of which NSSTA has made available to its members, including S2KM. NSSTA and CLM Advisor representatives have also provided their own interpretive analyses of these surveys during prior NSSTA educational conferences.

This blog post discusses selected portions of Part 3 (Titled: "Plaintiff Attorney Survey of Structured Settlements") the results of which: 1) NSSTA has made available to its members, including S2KM; 2) neither NSSTA nor CLM Advisors has yet to discuss or analyze during a NSSTA educational conference. 130 attorneys participated in the Part 3 survey. Not every attorney responded to every question.

S2KM INTRODUCTION

Until the Weil lawsuit settled in 1996, defendants retained exclusive control of structured settlements. Many defense brokers, as well as their liability insurance company clients, historically have referred to unsuccessful sales as "cash outs". As a general rule, their professional interests in structured settlements have been narrowly defined and focused upon their own product to the exclusion of other settlement related financial and insurance products.

To a much greater extent than defense brokers, plaintiff structured settlement brokers (and settlement planners, their evolutionary progeny) face direct competition from other product and service providers who market to plaintiff attorneys. These settlement planning product and service providers include: tax attorneys, special needs attorneys, settlement trustees, financial planners, life care planners, case managers, economists, Medicare set-aside (MSA) specialists and damage allocators - as well as structured settlement consultants. In response, many plaintiff structured settlement brokers and settlement planners increasingly offer financial and insurance products and services which extend beyond structured settlements.

Regardless of case complexity, or the involvement of other settlement planning professionals, plaintiff attorneys continue to perform the following essential settlement planning roles:

• Recognizing settlement planning issues which impact their clients;
• Recommending appropriate settlement planning professional resources to their clients; and
• Retaining ultimate responsibility for effectuating settlements.

For these reasons, plaintiff attorneys represent the primary marketing target for companies and professionals offering settlement planning services - as well as a logical priority marketing target for growing the structured settlement market.

To effectively analyze the growth opportunities and obstacles for structured settlements and structured settlement brokers from the plaintiff attorney's perspective, therefore, both need to be viewed (and surveyed) in a broader context - as subsets of, and participants in, the larger and more complex personal injury settlement planning market. Although the results of NSSTA's Part 3 Survey provide valuable marketing information, the survey questions neither attempt nor accomplish this more comprehensive objective.

This shortcoming is understandable - even predictable. CLM Advisors, which conducted all three of the NSSTA surveys, is an affiliate of Claims and Litigation Management (CLM) Alliance - "the only national organization created to meet the needs of professionals in the claims and litigation management industries". Perhaps as a result, NSSTA's Part 3 Survey has a defense-oriented, historic quality. Some of their survey questions use awkward or unfamiliar language ("ancillary products to structures"). Some important issues (fiduciary responsibilities) are only addressed obliquely. Other important topics (Non-Qualified Assignments; Qualified Settlement Funds; Affordable Care Act) are not addressed at all.

Borrowing a phrase from an excellent presentation titled "Marketing Attorney Fees", delivered by Spooner Phillips and Rebecca Metzger at NSSTA's inaugural Structures 202 Conference, and applying it more broadly, perhaps it's time for proponents of structured settlements to "change the conversation" when marketing to plaintiff attorneys.

NSSTA SURVEY PART 3 SELECTED RESPONSES WITH S2KM COMMENTS

• 40% of respondents stated low interest rates have not negatively affected their perception of structured settlements.
• 67% said factoring has no impact on their willingness to consider a structured settlement or that they are indifferent to the factoring industry.

S2KM Comment: These findings should encourage NSSTA members to re-think standard explanations for recent lackluster industry sales results. They also support two of the seven goals Michael Goodman has identified for NSSTA during his term as president.

• 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).

S2KM Comment: Similar to NSSTA surveys Parts 1 and 2, Part 3 identifies a need and opportunity to educate all structured settlement stakeholders to the advantages of funding MSAs with structured settlements including their inherent cost advantage compared with lump sums resulting from current CMS regulations for calculating present values.

• 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.

S2KM Comment: Every plaintiff structured settlement broker and settlement planner who sells structured settlements should be familiar with the Grillo case and use it help educate plaintiff attorneys about their potential liability for not advising their clients about structured settlements.

• 40% said they felt obligated to introduce the idea of a structured settlement to a client if a case has a value between $101,000 and $500,000.
• An additional 32% felt obligated for cases having a value in excess of $500,000.

S2KM Comment: Although there is nothing inherently wrong with utilizing case values to identify potential structured settlement cases, this approach represents a more traditional, defense-oriented methodology rather than a plaintiff-oriented, comprehensive planning methodology that attempts to match products to needs.

• 48% stated the most significant drawback of a structured settlement is lack of liquidity.

S2KM Comment: NSSTA and its members should carefully consider how to improve primary market sales by proactively addressing this finding based upon the following, previously highlighted finding: 67% said factoring has no impact on their willingness to consider a structured settlement or that they are indifferent to the factoring industry.

• Only 4% view structured settlement consultants as adding value for negotiations and/or case evaluations separate from, or in addition to, their knowledge of structured settlements.
• 35% stated that structured settlement consultants fail to deliver value because they are concerned with structuring as much of a settlement as possible.
• 52% contact a structured settlement broker one week (possibly less) prior to a mediation.
• 38% make contact only after a case settles.
• 40% said they would use the defendant's structured settlement consultant.
• Only 20% assume a defendant will be offering more money if a defense structured settlement consultant is present.
• 38% work with financial planners instead of structured settlement consultants - at least on some cases.

S2KM Comment: This feedback provide an excellent starting point for NSSTA and its members to think strategically about how to increase structured settlements sales within the larger, more complex personal injury settlement planning market.

• Only 26% have ever structured their fees.

S2KM Comment: Similar to MSAs, structured attorney fees appear to represent an underdeveloped opportunity to grow the structured settlement market. Among the significant takeaways from the Structures 202 "Marketing Attorneys Fees" presentation referenced above: 1) the presenters were a settlement planner, who sells multiple products including structured settlement annuities, and a tax attorney; 2) their recommended sale encompasses tax, business, retirement and estate planning.

CONCLUSION

Although somewhat circumscribed by a traditional, defense perspective, NSSTA's Part 3 Survey of plaintiff attorneys provides valuable information for re-positioning the structured settlement industry for additional growth within the personal injury settlement market. The findings support and supplement the goals for growth previously identified by NSSTA president Michael Goodman and should assist NSSTA's Growth Initiative Committee in formulating its strategic priorities.

Misguided Recommendations

In a recent article titled "Time for Congress to Reform Structured Settlements", published April 20, 2015 in the Congress Blog, attorney Richard Risk alleges "Congress’ noble goal of supporting accident victims has been upended by the current system in which insurers and their consultants often deceptively rig structured settlements against accident victims."

To "clean up" the primary structured settlement market, Risk recommends that Congress or the Consumer Financial Protection Bureau (CFPB) should take action against "abusive practices" in the structured settlement industry and, "at a minimum", these reforms should include:

1. "Ensure victims have better access to their own structure consultants."
2. "Require diversification in large cases."
3. "Demand better disclosure from the defense."

Even assuming Risk's prognosis is correct, his proposed governmental solution is not - at least not for injury victims who are represented by legal counsel. Each of the three "reforms" Risk highlights falls squarely within the fiduciary role and responsibilities of plaintiff attorneys which encompass settlement planning and negotiation as well as litigation.

In the past, many plaintiff attorneys have relied on defendants and their advisors to make structured settlement proposals and to provide expertise regarding structured settlements. This practice was and continues to be a mistake and could be considered professional malpractice.

Plaintiff attorneys should never rely exclusively on the defense for structured settlement advice. Defense attorneys, structured settlement brokers and other consultants working on the defense side are not engaged to work for the plaintiff or to advise the plaintiff’s attorney. Defense settlement objectives are to secure a full release for all defendants and related parties at a reasonable cost.

A broad range of professionals, including structured settlement consultants, currently provides settlement planning related services to plaintiffs and their attorneys. Most structured settlement consultants belong to one of two primary market structured settlement associations: the National Structured Settlement Trade Association (NSSTA) or the Society of Settlement Planners (SSP).

NSSTA and SSP share a divisive political history which may explain, in part, the indirect critique of NSSTA (whose members are meeting this week in Washington, D.C.) that envelops the article by Risk, an SSP member. Whether intentional or not, Risk's article appears to represent a step backward from recent attempts by leaders of both associations to unify the primary structured settlement market.

During the NSSTA Fall 2014 Conference, for example, SSP President Neil Johnson outlined a "Blueprint for Industry Unification" which he and NSSTA President Kevin Silo continued to discuss at the SSP 2015 Annual Conference in a repeat performance of their "Presidents' Panel". Johnson's appeal for unity characterized "industry disarray" as a "threat to our future." Labeling diversity "good" and disparity "bad", he called for a united front before the public.

In Johnson's words: lack of structured settlement industry unity is "a drain - a drain on financial resources ... a drain on productivity ... a drain on our public image ... a drain on physical and emotional health. Lack of unity diverts attention from productive projects. It always focuses attention on the negative, never on the positive. Lack of industry unity shows no partiality or favoritism for either NSSTA or SSP."

Many structured settlement professionals increasingly recognize the need to acknowledge and address structured settlement industry problems - including the need to improve primary and secondary business practices and standards. Relatively few industry participants, however, are likely to support Risk's proposal for federal legislation and/or regulation to attempt to force defendants to fulfill the fiduciary responsibilities plaintiff attorneys owe to their own clients.

A better solution, in S2KM's opinion, would encompass a combination of structured settlement industry self-regulation and improved education of plaintiff attorneys (and consultants themselves) about the client benefits and professional responsibilities associated with structured settlements in the context of personal injury settlement planning. This solution represents both an opportunity and a challenge for a new generation of structured settlement leaders.

For more detailed analysis about the role and responsibilities of plaintiff attorneys in structured settlements, see chapter 5 of "Structured Settlements and Periodic Payment Judgments" (S2P2J).

Structured Settlements 2014 - Settlement Planning

During the late 1970s, and throughout the 1980s, when defendants retained exclusive control of structured settlements, many brokers and their liability insurance company clients referred to unsuccessful sales as "cash outs". Their professional interests and curiosity were narrowly defined and focused upon their own product to the exclusion of other settlement related products and services.

With the advent of plaintiff structured settlement brokers, continuing legislative and regulatory developments, plus an expanding array of settlement planning professionals, products and product providers, structured settlements are now viewed by most stakeholders as a subset of the larger and more complex personal injury settlement planning market.

For future success, a new generation of structured settlement leaders must look beyond structured settlements and learn to re-position their product as a fundamental and catalytic settlement planning component. This strategic adjustment requires a more comprehensive understanding of, and interaction with, other professional associations whose members also provide settlement planning products and services.

During 2014, S2KM attended 13 national educational conferences sponsored by such professional associations. What follows are 2014 summaries, from a settlement planning perspective, of the educational programs offered by these professional associations plus links to related S2KM reporting. Prior S2KM blog posts provide 2014 summaries of the primary and secondary structured settlement markets. A subsequent S2KM blog post will summarize continuing 2014 developments related to ELNY and Reliance.

American Association for Justice (AAJ)

The role of personal injury attorneys historically has encompassed settlement planning and negotiation as well as litigation. As settlement planning has become increasingly complex, however, personal injury attorneys now require the services of other settlement planning professionals including: tax attorneys, special needs attorneys, settlement trustees, financial planners, structured settlement specialists, life care planners, case managers, economists, Medicare set-aside (MSA) specialists and damage allocators.

Regardless of case complexity, plaintiff attorneys continue to perform the following essential settlement planning roles:

• Recognizing settlement planning issues which impact their clients;
• Recommending appropriate settlement planning professional resources to their clients; and
• Retaining ultimate responsibility for effectuating settlements.

As one result, plaintiff attorneys represent the primary marketing target for for companies and professionals offering settlement planning services. Seven primary market brokers, one structured settlement annuity provider and one factoring company were among the 141 sponsors and exhibitors at the AAJ 2014 Annual Conference which also included companies offering lien resolution, MSA compliance, life care planning, legal finance and economic consulting services.

Notable features of the 2014 AAJ conferences:

• AAJ's educational programs focused on litigation issues with no structured settlement, no Affordable Care Act (ACA) and almost no settlement planning presentations.
• Exhibiting structured settlement brokers shared one distinguishing characteristic - their product and service offerings extended far beyond traditional structured settlements.

Related Resources:

• AAJ 2014 Winter Meeting
• AAJ 2014 Annual Meeting

Society of Settlement Planners (SSP)

SSP is a professional association most of whose members are plaintiff structured settlement brokers. SSP's 2014 Annual Conference provided three important contributions to settlement planning.

First, SSP President Neil Johnson's SSP keynote speech, which he repeated at NSSTA's Fall Conference, highlighted continuing polarization among structured settlement professionals and proposed the following solutions: 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.

Second, consistent with Johnson's proposed unification solutions, SSP's Secondary Market Panel featured two leading structured settlement transfer experts whose clients typically oppose each other in secondary market cases: NASP Executive Director Earl Nesbitt and Stephen Harris, former co-Chairman of NSSTA's legal committee.

Third, SSP speaker Michele Fuller identified her list of 2014 settlement planning "game changers" as a baseline for industry discussion:

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.

Related Resources - SSP 2014 Annual Conference

• Part 1 - Secondary market panel.
• Part 2 - Conference summary.

National Structured Settlement Trade Association (NSSTA)

By inviting NASP President Patricia LaBorde and SSP President Neil Johnson to speak at its members-only 2014 Fall Educational Conference, NSSTA took a symbolic step toward restoring its original vision as articulated by David Ringler, NSSTA's first president: "a place where everyone and anyone can sit down with each other and discuss the issues and viewpoints regardless of beliefs is the most important reason for NSSTA."

For the past several years, NSSTA's leadership has superimposed a political litmus test for membership, as well as for topics and speakers at its educational conferences. NSSTA's near-sighted strategy has limited the potential growth of structured settlements within the larger and more complex settlement planning market and created multiple challenges for the next generation of structured settlement leaders.

Structured settlements, however, represent a core settlement planning product with emerging product improvements and nontraditional products demonstrating the potential for settlement planning market expansion. In addition, NSSTA's Fall conference underscored, and re-enforced, NSSTA's and NSSTA members' strategic settlement planning relationship knowledge about and with: 1) plaintiff attorneys; 2) insurance associations; 3) insurance claims adjustors; 4) national consumer associations; 5) U.S. Congressional members; and 6) MSA administrators - as well as with SSP and NASP.

Related Resources:

• NSSTA 2014 Fall Educational Conference
• Potential "Game Changing" Structured Settlement PLR
• Structured Settlements 2014 - Primary Market

National Association of Settlement Purchasers (NASP)

Assuming settlement planning includes adjustments during an injury victim's lifetime, structured settlement transfer (factoring) companies should be included among settlement planning participants. Like NSSTA, its primary market counterpart, NASP and its members face serious challenges which NASP president Patricia LaBorde acknowledged during NASP's 2014 Annual Conference.

"There are some forces working against us right now" Laborde stated, "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." These "negative" forces include predicted secondary market "chaos" resulting from the Washington Square v. RSL case as well as market restrictions resulting from anti-assignment lawsuits.

Shared educational dialogue among representatives of NASP, NSSTA and SSP during 2014 appear to support the possibility of increasing primary and secondary market integration as predicted by Peter Arnold during his NASP conference presentation.

Related Resources:

• NASP 2014 Annual Conference
• Structured Settlements 2014 - Secondary Market

Academy of Special Needs Planners (ASNP)

ASNP is one of three national associations of attorneys whose members practice special needs (SN) planning. SN planning encompasses individuals with congenital and developmental defects, as well as personal injury victims, and therefore represents a parallel market which overlaps with personal injury settlement planning.

For the past eight years, ASNP has sponsored some of the best educational programs addressing settlement planning topics including such fundamental issues as: "know your client", "needs analysis", "best practices", "industry standards" and "product suitability", as well as "professional responsibility, qualifications and liability".

Among other topics, the ASNP 2014 Conference expanded previous ASNP educational programs about the Patient Protection and Affordable Care Act (ACA aka "Obamacare") including a multi-professional "ACA Panel" consisting of: David Lillesand (attorney); Ann Koerner (life care planner); and Scott MacDonald (investment adviser).

Other settlement planning topics addressed during ASNP's 2014 Annual Conference:

• Blaine Brockman and Patricia Kefalas Dudek spoke about "Housing, Food Assistance, Employment Benefits" - critical topics for many people with disabilities which are rarely addressed at structured settlement and settlement planning educational conferences.
• Cynthia Barrett discussed "Post-Windsor Issues for LGBT Couples & Children" - another settlement planning subject other settlement planning conferences failed to encompass.

Expanding its settlement planning educational programs, ASNP is currently sponsoring a 12-part settlement planning webinar series which demonstrates both the growing importance of settlement planning for SN attorneys as well as the broad scope of settlement planning topics.

Related Resources:

• ASNP 2014 Annual Conference
• ASNP Settlement Planning Webinar Series
• ACA and Future Medical Expenses

National Alliance of Medicare Set-Aside Professionals (NAMSAP)

NAMSAP is the only national professional association whose singular focus is Medicare Set-Aside (MSA) arrangements. NAMSAP's growth has paralleled the expansion of workers compensation MSAs (WCMSAs) to satisfy the requirements of the Medicare Secondary Payer (MSP) Act. Enacted in 1980, the MSP Act requires certain insurers, including liability, automobile, no-fault and workers compensation insurers, to make payment first for services to Medicare beneficiaries regarding claimed injuries, with Medicare responsible only as a “secondary payer.”

The Center for Medicare & Medicaid Services (CMS) published a WCMSA Reference Guide (WCRG) on March 29, 2013 plus a WCRG Version 2.0 on November 7, 2013. Both address structured settlement issues and provide guidelines for their utilization. WCMSAs represent one of the few submarkets where structured settlements sales have increased since 2008 - in large part because the method CMS requires for calculating WCMSA present values provides an inherent cost advantage for annuities compared with lump sum alternatives.

CMS withdrew its Notice of Proposed Rulemaking (NPRM) related to liability MSAs in October 2014 because it failed to gain approval from the Office of Management and Budget (OMB). Therefore, settlement planners must continue to analyze each liability case individually to determine whether and how to protect Medicare's interests.

During NAMSAP's 2014 Regional Conference, Roy Franco predicted the following settlement planning changes likely to result from the Bipartisan Budget Act of 2013, implementation of the ACA and the still anticipated CMS rules for liability MSAs: "workers' compensation, liability and no-fault insurers will all become primary payers vis a vis Medicare, Medicaid and ACA health providers" as part of integrated settlement planning models similar to WCMSAs." Franco added, however, that different state models are likely to develop as a result of both state-specific collateral source rules and the new Medicaid reimbursement rules promulgated by the Bipartisan Budget Act of 2013.

Related Resources

• NAMSAP 2014 Regional Conference
  • Part 1
  • Part 2
• NAMSAP 2014 Annual Meeting
• Bipartisan Budget Act of 2013

Evolve Qualified Settlement Fund (QSF) Symposium

Organized "to provide a forum for open dialogue that helps shape industry developments", the 2014 Evolve QSF Symposium avoided the single claimant controversy and focused instead on other important QSF and settlement planning issues including:

• How QSFs reconfigure the traditional settlement planning process.
• QSF-related compensation issues for administrators and structured settlement brokers.
• The increasingly important settlement planning roles for life care planners and case managers.
• QSF-related tax issues such as state taxation, foreign structured settlement assignment companies and structured attorney fees.

Related Resources

• Evolve 2014 QSF Symposium
• Single Claimant QSFs Revisited
• "How the ACA Affects Nurse Life Care Planners"
• Wendie Howland Interview

National Academy of Elder Law Attorneys (NAELA)

NAELA was the first and remains the largest U.S. professional association focused on the needs of elder and special needs law attorneys. Responding to its own strategic challenges, NAELA organized its 2014 Annual Conference to address what it perceives to be its two primary strategic issues: 1) the future needs of persons with disabilities; and 2) the future of elder law.

Compared with ASNP, however, NAELA's educational programs rarely address settlement planning or structured settlements. When NAELA members discuss special needs planning, many tend to think about developmental (as opposed to personal injury) disabilities. Unfortunately, many NAELA members view structured settlements negatively despite familiarity with the concept and a general affinity for annuities.

Related Resources

• NAELA 2014 Annual Conference
• Person-Centered Planning
• Cornell Disability Studies, Research, Statistics

Evolve 2014 QSF Symposium

Despite unresolved issues, utilization of IRC 468B Qualified Settlement Funds (QSFs) in "single event" cases, as well as class action and mass tort cases, is expanding, and increasingly represents the preferred method for resolving complex personal injury claims, according to participants at the Third Annual QSF Symposium sponsored by Evolve Bank and Trust on November 14, 2014 in Memphis, Tennessee.

Various speakers estimated the number of QSF cases annually currently exceeds 2500, equally split between single event cases and class action/mass tort cases, increasing by 25% per year. This expansion has occurred as more settlement planning stakeholders learn about the advantages of QSFs - and despite single claimant QSF tax uncertainty.

Although Rev. Proc. 93-34 permits QSFs to make IRC 130 qualified assignments, and no tax authority exists prohibiting single claimant QSFs, structured settlement annuity providers currently refuse to accept single claimant QSFs which they broadly define to encompass claims by family members, plaintiff attorneys, lien holders and creditors.

Organized "to provide a forum for open dialogue that helps shape industry developments", the 2014 QSF Symposium completely avoided the single claimant controversy and focused instead on other important QSF and settlement planning issues.

Topics and Speakers

• Introduction and Welcome - Andrew Cook
• QSF Administrator Control Systems and Fraud Protection - Brian Berning
• QSF State Tax Issues - Mike May
• Tax Issues for Foreign Structured Settlement Assignment Companies - Jeremy Babener
• Calculating Settlement Awards - Chris Lordan
• QSF Settlement Planning Panel - Patrick Hindert (Moderator), Andrew Cook, Wendie Howland, Pi-Yi Mayo, Bryn Poland, Joseph Tombs.
• How New SEC Rules Impact QSF Money Market Fund Investments - John Rush.
• How Plaintiff Attorneys View QSFs - William Burns
• QSF Administrator Compensation Issues - Paige Balnum; Pi-Yi Mayo; Bryn Poland.
• QSF Attorney Fee Programs - Chris Shumate.

QSF Objectives and Benefits

In his legal treatise, "Qualified Settlement Funds and Section 468B", published in 2009, Robert Wood explains QSFs as follows: "Their primary objective is to gather and administer cash or assets and determine the amounts and exact nature of payments that the plaintiffs, attorneys, and other claimants will receive..... QSFs benefit both plaintiffs and defendants alike. They are separate entities for federal income tax purposes and are flexible and easy to establish."

Section 3.08B of "Structured Settlements and Periodic Payment Judgments" (S2P2J) summarizes the benefits of QSFs in more detail: "defendants obtain a binding release from liability by making a currently-deductible payment into a court or government-approved Fund; while claimants, who have no tax consequence as a result of this payment into a Fund, are then afforded as much time as they need to sort out important issues of their own, such as allocating settlement shares, obtaining court approvals for minors or other legally-disabled claimants, resolving liens (which sometimes involve complex pay-back and set-aside issues as to Medicaid and Medicare), and deciding on forms of distribution (whether cash, structured settlements, or special needs trusts that may be used to preserve eligibility for certain government benefits)."

QSFs reconfigure the traditional (ready; shoot; aim) settlement planning process:

1. Needs assessment
2. Design
3. Negotiation
4. Implementation
5. Monitoring

so that needs assessment and settlement design follow the negotiation (and funding) steps rather than precede them.

Highlighted Issues

• QSF Administrator - The QSF Symposium emphasized the important role of the QSF administrator as well as the services he or she may provide and/or require including: investment, expense and distribution management; tax reporting and filing; legal and regulatory compliance; and fraud control. The QSF administer appears best positioned to quarterback the QSF settlement planning team. An apparent need exists for more (and better qualified) QSF administrators.
• Life Care Planners and Case Managers - Life care planners and case managers are frequently overlooked in traditional settlement planning. Life care planners are rarely asked to revise their pre-trial and trial-focused life care plans to account for collateral sources or the actual amount of settlement funding. Case managers (who are separately certified) increasingly are retained to "monitor" settlement plans by providing post-settlement medical advice and services for serious personal injury victims.
• Compensation Issues - For QSFs to achieve their potential improvements for single event settlement planning, multiple compensation issues must still be addressed and resolved:
  • Administrators - The QSF Symposium devoted one of its panels to administrator compensation issues, including: who pays their fee? what fee is appropriate for what services? and how should the fee be calculated (flat fee; per claimant fee; or fee based on QSF earnings)? Complicating these issues, many attorney QSF administrators play multiple roles (trustee; administrator) in addition to drafting QSF documents and making court appearances.
  • Structured settlement brokers - In many single event QSFs, the plaintiff structured settlement broker plays key roles: 1) selecting and paying the QSF administrator; 2) performing "value added" settlement planning services as part of his/her contingent commission compensation. Not only do these arrangements create potential conflicts of interest ("needs based" selling determined by the needs of the broker and administrator), they also increase a broker's risk of loss in the the event of an unsuccessful structured settlement sale.
  • Additional compensation issues arise when: 1) a case settles with no allowance for QSF expenses; 2) a case involves minors or incompetents requiring a guardian and court to approve QSF expenses; and also because 3) in the current low interest rate environment, QSF fees often exceed investment yields. Although not discussed during the Symposium, defense structured settlement brokers have opposed QSFs fearing a reduction or the elimination of their contingent commission compensation.
• Tax topics - The QSF Symposium featured three tax topics:
  • State taxation - State taxation of QSFs is inconsistent with little guidance. Many states have not yet addressed QSF taxation. Potential penalties exist for failure to file including interest on any unpaid liability without any statute of limitations. QSF administrators are advised to follow a two step analysis: 1) can a specific state tax a QSF based upon the situs of the court or the administrator or the bank where funds are deposited? 2) assuming a filing obligation exists, how will a state tax a QSF - as a corporation or a trust?
  • Foreign structured settlement assignment companies - Potential tax issues exist for defendants, plaintiffs and the foreign assignment company. Can a defendant deduct its payment to a foreign assignment company? When does a plaintiff receive payments for tax purposes and what is the character of those payments? Does the foreign assignment company recognize income when it receives an assignment payment? If yes, will it be considered active or passive income or does a treaty override exist?
  • Structured attorney fees - When properly arranged, structured attorney fees allow a contingently-compensated attorney to defer portions of his or her compensation and pay tax upon receipt regardless of the type of case or whether the client receives a lump sum or periodic payments.
• Education issues - Single event QSF education is needed for plaintiff attorneys and judges who are still unfamiliar with the QSF concept. Among the most likely education providers are special needs attorneys who serve as QSF administrators or trustees and structured settlement brokers. In addition to litigating attorneys and judges, QSF educational targets should include other settlement planning stakeholders such as: liability insurers; settlement trustees, guardians; mediators; and life care planners.

Conclusion - Evolve's QSF Symposium offers a valuable and unique addition to the growing number of personal injury settlement planning conferences and educational resources. When Robert Wood's QSF legal treatise was published in 2009, he acknowledged his analysis "clearly enters unchartered ground". Congratulations to Chairman Andy Cook and Evolve Bank and Trust for helping to survey this unchartered QSF terrain by sponsoring an educational event specifically designed to promote discussion and exchange of ideas about QSF issues, standards and best practices.

For S2KM's complete coverage of 2014 structured settlement and settlement planning conferences, see the structured settlement wiki.

NSSTA 2014 Fall Educational Conference

Although David Ringler was unable to attend the National Structured Settlement Trade Association (NSSTA) 2014 Fall Educational Conference October 29-30 in La Jolla, California, he had an apparent impact. Ringler, NSSTA's first president, previously re-stated his original vision for NSSTA during NSSTA's 25th anniversary celebration in 2011:

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

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

NASP and SSP Participation

Perhaps responding to Ringler's clarion call, NSSTA opened its members-only educational program in La Jolla by inviting NASP President Patricia LaBorde and SSP President Neil Johnson to speak.

LaBorde was featured on a Secondary Market Panel, moderated by John McCulloch, which also included Stephen Harris and Patrick Hindert as panelists. McCulloch's questions targeted primary market concerns such as the prevalence of secondary market transfers, consequences of transfer company advertising and secondary market discount rates. The resulting discussion captured the audience's undivided attention and hopefully will result in expanded educational dialogue between NSSTA and NASP to include shared political and business interests.

Johnson and current NSSTA President Kevin Silo jointly addressed "Industry Challenges", a panel discussion moderated by NSSTA President-elect Michael Goodman. Repeating portions of his SSP 2014 keynote speech, Johnson proposed the following solutions for achieving 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.

Generational Change and Challenges

NSSTA and the primary structured settlement market face multiple challenges (see below) - perhaps none greater than succession. What new generation of distributors, or distribution channel(s), will emerge (and when) to replace and build upon the accomplishments of the pioneering generation (now in their 60s and 70s) who originated the structured settlement market in the late 1970s?

In addition to generating more than $140 billion of annuity premium, the legacy of NSSTA's retiring generation includes enactment of the existing structured settlement legislative framework: current IRC sections 104(a)(1) and (2) and 130 plus multiple state periodic payment of judgment statutes and (with NASP) enactment of IRC 5891 and the state protection statutes. More recently, however, NSSTA's aging leadership has focused on defense - with "protect and preserve" its principle mantra.

NSSTA attempted to addressed this generational succession issue at its Fall conference by juxtaposing panels featuring past NSSTA Presidents and "Next Generation" brokers. The impression that emerged: NSSTA and the primary market have reached an historic crossroads - with multiple stakeholders, issues and options, but no clear future direction.

Whatever next generation of NSSTA leaders emerges will face several challenges:

• Stagnant growth - Since achieving $6 billion of annual annuity sales in 2001, structured settlement premium growth has stagnated with 2013 sales totaling $5.1 billion.
• Polarized market(s) - NSSTA's leaders have been unable, and/or unwilling, to unify the structured settlement market(s) around such shared interests as: primary market growth; preservation of existing legislation; and consumer protection - which prioritizes maintaining promised periodic payments.
• Alternative business models - Can alternative structured settlement models (traditional defense vs. emerging plaintiff) continue to co-exist and collaborate?
• Complexity - Structured settlements represent a strategic product within the larger and more complex personal injury settlement planning (settlement planning) market.
• Product features - Will Pacific Life's recent private letter ruling encourage structured settlement annuity providers to expand their product offerings to include "equity-indexed" annuities and "hardship conversions"?
• Competition. Within the settlement planning market, the growth and leadership of other product and service providers has increasingly exceeded the growth and leadership of structured settlement participants.
• Success factors. To expand sales within the evolving settlement planning market, NSSTA's leaders must re-think and re-engineer historical success factors - backgrounds and skill sets; educational programs; business models; product enhancements; sales and marketing strategies.

KNOWLEDGE MANAGEMENT

The settlement planning market is knowledge-intense and increasingly Internet-based. To continue, and increase, their historical success within the evolving settlement planning market, NSSTA and its members must improve their knowledge management capabilities. One preliminary step is to identify and evaluate existing strategic knowledge. NSSTA and its members possess three primary types of strategic knowledge:

• Product knowledge - The "Tax Posse", the ACA summary, and even the Non-traditional Products presentation at NSSTA's Fall conference represent good examples of NSSTA's product knowledge. Perhaps more important, and more valuable, than explicit product knowledge, NSSTA members possess tacit (intuitive, experiential) knowledge of how structured settlements work. In the context of the secondary market, however, NSSTA member knowledge of its own product is arguably much weaker, and, therefore, incomplete and less valuable.
• Relationship knowledge - Much of NSSTA's Fall conference related to, and re-enforced, NSSTA's and NSSTA members' settlement planning relationship knowledge about and with: 1) plaintiff attorneys; 2) insurance associations; 3) insurance claims adjustors; 4) national consumer associations; 5) U.S. Congressional members; 6) MSA administrators; 7) SSP; and 8) NASP. In settlement planning, as in life more generally, it is not what you know but who you know that counts the most.
• Market knowledge - Compared with other settlement planning market segments, NSSTA (and NASP) appear to have developed and maintained more accurate market metrics including quarterly and annual premium and cases in total and for each member product provider. To further expand structured settlements into the settlement planning market, NSSTA and its members might begin to track additional metrics. For examples: what percentage of structured settlements are utilized to fund MSAs, SNTs and settlement trusts more generally. Which categories of structured settlement recipients are most likely to sell payment rights and why?

MARKETING INITIATIVES

NSSTA conference speakers introduced multiple new marketing initiatives including:

• "NSSTA University" - NSSTA's Debbie Sink announced a new "NSSTA University" service whereby NSSTA will partner with any member to secure CE credits for member-sponsored educational seminars or insurance claims departments or law firms.
• CLM Survey Part II - In partnership with CLM Advisors, NSSTA's Marketing Committee summarized CLM Survey Part II (claims adjustors) of an eventual three part survey project. Part I surveyed claims executives. Part III will survey plaintiff attorneys. These surveys provide NSSTA members with valuable marketing tools for discussions with the audiences surveyed.

TOPICS AND SPEAKERS

• Introduction and Welcome - Eric Vaughn.
• Industry Challenges - Michael Goodman (Moderator), Kevin Silo, Neil Johnson.
• Next Gen Brokers - Louis Masry (Moderator), Kristen Chess, Ryan Garrison, Tony Robinson.
• Financial Issues for People with Disabilities - Sally Greenberg and Mark Perriello.
• AAJ Treasurer Elect - Elise Sanguinetti.
• MSA Professional Administration - Tom Adams (Moderator), Marques Torbert, Joe Anderson.
• Affordable Care Act - Jordan Bossler.
• Past NSSTA Presidents - Moderators (Kevin Silo; Eric Vaughn); Jeff Bowers, Len Blonder, Joe Costello, Mal Deener, Dan Durbin, Randy Dyer, Dan Finn, Patrick Hindert, John Machir, Henry Strong.
• Factoring Panel - John McCulloch (Moderator), Stephen Harris, Patrick Hindert, Patricia LaBorde.
• Non-Traditional Products - Erin Muller (Moderator), John Arendt, Ryan Jandreau, Jeff Reinhold, Chris Shumate, Ravi Vaswani.
• American Insurance Association - Peter Foley.
• CLM Survey Part II - Taylor Smith, Susan Clark, Jeff Livingston.
• Tax Posse - John McCulloch, Timothy O'Driscoll, Tom Ronce.
• NSSTA CE News - Erin Muller and Debbie Sink.

Congratulations to NSSTA and conference chairperson Erin Muller for re-establishing NSSTA's tradition of educational programs featuring speakers with multiple viewpoints on industry issues "regardless of beliefs". David Ringler and other structured settlement pioneers should feel gratified - and hopeful for NSSTA's future success.

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

Wendie Howland Interview - 2

The increasing number, importance and roles of life care planners represents a significant development impacting several overlapping markets including structured settlements, personal injury settlement planning, special needs planning, and Medicare set-asides (MSAs).

This S2KM blog post continues a three part interview with Wendie A. Howland, MN, RN-BC, CRRN, CCM, CNLCP, LNCC, a nationally recognized life care planning expert, in which Wendie addresses life care planning qualifications, case management, industry standards, and criticism of life care planners among other issues. Link for Part 1.

S2KM: The two most important U.S. based life care planning professional associations appear to be the International Association of Life Care Planners (IALCP) and the American Association of Nurse Life Care Planners (AANLCP). You belong to the AANLCP.

• How many nurses belong to AANLCP?
• Who are/were the pioneers responsible for developing nurse life care planning?

Ms. HOWLAND: Currently, there are roughly 350 AANLCP members. Not all have earned CNLCP certification. Some are LNCP-Cs and CLCPs, and/or nurses without formal life care planning credentials. All full AANLCP members are registered nurses bound by the ANA Scope and Standards of Nursing Practice and the nurse practice acts of our respective states. Some CNLCPs and RN CLCPs are not AANLCP members. There are also some associate AANLCP members who are not RNs. AANLCP has some Canadian members who are bound by their own nurse practice act.

These excerpts from the AANLCP Core Curriculum for Nurse Life Care Planning (2013) highlight some of our profession's pioneers:

• Lillian Wald - "In the early 1900s, Lillian Wald promoted the term 'public health nurse,' expanding nursing practice to encompass employment, recreation, health education, and sanitation....By the 1940s, the insurance industry was using case management as a method of cost containment"
• Paul Deutsch - "In the mid-1970s, Paul Deutsch first identified the term 'Life Care Planning,' referring to future needs, to describe a tool to project the costs of medical care in the litigation environment." In "Damages in Tort Actions" (1981), a multi-volume text, Deutsch and co-author Fred Raffa "referenced case management, catastrophic disability case management, and catastrophic disability research as means to project future medical care."
• Kelly Lance - "In 1997, the discipline of nurse life care planning (NLCP) began" when Kelly Lance founded AANLCP. "She developed a NLCP curriculum with the nursing process methodology at its core, including concepts and skills pertaining to LCP application in the medical-legal arena."

S2KM: What advantages and disadvantages do nurse life care planners offer compared with life care planners with alternative professional backgrounds and certifications?

Ms. HOWLAND: Our advantage is our licensure as registered nurses. We explicitly use nursing diagnosis, a recognized scientifically validated taxonomy to justify the items in our plan that are based on our nursing assessments. This means that we do not practice medicine, we stay within our scope of practice, and our recommendations stand independent of approval from any other discipline.

S2KM: As editor of the AANCPL Journal, how do you stay "ahead of the knowledge curve" on life care planning issues and developments?

Ms. HOWLAND: Serving as editor of professional journals and the AANLCP Core Curriculum helps inform my practice of life care planning. Reading submissions and working with peer reviewers and authors are excellent ways to learn and help guide my professional practice. Of course, I also attend national educational forums, speak at some, and write articles.

S2KM: What are the most important current issues and developments facing life care planning?

Ms. HOWLAND: Whether and how the Patient Protection and Affordable Care Act (ACA) affects life care planning is probably our most important current issue. For example, two recent California cases appear to require cost offsets based on past or existing insurance benefits. Historically, only Federal vaccine injury fund cases have required such offsets in life care plans. An upcoming issue of the Journal of Legal Nursing will focus on ACA-related issues.

S2KM: Some commentators have suggested the ACA will eliminate the need for life care plans in personal injury cases. Do you agree or disagree?

Ms. HOWLAND: I disagree. The vast majority of life care plan items and their associated costs are not covered by health insurance, including Medicare or Medicaid. Persons who seriously suggest that the ACA will render the need for life care plans moot are poorly-informed on health insurance, life care planning, or both. They should pull out the big booklet that describes their own health insurance and read it. They will be shocked.

S2KM: How important is the Medicare set-aside (MSA) market for life care planners? How does a life care planner's work product for MSAs differ, if at all, compared to work product for non-MSA applications?

Ms. HOWLAND: MSAs take Medicare’s interest into account in funding settlements. Currently, they are only required for worker’s compensation cases. Most life care plan costs are for items that Medicare does not cover. Therefore, it is comparatively simple for whoever prepares the MSA to abstract the applicable information from the much more comprehensive life care plan. Your readers should also know that although MSA certifications exist, Medicare has no requirement whatsoever for persons preparing MSAs to hold any type of certification.

S2KM: How can structured settlement professionals, settlement planners and special needs attorneys learn more about life care planning?

Ms. HOWLAND: I recommend that they ask us directly. Most life care planners welcome opportunities to visit an office or to attend a conference. Understanding the differences between certified nurse life care planners (CNLCP, LNCP-C) and non-nurse CLCPs is also important. Interested professionals should review the IARP and AANCLP websites for information, attend our conferences, and/or invite us to speak at their conferences.

In Part 3 of S2KM's interview with Wendie Howland, Wendie will respond to criticism some attorneys have directed at life care planners.

Wendie Howland Interview - 1

The most recent S2KM blog post highlights the growing strategic importance of life care planners for structured settlement and personal injury settlement planning professionals.

To gain additional knowledge about life care planners, S2KM interviewed Wendie A. Howland, MN, RN-BC, CRRN, CCM, CNLCP, LNCC, owner of Howland Health Consulting, Inc., which S2KM will publish in three blog posts addressing life care planning qualifications, case management, industry standards, and criticism of life care planners.

In addition to her education and certifications, Wendie's professional background includes work as a critical care nurse; catastrophically-injured workers case manager for multiple insurance carriers; and complex medical records review and analysis for catastrophic workers' compensation and liability cases at the reinsurance level.

Recognized as a national expert for nurse standards of practice and care issues, Wendie's current practice includes life care planning and complex medical records review and analysis for liability, workers compensation, elder/trustee, SSDI and Medicare set-aside (MSA) cases. Among her many professional affiliations, Wendie also serves as Editor for both the Journal of Nurse Life Care Planning and the Journal of Legal Nurse Consulting.

S2KM: Wendie, thank you for participating in this interview. What is your best estimate of the number of life care planners in the United States? How many (or what percentage) of the total have:

• A life care planning certification credential?
• A nursing background?

Ms. HOWLAND: I am not sure it is possible to know exactly how many people hold current life care planning credentials of any kind, but the last numbers I have heard are roughly 800 for Certified Nurse Life Care Planner (CNLCP), 2000 for Certified Life Care Planner (CLCP) (approximately 80% of which are not nurses), and 100 for Lifetime Nurse Care Planners (LNCP-C).

S2KM: One of the impressive characteristics about life care planners appears to be their commitment to certification and continuing education. What is your educational background and what certification credentials have your earned?

Ms. HOWLAND: My primary credential in nursing was a B.S. degree from Boston University (nursing major). I earned my master’s degree from the University of Washington in Seattle, in the thesis program for physiological nursing (cardiovascular/critical care). Since my first clinical work was in critical care as a staff nurse and then as a critical care clinical specialist, I earned certifications in critical care nursing and nursing education.

My second career in nursing was in case management, primarily in worker’s compensation and liability for which I earned certifications in case management (CCM, RN-BC) and rehabilitation nursing (CRRN). Many of us in legal nursing consider life care planning “case management on steroids,” so life care planning was a logical next step as I gained expertise.

Now, as a certified nurse life care planner I hold the CNLCP and LNCP-C credentials, and the LNCC for legal nurse consulting. These credentials require both education and experience, what the military would call “time in grade,” as well as sitting for psychometrically-validated exams. To renew them, I take many hours of continuing education and perform other qualifying activities (such as editing professional journals, teaching, and publishing) and submit proof for approval to the respective certifying bodies every five years.

S2KM: What criteria are most important in selecting a life care planner?

Ms. HOWLAND: There are several, in my opinion. First, of course, is looking at the life care planner’s clinical experience. Does the planner have expertise, experience, and connections in the injury or condition involved in the case? Second, certifications are important as they demonstrate experience, competence, and commitment to continued learning in the field. Certification in life care planning should be a given, but judging by some of the plans I have been asked to review, apparently it is not. Third, looking at the credentials and licensure that underlie the planner’s practice is critical. Do they grant the ability to assess, opine, and prescribe for the injury or conditions involved?

Many people think that only physicians are licensed to assess and prescribe for ill or injured people, but that’s not true. It’s important to know the difference between the legal requirement for physicians to prescribe medications or perform surgery, for example, and an insurance company’s requirement to have a physician’s name on a request for goods and services (such as equipment, physical therapy, visiting nursing, assisted living, and others) solely as a means of financial control. I always collaborate with treating physicians and therapists if possible when I’m formulating a life care plan and include their recommendations.

Registered nurses are required to implement some (not all) parts of a medical plan of care. RNs are also licensed to assess function and response to illness or injury and to develop an independent nursing plan of care. We can and do recommend further assessments by other disciplines, adaptive equipment, hours and kinds of nursing care in any setting, and many other needs found in a good life care plan.

In addition, good research and writing skills are important. Life care plans should never be “canned,” i.e., the same for every case, with no evidence of individualization or current research. Every item should have reference to a current assessment need, availability, replacement/maintenance, and source for cost.

Lastly, since much life care planning work involves litigation and may call for deposition or trial testimony, it is generally a good idea to look for someone with public speaking experience and confidence under questioning.

S2KM: How important is the personal injury market for life care planners? How much of your own work involves personal injury cases?

Ms. HOWLAND: Most (but not all) life care planning practices do work that involves litigation, and that usually involves some kind of injury. Examples include workers' compensation, medical malpractice, and personal liability. MSAs represent a growing field of practice. Almost all of my work involves personal injury cases.

S2KM: When you work on personal injury cases, in what percentage of your cases:

• Are your clients plaintiffs vs. defendants?
• Are you retained as a potential expert witness?
• Are you directly involved in settlement negotiations?

Ms. HOWLAND: My cases are about half plaintiff and half defense. Plaintiff clients are interested in knowing about needs and related costs over life expectancy for a person with an injury or other condition. Defense clients are interested in knowing what potential costs could be and why, so they can set reserves and prepare for negotiations. They also want to know if a plaintiff life care plan is reasonable and fair.

Life care planners who are not employees of a defense or plaintiff entity expect to have their work product introduced as part of litigation. I have never been directly involved in settlement negotiations, nor have most life care planners in my experience. I work with my client to make my work comprehensive enough that it can stand on its own as counsel’s tool for negotiations. Some life care planners also work with trust officers after litigation is settled, to help them understand how the money can be spent most appropriately and identify case managers to implement the plan.

S2KM: How much time does it take to develop a personal injury life care plan and how are you compensated?

Ms. HOWLAND: My life care plans for catastrophic injury cases generally take between forty to sixty hours of work, not including travel and testimony time. Like most of my colleagues, I take a retainer and work against it, having it replenished as needed, and provide a detailed invoice monthly or more often if the client requests it.

S2KM: What is the difference between a life care plan and a medical cost projection?

Ms. HOWLAND: A medical cost projection is generalized for a medical diagnosis, as opposed to a comprehensive nursing assessment. It does not include a personal patient assessment. A medical cost projection may be important early post-injury, for example, to help a client set preliminary reserves. I am usually asked to provide medical cost projections soon after injury or as a preoperative estimate when precision isn’t necessarily critical. Since every case progresses differently, it is not possible to know what complications or special circumstances will arise. So the disclaimer says that further information will be helpful to make a more meaningful estimate.

S2KM: Assuming your work product (life care plan) is utilized to develop a personal injury settlement plan, how frequently are you asked to review the settlement plan: 1) prior to its implementation and 2) subsequent to implementation to adjust for new developments or changed circumstances?

Ms. HOWLAND: I have never been asked to review a settlement plan to see how well it matches my recommendations. It is almost impossible for life care planners to obtain information about outcomes or to discover how much, if any, of their life care plan recommendations were actually implemented, or how effectively. That is one of the major barriers to better research in life care planning. Most responsible life care planners inform their clients that a life care plan should be updated at intervals to account for changes in the individual’s condition and also include provisions for a case manager to implement their plan.

S2KM: How can other settlement planning professionals (including plaintiff attorneys, special needs attorneys, settlement trustees and structured settlement brokers) improve their working relationship with life care planners?

Ms. HOWLAND: They should know what they want, know what they can get from us, and know how to use us to their best advantage. They should communicate clearly, with adequate advance notice, what their expectations are, how much they expect and are willing to pay, and how they will use our work products. Nobody wants surprises.

In Parts 2 and 3 of S2KM's interview with Wendie Howland, Wendie will discuss life care planning associations, industry standards and issues as well as criticism of life care planners.

AAJ 2014 Annual Meeting

Increasing use of structured settlements by plaintiff attorneys and their clients requires a more "unified marketing strategy" by stakeholders according to multiple brokers who exhibited at the recent American Association for Justice (AAJ) 2014 Annual Conference in Baltimore.

Seven primary market brokers, one structured settlement annuity provider and two secondary market companies were prominent among the 141 sponsors and exhibitors at the AAJ conference which also included as exhibitors multiple companies offering lien resolution, MSA compliance, life care planning, legal finance and economic consulting services.

Other marketing advice from AAJ structured settlement exhibitors offering insights into how to grow the primary market:

• "Our industry needs more educational marketing.
• "The secondary market has stolen our brand and we need to get it back.
• "Many plaintiff attorneys do not discuss structured settlements with their clients.
• "We need to educate plaintiff attorneys to stop thinking of their clients as 'investors' and to recognize the benefits of structured settlements.
• "Most plaintiff structured settlement brokers are too narrowly focused on product.
• "Future success requires 'full service' not just annuities - financial planning, settlement trusts and lien resolution.
• "Plaintiff brokers need to be more holistic and offer plaintiff attorneys a 'brain trust' of strategic relationships.
• Offering non-structured settlement products and services to plaintiff attorneys 'has taken the lid off' our company's original view of the size of the settlement planning market."

Underperforming Market

Many industry observers view the United States structured settlement primary market as a strategic, underperforming segment of the larger personal injury settlement planning market:

• Primary market structured settlement annuity premium increased approximately seven (7%) percent to $5.134,380,855 in 2013 (compared with $4,819,124,617 in 2012) according to industry estimates compiled by Melissa Evola.
• Total structured settlement cases in 2013 also increased to 26,533 from 25,038 a year earlier for an average case premium of $193,495.
• The 2013 annual premium totals, however, fell substantially short of the historic 12 month industry high ($6,226,578,725 in 2008) after consistently averaging close to $6 billion annually from 2001-2007.
• Evola's 2013 compilation also reported an annual decrease in annuity premium for non-qualified structured settlements (from $170.1 million in 2012 to $164.9 million in 2013) despite earlier industry projections of a large and growing market .
• Non-qualified structured settlements represent transfers of periodic payment obligations that do not meet the requirements of IRC sections 130 and 104(a)(1) or (2) including deferred plaintiff attorney fees.
• Independent industry sources further report a substantial shift in recent structured settlement premium with increasing sales to fund workers compensation Medicare set-aside arrangements (WCMSAs).

For comparison, based upon Towers Watson's 2011 Annual Study of "United States Tort Cost Trends" and utilizing Tower Watson's 2002 "best estimate" of payout percentages, S2KM estimates that more than $170 billion of United States tort costs annually have represented payments to injury victims and their attorneys. The Towers Watson study excluded: 1) no-fault auto insurance; 2) property coverages; 3) workers compensation; 4) certain extraordinary (one time) costs.

Structured Settlement Marketing - to Defendant Insurers

Although primary market structured settlement participants have successfully marketed their products and services to defendants and their insurers, they have been less successful marketing to plaintiff attorneys and their clients.

A 2011 National Litigation Management study, commissioned by the Council on Litigation Management (CLM) and conducted by Revere Advisory, identified structured settlement as the "most penetrated external initiative" among 30 litigation-related service areas analyzed based upon interviews with leading litigation management executives.

The success of structured settlement marketing to defense insurers was further evidenced by a 2014 study of "how senior claims executives perceive the value of structured settlements and the value that structured settlement consultants bring to the table" commissioned by the National Structured Settlement Trade Association (NSSTA) and conducted by CLM Advisors. Among the findings - ninety percent of respondents:

• Indicated their organizations maintain a “formalized structured settlement program”; and
• Reported their belief that, when a structured settlement consultant is involved, claims are “more likely to settle.”

 Structured Settlement Marketing - to Plaintiff Attorneys and Injury Victims

Earlier in 2006 (before interest rates crashed), NSSTA sponsored a survey of plaintiff attorneys involved in structured settlements (43 telephone surveys) and structured settlement recipients (1275 telephone and Internet surveys) titled: "A Study of the Structured Settlement Process Conducted on behalf of the National Structured Settlement Trade Association." Among the results, as reported at NSSTA's 2007 Winter and Annual meetings:

• Structured settlement recipients:
  • 65% said they had not heard about structured settlements prior to settlement.
  • Most were uncertain whether a structured settlement consultant was involved with their case.
  • 34% recalled receiving educational information while 75% of this 34% said the information was helpful.
  • 66% first learned about structured settlements from their trial attorney.
  • 75% said they were very happy their settlement included structured settlement annuities.
  • 75% said they would recommend a structured settlement.
• Plaintiff attorneys involved in structured settlements:
  • 95% said they are proponents of structured settlements.
  • 70% said they retain a structured settlement consultant at least for some cases.
  • When asked: "Whom do you prefer to use for purposes of financial planning for your clients?", the attorneys responded:
    • 30% - Trust company/department.
    • 28% - Financial planner.
    • 23% - Structured settlement consultant.
    • 19% - No response.

Based upon the 2006 survey results, however, NSSTA estimated only 7% of personal injury settlements between $75,000 and $200,000 include structured settlements; and only 30% of personal injury settlements above $1 million include structured settlements.

Growing the Primary Market

What explains the apparent differences in marketing success by the primary structured settlement industry to 1) defense insurers; and 2) plaintiff attorneys and personal injury victims?

Several explanations are possible. They deserve and require greater analysis by the primary market. As one example, while defense brokers essentially sell a singular structured settlement product to their clients without direct competition from other financial/insurance product providers, plaintiff brokers must compete with settlement trustees, financial planners and other providers of asset management services.

As a result, plaintiff structured settlement brokers increasingly are evolving into alternative business models that offer structured settlement annuities as one of multiple products and more fully participate in a larger, more complex business (personal injury settlement planning) than structured settlement defense brokers.

Growing the primary structured settlement market therefore requires its proponents to ask themselves these fundamental questions: "what business are we in?", or, stated somewhat differently, "in what markets do we, or should we, participate?"

Failure to sufficiently address these issues has perpetuated both "inside-the-box" strategic thinking and traditional marketing strategies responsible, in part, for recent sales declines of the structured settlement product - a product which offers multiple, unique advantages and benefits from public policy endorsement, multiple tax preferences and statutory consumer protection.

The Settlement Planning Market

Despite an abundance of related professional associations, participants and conferences, as well as legislative and regulatory developments, personal injury settlement planning remains an evolving concept and market with competing definitions, standards and business models and many unanswered questions.

Many recent and continuing legislative and regulatory developments impact personal injury settlement planning, including:

• Affordable Care Act
• CMS WCMSA Reference Guide
• The SMART Act
• Defense of Marriage Act
• Dodd-Frank Uniform Fiduciary Standard
• Bipartisan Budget Act of 2013

Settlement planners consist, or represent a blend, of several professionals in addition to traditional personal injury litigation participants. These professionals include: tax attorneys, special needs attorneys, trustees, financial planners, structured settlement specialists, life care planners, economists, Medicare set-aside (MSA) specialists and damage allocators.

Professional associations, in addition to AAJ, whose members engage in settlement planning include: NSSTA, SSP, NAELA, ASNP, SNA, NAMSAP, AANLCP - and NASP assuming the definition of settlement planning includes adjustments during an injury victim's lifetime.

To grow the primary market, structured settlement proponents must learn how to better market the benefits and applications of structured settlements to plaintiff attorneys and these other professional groups and associations in the context of evolving settlement planning marketing, work product, business standards and educational priorities.

This educational and marketing challenge requires all structured settlement participants to fundamentally "re-think" structured settlements and their own roles in personal injury settlement planning. One result should be consideration of a more unified marketing strategy to plaintiff attorneys and their clients among heretofore competing professional associations such as NSSTA, SSP and NASP.

Conversations with structured settlement exhibitors at the AAJ 2014 Annual Meeting indicate some primary market plaintiff brokers already understand this message and are transitioning their business models accordingly.

For S2KM's report about the AAJ 2014 Winter Meeting, see this prior blog post.