Structured Settlements

Scenario - Plaintiff Case

Since the development of structured settlements, constructive receipt issues have dictated that an offer of periodic payments should come from the defense, many times concealing the present value of the payments*. Although many companies still believe this, the realization that the plaintiff is entitled to be involved in the process has eased this philosophy somewhat. Originally the theory was that the defense controlled the funds - period. This paradigm has shifted considerably as the leaders in the structured settlement industry recognized that while the defense writes the settlement check(s), the plaintiff controls whether or not the entire settlement is paid in cash.

During this transition, brokers who once professed to be strictly defense oriented are finding themselves on the other side of the table and have discovered that the show goes on.

Working with the plaintiff attorney has some advantages and disadvantages. You will have first hand access to the claimant's situation and needs. This makes it easier to provide a well-suited payment stream. Also, the documents can circulate quickly since you have a relationship with the plaintiff attorney and have already discussed what to expect.

On the other hand, you risk alienating the defending insurance company. Some insurance companies absolutely insist that they work with only defense side brokers. You will need to assess whether or not each case is worth the risk. Keep in mind the familial nature of the insurance business. Most of our annuity carriers have property and casualty companies somewhere within their ownership and this can create problems. The best advice we can offer is get your information up front so no one is surprised later.

*we still provide copies of proposals without cost for review by the plaintiff, but the purpose is more to focus on the payment stream rather than cost. The defense may request this service which is their prerogative.

Assumptions:

• A plaintiff attorney calls with a wrongful death case. A man died in the hospital during a tonsillectomy.
• The claimants are the wife and daughter of the deceased. The wife is 41 and the daughter 12. The wife has some health issues and is concerned about her daughter's future.

This case is a little further along in settlement than we normally like to become involved. Structures 'N Such is working with the defense. Brokers representing each side is becoming more common. It is routine to split the case at a ratio determined by the principals of each company. It is not within your authority to agree to a split unless previously discussed with Lee.

Preliminary Filework

More than likely a structured settlement offer has already been made. The plaintiff attorney may either send a copy or give you an idea of the payout stream so we can confirm the numbers and provide rating/security information for the company used.

We still need all of the information as we would in a traditional case. Complete the File Information Sheet and fax or call it in. It is important to get the name of the defending insurance company, and the defense attorney. Many times plaintiff attorneys are reluctant to give this information at first. It is critical to let the attorney know that we are asking for this information not for marketing purposes, but merely to protect ourselves.

Several offers have been made on this case. However, the concerns over the wife's health have alerted you that a rated age may be possible. You are able to collect some medical information resulting in a rated age of 53.

Active Quoting Phase

Even though we are providing quotes directly to the plaintiff attorney it is imperative that the defense knows what is happening.

There are two claimants involved in this case which means double information on the file. Names, dates of birth, etc. You are working with the plaintiff attorney, so this should be readily available.

Just because the plaintiff attorney is demanding $5 million on this case doesn't mean the defense is authorizing that amount.

There is a settlement conference scheduled for two weeks from today. In order to get prepared, you can send the plaintiff attorney some rating information from a few of the larger companies. Security is a major concern here and the widow is very cynical about this idea. By talking with the plaintiff attorney before the conference, you can alleviate many of the concerns that may come up. This might also be a good time to call Lee and ask for some guidance on procedures at the conference. If a judge will be the mediator, you might want to practice saying "Your Honor".

The plaintiff attorney calls to tell you he just received a structured settlement proposal and he wants you to take a look at it. There are concerns about the company used, and he doesn't like the payment stream.

It is crucial to find out what he would like to see. There is no point in providing a proposal until you get a specific idea of what he is looking for.

Your proposal includes monthly income with an annual increase of 3% and the attorney is interested. Throw in some lump sums here and there and you are getting close.

As far as the daughter, a college fund with future lump sums has been presented and the attorney is okay with that. (We might be able to come up with something a little more creative and appealing, so we'll take a look at this proposal too)

The security concerns are taken into consideration and we go to work figuring out the best place(s) to put the money. We want to provide the attorney with all relevant rating material so the decision on the life company is up to him.

At the settlement conference the structures N' such broker is there bright and early with a laptop. Fortunately you have already provided the quote that is going to be accepted. But if quoting were necessary, it wouldn't be a problem to have the other broker quote, or we could provide instant quotes via phone or fax.

Settlement Phase

The plaintiff attorney has decided on one of our proposals. The widow likes the idea of the increasing benefit. The final cost is $1.75 million (not including attorney fees). The defense is pleased with the settlement as well. The claimant is financially stable due to a life insurance policy so she is not concerned about up front cash.

We go to work immediately sending out the confirmation letters and sample documents. The plaintiff attorney has already reviewed a copy of the required Settlement Agreement language and his staff is preparing the final draft. He also remembers hearing about Secured Creditor Status and believes that is the added security his client needs to feel comfortable with the idea. The documents are adjusted accordingly, and we prepare the Uniform Qualified Assignment, Release and Pledge.

Time is critical at this stage. Rates are only valid for seven days and the question of a lock-in may come up. It is imperative that all parties understand the time-sensitive nature of structures. Not only for rates, but the general 60 day rule for assignments as well.