Why cases cash out and don't get structured. A case study.
Monday, February 12, 2007 at 11:30AM I don't usually post three times in one day, but I just had the perfect example of exactly why cases DON'T get structured and end up cashing out. Allow me to share this, with the names of the principals left out for obvious reasons:
I have a client trial lawyer who contacts my office 4 weeks ago and says they have a young woman client who is settling a auto claim for approximately $600,000 and wants to structure $300,000. So, we have a trial lawyer who is on board with the concept, a client that is already agreeable to structure and plenty of time to do the case and get it done properly. The client was also injured in a fashion that allowed for age rating, which we went ahead and got done, with AIG/American General having the best combination of age rating and interest rates.
The Trial lawyer shares with me that the defense attorney told him that he could use his own/plaintiff broker to design it and would allow our office to draft the model documents to get it done, i.e. uniform qualified consent, sample settlement agreement and release, applications, annuity bids, etc. This was sent on to the trial lawyer who then sent it for signature and follow through by defense counsel. All parties signed, but then my client was presented with the checks made payable to his client, not structured, along with a revised release and a cover letter informing him:
1. AIG was not on their approved list, however the approved list did have Transamerica, Genworth, First Colony and Mass Mutual. Other notables not on the list were Allstate and Prudential.
2. They wouldn't offer a structure unless their broker, who has been no where to be seen on this case, wrote the annuity and protected their interests. I'm fine with that, but then the broker informed my office they would write 100% of the contract as they have an exclusive.
3. The rate offered by the company on their counter structure, mind you we are holding checks payable to the client as this negotiation is going on between defense broker and plaintiff counsel on the product design, is worse then that offered by AIG/American General.
4. Plaintiff counsel says, " Mark this is insane, I'm cashing the checks and I'll have my client invest it. This is nothing but bad faith, my client is disgusted and wants their money. "
So, we have a defense broker that works for a casualty market that has an outdated, obsolete approved market list, but yet defends this broker as their sole source of annuity contracts to the point where they are refusing to work with a plaintiff attorney that walks a $300,000 premium case in the door to them on a platter, when they weren't able to close the case up front through either not noticing the case or not making structured offers that made sense to the client.
End result, $300,000 that will go to a local planner or bank, a casualty company that has outdated policies and procedures but yet has a "protected broker" that isn't looking after their interests and is so antagonistic that $300,000 that should have been structured is lost. I really wonder how often this scenario is played out every day, in claims and cases nationwide, and how much premium is lost due to practices such as this. Virtually no one benefits from this scenario, but every one loses.
Wasn't it Einstein who stated that the definition of insanity was doing the same thing over and over again but expecting a different result?
Reader Comments (5)
I my cases representing brain injury survivors the stakes are just too important to walk away from the structure but I will be dammned if my client is cheated in the process and I simply will not allow it to happen.
Perhaps the best answer is to push for legislation in all 50 states as well as nationally as an amendment to act which authorizes annuity payments that the receipient has the absolute right to use their own broker.
Michael V.Kaplen, Esq.
De Caro & Kaplen, LLP
20 Vesey Street
New York, NY 10007
President, Brain Injury Assoc New York State
Past Chair, ATLA Motor Vehicle, Highway & Premise Liability Section
Past Chair, ATLA Traumatic Brain Injury Litigation Group
www.brainlaw.com
www.braininjury.blogs.com
mvk.brainlaw@verizon.net
As I've said before, if your friends in the trial bar had a 1/3rd of the spine you have in standing up for your clients rights in choosing a structured settlement 99% of all the abuses in this industry would vanish, AND about 50% more premium would get written.
As you know from personal experience, when the defense blatantly shuts out the use of a plaintiff expert the result is almost always the case cashing out, or at the very least, that case being the last one the trial lawyer structures due to the bad taste it left in his mouth.
I'd love to see ATLA and other trial lawyer organizations get behind model legislation but the opposition that would come down on that from the settlement community would be intense. However, I'd like to see people arguing in front of legislators how preventing a victim a choice in their broker is somehow against public policy or anti-structure.
Thanks as always for your support on this issue.
Such a thing is less likely to happen at AIG or St. Paul Travelers or other places where the programs are more organized and have a structured settlement coordinator.
What is truly painful is that these "worst case scenarios" erode the growth needed to keep provider companies in the market, and make the industry attractive to potential entrants. I've had dialogue with companies who can't see past the flat market. Stop the madness.
Glad to see your a reader and contributor. Always welcome the perspective of someone who has been on the inside with the markets. Your right, it does erode the growth, and as a plaintiff guy, I'm accutely aware of how many cases cash out as a result of either sloppy or greedy practices by defense brokers, not because the plaintiff guy is trying to steer it away from a structure. The need for our product should be growing, not shrinking.