Why cases cash out and don't get structured. A case study.

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So, we have a defense broker that works for a casualty market that has an outdated, obsolete approved market list, but yet defends this broker as their sole source of annuity contracts to the point where they are refusing to work with a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? 

Posted on February 12, 2007 .