Too much power in the hands of a few? The risk of a shrinking structured settlement profession.

In this weeks edition of Speaking of Settlements to be released on Thursday, my video commentary is pointed directly at the two professional associations that work in the arena of structured settlements, NSSTA and the SSP.  

With the NSSTA annual meeting scheduled for Palm Springs, CA in April and the SSP annual meeting set for Las Vegas, NV in early May, I think the time is right to start an honest discussion about the low level rumblings that there is a concerted effort underway in the profession to "take on the issue of single claimant QSF's" and to end the practice once and for all.  

Structured Settlements, are we headed down the same dark tunnel of our past?

Structured Settlements, are we headed down the same dark tunnel of our past?

As I mention in my video commentary, in the past era's of our profession, when ever there was a concentration of power in the hands of either one firm, or a particular orientation such as defense or claims, it was human nature to exploit that power for economic advantage. This led to such practices as:

  • In the 1980's stating that mere knowledge of the cost of annuity in the structure was potentially constructive receipt  A lie that gained currency over time and took years to erase as there was never any such ruling or holding by the IRS. Yet, it was passed on as fact so as to maintain the negotiating edge of the defense interests in control of the process at that time. 
  • In the 1990's the iron clad "rule" that plaintiff brokers or those who worked with plaintiff attorneys and provided rates to them could have their general agency contracts pulled. Again, this only made sense if you were working for the defense and looking to maintain a tightly enforced cartel, but as typically happens, this was challenged in the Weill case, which resulted in a suit against the life markets and trade association and led to the end of this practice and the subsequent ability of plaintiff brokers being able to write structures.  
  • In the 2000's we had in house claims programs that tightly controlled approved markets, approved broker lists and which led to compensation sharing schemes that eventually resulted in the Spencer vs Hartford litigation and settlement over the legitimacy of those practices. The net impact of that litigation being fewer casualty markets actively promoting structured settlement claims with the same vigor and passion which likely reduced the number of cases structured over the last decade as a result, a result which benefited virtually no one in our profession.

Now as we are well into the second decade of the new millennium, I keep hearing rumblings that elements in the defense and casualty claims side of our profession are putting pressure on the remaining life markets to end the practice of allowing single claimant Qualified Settlement Funds from being written and to more actively discourage casualty companies from paying into QSF's in general, so as to maintain defense control over annuity placement and pricing.  

While I hope these reports are untrue, evidence is mounting that more life markets are toeing the line, despite any IRS or Treasury opinion that would change the wording on 468B. What accounts for this change of heart? I doubt it is a spontaneous intellectual agreement reached independently by the life markets, but is in fact a result of lobbying on behalf of people and organizations that would benefit from this change.  

So what is the big deal you might ask? Single claimant cases are actually very rare, in fact, I think I can only recall two in my entire career I was involved in that required the approach, and only then, because of extremely unique circumstance such as the pending insolvency at the time of Reliance Insurance or more recently a case with an incarcerated claimant who was subject to a variety of potential claims on his award from related parties. In both cases substantial structures were written, each for sound economic and planning reasons and designed to benefit people who badly needed the funds and who would have squandered the money absent this planning tool. 

So what do I suggest the two trade associations do about this looming conflict? Are we doomed to go down the same dark tunnel as past decades on this topic or can we agree to come to some reasonable resolution as a profession before we spend a fortune, and quite possibly, put at risk a planning tool used in virtually every mass tort and multi-claimant case of any size that is settled in the US?  My suggestions: 

  • A meeting of the respective boards of directors of the associations to discuss what concerns each side has on the topic of QSF's. If you can't even contemplate an open, transparent meeting of the respective schools of thought then we know where this will all lead. 
  • At that meeting discuss the respective concerns regarding single claimant cases, but by all means affirm the integrity and use of 468B Qualified Settlement Funds in mass tort and multi-claimant cases.  
  • See if the respective associations can mutually agree upon an industry standard regarding single claimant QSF and present a united front to our respective defense and trial lawyer clients as opposed to the usual vicious in fighting that makes us look like clowns.Also, stop putting life markets in the middle of this battle and using them as pawns for one side or the other and instead develop a broker led industry standard of cooperation that encourages more companies to enter this market, not give them reasons to leave.
  • Present an agreement to members pledging to not waste precious association resources going to Treasury or Congress and attempting to modify or clarify 468B to the benefit of one side or the other. For once lets resolve a broker related issue with out litigation, lobbying and years of bleeding which benefits no one. 

At the end of the day our profession desperately needs to INNOVATE, COOPERATE and COMMUNICATE a positive, growth oriented message regardless of defense or plaintiff orientation. Let's not waste any more time trying to squeeze one group at the expense of another. The short term gain is never worth the long term pain and the result is always some unintended consequence that harms us all in the end. 


Posted on April 9, 2013 .