Structured Settlement reform called for. Opinion article in The Hill

Earlier this week an opinion segment was published in the widely read Washington news entity, The Hill, that brought up the issue of Structured Settlement reform and looked once again at the AIG class action lawsuit and issues related to transparency, commissions and business practices in the light of how things are done in comparable financial transactions. 

Credit: The Hill

Credit: The Hill

Authored by trial lawyer and former structured settlement planner, Dick Risk, it is entitled "Why Congress needs to reform structured settlements" and it examines crucial issues that are rarely discussed by trial lawyers, Congress and structured settlement professionals. For anyone in the structured settlement profession Dick Risk is a familiar name as a determined advocate for the rights of plaintiffs in settlement to select the adviser, planner and funding company that set's up their structured settlement. This has often brought him into sharp conflict with NSSTA (National Structured Settlement Trade Association) leadership and members, as the type of transparency and plaintiff control Dick advocates directly threaten's the business model upon which the structured settlement profession largely exists and operated on over the last 40 years. 

Further, Dick Risk late in his career went to law school, obtained membership in the bar and commenced lawsuits against the industry and these practices. The most notable being one against The Hartford Insurance Group regarding an undisclosed commission arrangement they had as part of their claims practice. Then more recently Attorney Risk is one of the plaintiff attorney's at the center of the AIG class action filed earlier this year. As a result of his advocacy in this area, many would tend to dismiss this article and it's points as hopelessly slanted given the back ground and career of the author. 

I believe ignoring or trying to minimize this article would be a huge mistake for trial lawyers, but even more of a mistake for the leadership of the Structured Settlement profession as the issues he highlights are at the center of a wave of change that is going to soon overwhelm the structured settlement planning profession. 

While most will want to "shoot the messenger" I am strongly of the opinion that much, if not all of what is being proposed here is totally consistent with the broader trends toward a fiduciary standard, full disclosure to clients and the BICE, Best Interest Contract Exemption, standard that is now being applied to fixed index annuity sales under DOL standards effective June 9, 2017. Just yesterday the Secretary of Labor essentially conceded that it would be disruptive to further delay the implementation of the fiduciary standard of care when dealing with any retirement accounts. This decision came after an avalanche of opposition to the rule from the annuity industry to rules that require them to clearly disclose all compensation, state any conflicts and make clear that the recommendation is in the best interest of the client. Clearly the tide has shifted as such a lobby effort in the past inside a Republican administration would have produced the desired results that life companies are use to getting. 

My questions is how could any reasonable person be opposed to such a standard being applied to the planning of a structured settlement for a badly injured, disabled or impaired individual? Well, the reality is that standard is not applied currently and if you look at the litigation mentioned in the article, it is clear that this important transaction is not even governed using the NAIC standards for suitability. However, there is a sea change coming and articles such as this one by Attorney Risk are just the first warning bells to both trial lawyers and planners that a fiduciary standard eventually needs to be applied on these irrevocable annuity programs. However, as the article makes clear, until the business relationships that prevent trial lawyers and plaintiffs from having the sole choice of who their settlement planner is, what life company they use for the annuity and the control of casualty companies in the decision is removed, these changes simply won't arrive any time in the near future. 

I'll be covering in greater detail in coming posts some of the current conflicts and issues that are stripping away the rights of plaintiffs to control their financial futures, largely due to troubling trends in some federal cases that take all choice of planning away from the client at settlement and during the life of their annuity. It is up to trial lawyers and their state and national organizations to raise the profile of this issue so that a contemporary and transparent level of diligence is required on all structured settlements and that plaintiffs are sufficiently empowered as to their choice of advisers and companies they wish to work with when putting these essential annuity programs into place.