Structured Settlements and Periodic Payment Judgments

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by Daniel W. Hindert, Joseph J. Dehner, Patrick J. Hindert

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An excellent treatise which I recommend to all tort trial lawyers.
Philip Corboy of Corboy & Demetrio, P.C., Chicago

A must have for every structured settlement professional who intends to provide comprehensive service to his/her clients. It likewise is a second to none reference source for both attorneys and claims professionals that facilitates quick access to complex areas of the law involved in the settlement of both personal physical injury and other claims.
Karen D. Meyers, MBA/JD, MEd, CPCU, CLU, FLMI, CSSC, NSSTA Certification Chair
Little, Meyers & Associates, Ltd.

Structured Settlements and Periodic Payment Judgments is a complete reference work for attorneys, settlement planners, and insurance and annuity brokers. It contains complete and current coverage of all issues confronting those who resolve personal injury cases through structured settlements or who litigate cases under periodic payment of judgment rules. Topics include: negotiation strategies; annuity testimony to prove future losses; the responsibilities of plaintiff and defense counsel; IRC Section 468B Settlement Funds; annuity rates; evaluating the financial strength of insurance companies; state insurance guarantee associations; financing alternatives; the interrelationship of periodic payments and entitlement to Social Security, Medicare and other public benefits; evaluating and augmenting damages; expert testimony; mass tort litigation; effects of tax legislation; structured settlement work processes; factoring; structuring worker's compensation cases; and more.

Structured Settlements and Periodic Payment Judgments brings you the historical underpinnings, latest case law and statutory developments. It also provides numerous sample forms, including settlement forms, jury verdict forms, privacy waivers, offer letters, interrogatories, document requests and an attorney fee agreement, as well as ratings for life insurance companies and lists of companies that provide periodic payments.

Book #00598; looseleaf, one volume, 858 pages and one CD-ROM; published in 1986, updated as needed; no additional charge for updates during your subscription. Looseleaf print subscribers receive supplements. The online edition is updated automatically. ISBN: 978-1-58852-037-1

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  • Brand: Law Journal Press
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  • Page Count: 858
  • ISBN: 978-1-58852-037-1
  • Pub#/SKU#: 598
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  • Daniel W. Hindert
Daniel W. Hindert, a graduate of Williams College and Vanderbilt Law School. He is now a partner in Lewis Hansen in Salt Lake City, where he advises clients on personal injury litigation, both plaintiff and defense.

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  • Joseph J. Dehner
Joseph J. Dehner, an honors graduate of Princeton University and the Harvard Law School, is a member of Frost, Brown & Todd LLC, a Midwestern law firm, with his office in Cincinnati, Ohio.

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  • Patrick J. Hindert
Patrick Hindert is Managing Director of S2KM Limited. He is member of the Ohio State Bar Association and graduated from Harvard College and the University of Michigan Law School.

Hindert has been a leader within the structured settlement industry since since 1977. He previously served as President of Benefit Designs, Inc. (1977-98) and The National Structured Structured Settlement Trade Association (NSSTA) (1990-91) as well as Executive Director of the Society of Settlement Planners (SSP) (2003).

Hindert authors S2KM's blog "Beyond Structured Settlements" as well as S2KM's wikis. With Daniel Hindert and Joseph Dehner, Hindert authors Structured Settlements and Periodic Payment Judgments published by Law Journal Press® and updated semi-annually.

Introduction and History

§ 1.01 Periodic Payment Defined
[1] Lump Sum v. Periodic Payment
[2] Periodic Payment v. Structured Settlement
[3] Varieties of Periodic Payment Arrangements
§ 1.02 History of Periodic Payment
[1] Common Law Reliance on Lump Sum Payment
[2] Single Recovery Rule and Periodic Payment
[3] Precedents for Periodic Payment of Damages
[4] Early Use of Structured Settlements
§ 1.03 Expanding Use of Periodic Payment
[1] Structured Settlements and Statutory Mandates
[2] Benefits to Parties
[3] Benefits to Society
[4] Guidelines for Use
§ 1.04 Advantages and Disadvantages of Periodic Payment
[1] Advantages to Claimant
[2] Disadvantages to Claimant
[3] Advantages and Disadvantages to Plaintiff’s Attorney
[4] Advantages and Disadvantages to Defendant and Insurer
[5] Advantages and Disadvantages to Defense
[6] Summary of the U.S, Structured Settlement Experience
§ 1.05 Use of Structured Settlements Outside the United States
[1] Canada
[2] United Kingdom
[3] Continental Europe
[4] Australia and New Zealand
[5] Other Countries
§ 1.06 Impact on Tort System

Taxation of Damages Received by Claimant

§ 2.01 Statutory Framework
§ 2.02 History of the Statutory Exclusion
§ 2.03 Scope of the Exclusion
[1] “Damages (Other Than Punitive Damages) Received . . . On Account of Personal Physical Injuries or Physical Sickness”
[2] Damages Received as “Periodic Payments”
[3] Nonexclusion of Damages Due to Prior Medical Deductions
[4] Other Exempt Recoveries
§ 2.04 Deduction of Expenses
[1] Attorney Fees and Other Costs of Litigation
[2] Medical Expenses
§ 2.05 Estate Taxation of Periodic Payments
[1] Statutory Grounds for Estate Tax Inclusion of Periodic Payments
[2] Valuation of the Right to Receive Periodic Payments
[3] Planning Considerations
[4] Payment of an Estate Tax Liability
§ 2.06 Non-Qualified Assignments

Financing Alternatives for Structured Settlements and Periodic Payment Judgments

§ 3.01 Introduction
§ 3.02 The Periodic Payment Obligation
[1] No Obligation
[2] Assumption of Obligation
[3] Transfer of Obligation
§ 3.03 Periodic Payment Financing Alternatives
§ 3.04 Internal Financing
[1] Internal Financing Defined
[2] Contractual Rights and Duties
§ 3.05 Annuity Financing
[1] Annuity Financing Defined
[2] Contractual Rights and Duties
[3] Legal Interests in the Annuity Contract
[4] Types of Annuities
[5] Standard Age Ratings
[6] Substandard Age Ratings
[7] Annuity Pricing and Price Changes
[8] Assessment of Premium Taxes
[9] Life Insurance Insolvencies
[10] Life Insurance Guaranty Associations
[11] First Executive Corporation and the Executive Life Insurance Companies
[12] Executive Life Insurance Company of California Insolvency
[13] Executive Life Insurance Company of New York Insolvency
[14] Other Life Insurance Insolvencies Involving Structured Settlements
§ 3.06 Qualified Assignment
[1] Qualified Assignment Defined
[2] Contractual Rights and Duties
[3] Compliance with Statutory Requirements
[4] U.S. Government Bond Funds
[5] Qualified Assignment as a Secured Transaction
[6] Qualified Assignment From a Section 468B Fund
§ 3.06A Non-Qualified Assignment
§ 3.07 Reinsurance
[1] Indemnity Reinsurance
[2] Assumption Reinsurance
§ 3.07A Settlement Trusts
[1] Introduction
[2] Types of Settlement Trusts
[3] Selecting a Settlement Trustee
§ 3.08 Reversionary Grantor Trust
[1] Reversionary Grantor Trust Defined
[2] Rights, Duties, and Powers
§ 3.08A Supplemental Needs Trust
[1] Supplemental Needs or Special Needs Trust Defined
[2] Characteristics of Supplemental Needs or Special Needs Trusts
§ 3.08B Section 468B Settlement Funds
[1] What Are Section 468B Funds?
[2] Statutory and Regulatory Background
[3] When and Why Are 468B Funds Used?
[4] What Are the Mechanics of Setting Up and Operating a 468B Fund?
[5] Practice Pointers for Courts, Litigators and Fund Administrators
§ 3.09 Surety Bonds and Other Financial Guarantees
[1] “Surety” Which is Not a Surety
[2] Surety Within Same Economic Family as Assignee
§ 3.10 Other Financing Vehicles
[1] Introduction
[2] Financial Services Modernization Act
[3] State Funds and Statutes
[4] Life Insurance
[5] Retained Asset Accounts
[6] Variable Annuities
[7] Commutation Riders
[8] Medical Cost Products
[9] Conclusion

Role and Responsibilities of Defense Counsel in Structured Settlements

§ 4.01 Why the Nature of the Settlement Matters to the Defense
[1] Effect of Periodic Payments on the Defense
[2] Structured Settlement Participants
[3] Basic Structured Settlement Questions for Defendants
[4] Structured Settlement Metrics
§ 4.02 Insurance Policy Issues
[1] Control of Decisions
[2] Policy Limits
§ 4.03  Financial Impact on Defense Participants
[1] Taxable Self-Insured Defendants
[2] Nontaxable Self-Insured Defendants
[3] Liability Insurers
§ 4.04 Privacy, Consultants and the Choice Between Negotiating Structured Settlements or Cashing Out
[1] Privacy
[2] Structured Settlement Consultants
[3] The Choice Between Negotiating Structured Settlements or Cashing Out
§ 4.05 Disclosure About the Settlement and the Obligor
[1] Disclosure of Obligor’s Financial Condition
[2] Securities Law Issues
[3] Cost of a Settlement; Affiliated Annuity Issuers
[4] Compensation
[5] A Practical Approach to Meeting a Professional Responsibility
[6] State Mandated Disclosures
[7] Medicare/Medicaid Disclosures
§ 4.06 Drafting of Settlement Documents
[1] Ultimate Responsibility for the Settlement Documents
[2] Release for All but the Obligor
[3] Definition of Roles and Obligations
[4] Court Approval
§ 4.07 Multiple Defendants
[1] Management by the Defense
[2] Options for Defense Participants
[3] The Importance of Clear Drafting of Settlement Documents

Role and Responsibilities of Plaintiff’s Counsel in Structured Settlements

§ 5.01 Why the Nature of a Settlement Matters to the Plaintiff’s Attorney
[1] Effect of Structured Settlements on the Role of the Plaintiff’s Attorney
[2] Assistance Available to Plaintiffs and Their Attorneys
§ 5.02 Comparing Lump Sum and Structured Settlements
[1] Many Different Criteria are Appropriate for Decision-Making
[2] Financial Criteria
[3] Comparing Settlement Alternatives
[4] Interrelationship with Government Benefits
[5] Ability to Liquidate a Structured Settlement
[6] The Special Case of Minors and Incompetents
[7] Efforts to Get a Lump Sum and Then Structure It
§ 5.03 Using a Qualified Assignment to Make the Plaintiff a Secured Creditor
[1] Deciding Whether and How to Grant Secured Creditor Rights
[2] Impact of Article 9 of Uniform Commercial Code
[3] Methods of Securing the Transaction
[4] Security Interests in Annuity Contracts
[5] Security Interests in U.S. Government Obligations
§ 5.04 Addressing the Risk of Nonpayment to a Claimant
[1] Protecting the Claimant
[2] Creditor Rights Against the Obligor
[3] Other Rights and Remedies for Collecting Periodic Payments
[4] Evaluating the Obligor and Others Involved in Making or Providing Payments
[5] Obtaining Representations from the Defense
§ 5.05 Controlling Decision Making About Structured Settlements
[1] Control Issues
[2] How Plaintiffs Can Increase Control
[3] Privacy
§ 5.06 Drafting Settlement Documents
[1] Ultimate Responsibility for Certain Aspects of Settlement Documents
[2] Definitions of Payees
[3] Other Matters of Plaintiff’s Concern
§ 5.07 Attorney Compensation
[1] Determining the Amount of a Contingent Fee
[2] Taxation of Deferred Compensation

Case Preparation

§ 6.01 Increased Need for Information About the Claimant
§ 6.02 Structured Settlement Consultants
[1] Roles and Responsibilities of Consultants
[2] Selecting Structured Settlement Consultants
[3] Business Conduct/Practices/Issues of Consultants
§ 6.03 Evaluation and Argumentation of Damages
[1] Determinants of Future Loss
[2] Present Value of Future Loss
§ 6.04 Sample Evaluation of Damages
[1] Hypothetical Claim for Brain-Damaged Child
[2] Purpose of Evaluation
[3] Findings of Economic Loss
[4] Comparison of Key Assumptions
[5] Effect of Alternative Assumptions
[6] Application of Periodic Payment
§ 6.05 Discovery Issues
[1] Scope of Discovery
[2] Potential Bars to Discovery
[3] Direct Discovery from a Structured Settlement Consultant
§ 6.06 Using a Checklist
[1] Contents of Checklist
[2] Checklist of Documents

Case Negotiation

§ 7.01 Introduction
§ 7.02 Guidelines for Negotiating Structured Settlements
[1] Initial Case Review
[2] Assemble Supporting Materials
[3] Determine Each Participant’s Position on Use of Periodic Payment
[4] Identify Specific Objectives for Each Negotiating Session
[5] Making an Offer
[6] Analyzing an Offer
[7] Concluding a Negotiation
§ 7.03 Defense Strategies
[1] Evaluate and Confirm the Role of Structured Settlements
[2] Define a Negotiation Strategy
[3] Establish Value by Reference to Claimant’s Economic Needs
[4] Negotiate Benefits, Not Cost
[5] Make Only One Offer at a Time
[6] Condition Any Structured Settlement Offer or Counter Offer on the Client’s Preferred Method of Financing
[7] Condition the Offer on Confidentiality from Third Parties
[8] Make All Mandatory Disclosures
§ 7.04 Claimant’s Strategies
[1] Determine Whether Structured Settlement is Appropriate
[2] Determine Defendants’ Structured Settlement Policy and Strategy
[3] Identify and Retain Structured Settlement Experts
[4] Use a Period Certain that Approximates the Claimant’s Life Expectancy
[5] Negotiate Benefits Separately for Each Claimant
[6] Consider Alternatives to Big Balloon Payments With Long Deferrals
[7] Evaluate Attendance by a Claimant
[8] Ask the Defense to Unbundle the Financing
§ 7.05 Other Issues
[1] Liens on Amounts Recoverable by Claimant
[2] Bad Faith
[3] Offer of Judgments
[4] Post-Judgment Settlements
[5] Disclosure of Cost
[6] Attorney Fees
[7] Structured Settlement Compensation
[8] Representations Regarding Taxation and Financing
[9] Complex Litigation
[10] The Court’s Role
§ 7.06 Negotiation Checklist

Case Closing

§ 8.01 Introduction
§ 8.02 Administrative Steps in Closing
[1] Defense Counsel Gives Notification of Settlement or Judgment
[2] Consultant Confirms a Financing Commitment
[3] Obtaining Court Approval
[4] Defense Team Submits All Closing Materials to Consultant
[5] Consultant Obtains Financing and Sends Evidence to Defense Team
§ 8.03 Closing Documentation
[1] Annuity Financing
[2] Qualified Assignment
[3] Indemnity Reinsurance
[4] Assumption Reinsurance
[5] Reversionary Grantor Trust
§ 8.04 Issues Arising After Closing of the Case
[1] Claimant’s Divorce
[2] Claimant’s Indebtedness
[3] Claimant’s Death
[4] Attempts to Set Aside Settlement Agreement Because of Adverse Tax Impact
§ 8.05 Settlement Hearing

Uniform Periodic Payment of Judgments Act

§ 9.01 History of the Uniform Act
[1] The National Conference of Commissioners on Uniform State Laws
[2] The Model Act
[3] The Uniform Act
§ 9.02 Summary of the Uniform Act
[1] Scope of the Act
[2] Election for the Act to Apply
[3] Required Damages Findings
[4] Determining the Form of the Judgment
[5] Effect of Death
[6] Funding the Judgment
[7] Bonding the Judgment on Appeal
[8] Satisfaction of Judgment
[9] Assignment and Exemption of Periodic Payments
[10] Arbitrations and Settlement Agreements
[11] Duties of the Insurance Commissioner
[12] Effective Date of the Act
§ 9.03 Analysis and Evaluation of the Uniform Act
[1] Scope of the Act
[2] Election for the Act to Apply
[3] Required Damages Findings
[4] Determining the Form of the Judgment
[5] Effect of Death
[6] Funding the Judgment
[7] Liability Insurer’s Obligation
[8] Assignment and Garnishment
[9] Judicial Receptivity to the Uniform Act
§ 9.04 Hypothetical Applications of the Uniform Act
[1] Assumptions Underlying Three Hypothetical Cases
[2] First Scenario: Adjustment of Verdict for One-Third Lump-Sum Attorney’s Fee
[3] Second Scenario: Adjustment of Verdict for (1) Prior Settlement of $300,000 in Cash and (2) One-Third Attorney’s Fee
[4] Third Scenario: Adjustment of Verdict for (1) Prior Settlement of $300,000 in Cash and Periodic Payments That Cost $400,000 and (2) One-Third Attorney’s Fee
[5] Hypothetical Case in the Commissioners’ Comment to the Uniform Act

Survey of State Statutes on Periodic Payment of Judgments

§ 10.01 Introduction
§ 10.02 Damages Subject to Periodic Payment
[1] Injuries Covered by State Statutes
[2] Threshold Amounts
[3] Damages Which May Be Paid Periodically
[4] Applicability to Torts Prior to Statutes Passage
§ 10.03 Roles of Parties, Judge and Jury
[1] Optional Periodic Payments
[2] Judge’s Discretion to Order Periodic Payments
[3] Role of the Jury
[4] Determination of Damages
§ 10.04 Form of the Periodic Payment Judgment
[1] Essential Terms of the Judgment
[2] Assurance of Payment
[3] Availability of Adjustments
[4] Reversions and Beneficiaries
§ 10.05 Treatment of Attorney Fees
§ 10.06 Constitutionality of State Statutes Authorizing Periodic Payment Judgments
[1] Constitutionality of Statutes Singling Out Medical Malpractice Cases
[2] Constitutionality of Statutes Generally Authorizing Periodic Payment of Judgments

Procedure for Fashioning a Periodic Payment Judgment

§ 11.01 The Request for a Periodic Payment Judgment
[1] Initial Pleadings
[2] Pre-Trial Motion
[3] Post-Verdict Motion
§ 11.02 Discovery
§ 11.03 Itemized Verdicts
[1] Needed Elements
[2] Alternatives
§ 11.04 Presentation of Damages
[1] Generally
[2] Plaintiff’s Presentation
[3] Defense Presentation
[4] Annuity Testimony
§ 11.05 Post-Verdict Events
[1] Translating the Verdict’s Numbers into a Judgment
[2] Offsets and Other Reductions
[3] Attorney Fees
[4] The Periodic Payment Plan
[5] Post-Verdict Hearing
[6] An Example of a Verdict Translated into a Periodic Payment Judgment
[7] Interest
§ 11.06 Appeals
§ 11.07 Conclusions

Annuity Testimony

§12.01 Introduction
§12.02 Use of Annuity Testimony
[1] The Economics of Present Cash Value
[2] Annuity Testimony As An Alternative Method of Present Value Calculation
[3] “Annuitist” Defined
§ 12.03 Standards of Review
[1] Trial Court Discretion
[2] Misleading, Confusing, or Prejudicial Nature of Evidence v. Its Probative Value
[3] Statutes or Rules Requiring or Permitting Use of Annuity Testimony
§ 12.04 Distinguishing Types of Annuity Testimony
[1] Annuity Tables or Neutral Figures
[2] Single v. Multiple Quotes as Indication of Market Rate
[3] Economist Testifying About Annuity Prices
§ 12.05 Objections to Annuity Testimony
[1] Hearsay
[2] Quote Expiration
[3] Rated Age v. Life Expectancy
[4] Risk Allocation
[5] Future Medical Expenses
[6] Possible Affiliation with Defendant’s Insurer
[7] Double Discounting
[8] Failure to Identify the Annuitist as an Expert
§ 12.06 Strengths of Annuity Testimony
[1] Present Value Calculation in Real World Terms
[2] Risk of Life Expectancy is Transferred to the Annuity Issuer

Periodic Payments in Environmental Cases

§ 13.01 Introduction
§ 13.02 Environmental Personal Injury Claims
§ 13.03 Superfund Cases
§ 13.04 Resolving Environmental Claims With Section 468B Qualified Settlement Funds
§ 13.05 Caveat on Use of Section 468B in Environmental Settlements With a Remote Obligation

Structuring Workers’ Compensation Claims

§ 14.01 Nature of Workers’ Compensation Laws
§ 14.02 Statutory Benefits
§ 14.03 Funding Workers’ Compensation Benefits
§ 14.04 Tax Treatment of Benefits
§ 14.05 Claim Financing Techniques
[1] Compromise Settlements and Redemptions
[2] Financing of Statutory Obligations
[3] Post-Settlement Treatment of Benefits

Government Benefits and Structured Settlements

§ 15.01 Introduction
§ 15.02 Social Security
[1] History of Disability Programs
[2] The Social Security Act
[3] The Social Security Administration
[4] Social Security Benefits for People with Disabilities
§ 15.03 Medicare
[1] Introduction
[2] Medicare Secondary Payer Rules
[3] Conditional Payment Process
[4] Medicare, Medicaid and SCHIP Extension Act of 2007
[5] MSP and MSA Regulation
[6] CMS Structured Settlement Rules
[7] CMS WCMSA Policy Memoranda Addressing Structured Settlements
§ 15.04 Medicaid
[1] Introduction
[2] Medicaid Omnibus Reconciliation Budget Act
[3] Deficit Reduction Act of 2005
[4] Structured Settlement DRA Issues
[5] Regulation
[6] Medicaid Liens
[7] Special Needs Trusts
[8] Structured Settlement Rules for Special Needs Trusts
§ 15.05 Veterans Benefits
§ 15.06 Federally Assisted Housing
[1] Section 202 Program
[2] Section 8 Rental Assistance

Transfers of Structured Settlement Payment Rights

§ 16.01 Introduction
[1] Background
[2] Definitions
[3] Public Policy
[4] Purpose of Chapter
§ 16.02 History of Structured Settlement Transfers
[1] Origin and Participants
[2] Business Practices and Issues
§ 16.03 IRC § 5891
[1] Introduction
[2] Summary of Act
[3] Analysis of IRC § 5891
§ 16.04 Structured Settlement Protection Acts (SSPAs)
[1] Legislative Recognition of the Need for SSPAs
[2] Model Legislation
[3] How the SSPAs Work
[4] Procedure for Seeking Court Approval
[5] Opposed vs. Unopposed Applications
[6] Transfers vs. Commutations
[7] Proceedings
§ 16.05  Judicial Review of Transfer Applications
[1] Role of the Court as Gatekeeper
[2] Identifying the Applicable SSPA(s)
[3] Conduct of Proceedings
[4] Issues the Court is Required to Address
[5] Conflicting Interests in Payment Rights
[6] Legal Effects of An Approved Transfer
§ 16.06  Determining Taxability Under IRC § 5891