Conditions you should be aware of in the transfer of cash for structured settlements payment rights.
When you sell structured settlements, this is nothing new. Financial arrangements such as these are commonplace, and they are meant to resolve wrongful death or personal injury claims, with the responsible party agreeing to make payments over time instead of in one lump payment. This is very useful when it comes to settling lawsuits, since undertaking extended legal proceedings can be a drain on both your personal and financial health. Structured settlements can be very useful, because you will get on with your life once you have them set in place, and your lawyer can handle the specifics.
What structured settlements mean to most people is that you can get the best possible settlement for everything you might experience — whether it be a slip and fall case to a lifelong injury that’s going to have serious and long lasting consequences. However, structured settlements aren’t just limited to catastrophic injury. In other words, structured settlements don’t just involve lifelong disabilities.
A structured settlement is defined as an arrangement for periodic payment of damages established by settlement or judgment in resolution of a tort claim. In most instances, these periodic payments are established and tailored to the living and medical needs of the victim and prevent the shift of responsibility for care to the taxpayer-financed social safety net.
Laws do protect consumers from brokerage companies that are unscrupulous. Usually, the settlement agreement also specifies a nonassignability clause. Basically, this is unenforceable, though.
Some of the purchase agreements require the consumer to stipulate to a host of provisions which severely restricts consumers rights and raises questions as to their basic fairness. To forestall suit, however, the contracts often require the consumer to defend and hold harmless the purchasing party in any lawsuit.
One of the largest brokers of structured settlements has said that more than 50% of structured settlement agreements have premiums that are less than $50,000. Less than 13% have settlements that are valued at greater than $250,000. Whatever the original concept of structured settlement was, and whatever the purpose of the tax rules that facilitate them, these figures clearly show that structured settlements today are not used principally for catastrophic injury resolution.
A few make the case that that structured settlements provide crucial financial protection to seriously injured victims, including: protection against premature dissipation of benefits for injured victims; periodic payments tailored to the living and medical needs of the victim and his/her family; and avoiding the shift of responsibility for the victim’s care to the taxpayer-financed social safety net. They argue that there has been a dramatic growth in the number of factoring companies that are purchasing the future structured payments for a sharply discounted lump sum payment, “taking the structure out of structured settlements. This is a transaction that the injured victim enters into with a 3rd party, completely outside of the structured settlement and without knowledge of the other parties.
Industry watchdogs also say that structured settlement factoring businesses that are dark are also rapidly increasing. One company, in fact, announced that it had undertaken almost 8000 structured settlement purchase transactions totaling $370 million in value. During the first three quarters of 1997, this same company “bought” 3700 structured settlements, and paid $74 million for $163 million in structured settlement payments.
The National Association of Settlement Purchasers (NASP) is composed of companies that purchase deferred payment obligations, including structured settlements. It is a nonprofit. It was formed in July of 1996, and this organization, along with its member companies, support reasonable regulation whereby the rights of consumers who want to sell structured settlement payment rights are still protected. Because of this, the organization has adopted a code of ethics, including consumer suitability of protection standards. It has also implemented a fraud alert system. The organization seeks to provide claimant representatives and claimants themselves with legal, ethical and efficient means by which to obtain liquid funds from inflexible structured settlement schedules. NASP is active in a number of states, and is currently working to pass comprehensive legislation in those states that would protect the interests of personal-injury victims both when the settlement agreement is reached, and in the event the individual or his/her representatives seek to liquidate a portion or all of the structured settlement in the future.
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