Relates to structured settlements

Summary of provisions

In Section 2 of the bill, a new subdivision (a-1) is added to Section 5-1701 of the General Obligations Law (GOL), and defines a "claimant's structured settlement broker" as a person secured by the claimant to represent the claimant's interests in the acquisition of a funding mechanism for a structured settlement, including an annuity policy from a life insurer.

Subdivision (e) of section 5-1702 of the GOL is re-lettered (f) and a new subdivision (e) is added, which provides that a claimant receive written notice of the claimant's right to secure a claimant's structured settlement broker to represent the claimant during the acquisition of the defendant's settlement funding mechanism, including an annuity.

A new section 5-1702A of the GOL is added to provide in Subsection (1) that a claimant has the absolute right to use a claimant's structured settlement broker, and must be advised of this right by their attorney or the court. Subsection (2) provides that the broker represents the claimant in determining the funding mechanism used to support the structured settlement, including use of an annuity policy. No funding mechanism can be agreed upon and no annuity approved unless the claimant's structured settlement broker has been notified of an the details of the agreement, and been provided with a copy of the contract and the annuity policy (if applicable) 5-1702A Subsection (3) provides that the fee or commission paid to a claimant's structured settlement broker not be a separate fee paid by the claimant from the settlement. Rather, under this subsection. the fee or commission will be paid by the insurer funding the funding mechanism or annuity policy. A claimant's structured settlement broker will be entitled to a share of the commission paid in connection with the acquisition of the funding mechanism or annuity in an amount agreed to by the claimant's structured settlement broker and the defendant's broker. Absent such an agreement, the claimant's designated structured settlement broker will receive one-half of the total statutory commission paid in connection with the acquisition of the funding mechanism or issuance of the annuity policy.

5-1702A subsection (4) provides that nothing in this new section 5-1702A of the GOL can be deemed or interpreted as transferring an ownership right in the annuity policy to a claimant, and this section does not alter or effect any advantages or considerations with respect to the taxability of periodic payments pursuant to state or

federal law. Any existing tax benefits in place on the effective date will remain in effect.

Section 4 provides that the act becomes effective in 30 days and applies to structured settlements agreements entered into on and after such date.

Justification

Structured settlements are current public policy both in New York State and Federally, providing for significant tax exemptions to children and disabled citizens of our state as an incentive to enter into periodic payment obligations. Although we are protecting our citizens that are attempting to sell their current existing structured settlements, we have done nothing to protect their rights in establishing a structured settlement in the first instance. The marketplace of structured annuities is complex and diverse, this bill established transparency for plaintiffs entering into structured settlements as pall of the resolution of their lawsuits, and makes the brokers/agents accountable to them as part of the sale of insurance. Due to the natural opposition encountered between parties in litigation, the plaintiff, the real consumer of insurance, and beneficiary of the structured settlement needs representation from an expert in the field of structured settlements. This bill gives the plaintiff a right to representation, fairly compensates that expert, and eliminates the self dealing occasionally encountered when insurance companies settle cases with plaintiffs statewide. This policy will foster a greater confidence in structured settlements, and will further encourage their use by all parties to litigation. At a time when every financial transaction and insurance product is in question, we should not expect the citizens of our state to entrust their financial future to the agent of their opponent in litigation. To continue do so, controverts the public policy and undermines the entire existence of structured settlements.

Legislative history

S.8072/A.11425 (2009-2010)

Fiscal implications

Structured Settlement, assuming more are put in force each year, will prevent many citizens from spending the proceeds from their lawsuits, and therefore w11l not need public assistance and/or Medicaid. potentially positive effect.

Effective date

This act shall take effect thirty days after the date it becomes law and shall be applicable to structured settlements agreements entered into on and after such date.