Summit Structured Settlements
755 S.E. Frontier Suite 101
Waukee, Iowa 50263
Voice: 515.987.6888
Fax: 515.987.6999
Toll Free: 866.267.1177
info@summitsettlements.com
Disclaimer
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Malpractice Exposure is Threefold
Reliance on misrepresentations by the defense is the second cause of legal
malpractice involving structured settlements that we accurately predicted would
surface. Our first prediction, that an attorney can be sued for failure to offer
a structured settlement to his or her client, recently was reported in the cases
of Grillo v. Henry, Cause No. 96-167943-97, and Grillo v. Pettiette, Cause No.
96-144090-92, both in the 96th District Court, Tarrant County, Texas. The
plaintiff, an incompetent, had recovered $2.5 million from the hospital in the
underlying medical negligence case. Subsequently, she successfully pursued
claims against her guardian ad litem and her trial attorneys for their alleged
failure to provide the opportunity of tax-free future income through a
structured settlement. Additionally, there was no request to the life insurance
markets for the assignment of a rated age, based on her medical history, to
enhance lifetime benefits. Nor was there any attempt to establish or preserve
the plaintiff's Supplemental Security Income (SSI) and the Medicaid eligibility
through a supplemental needs trust. Instead, the funds were deposited with the
court's registry and eventually disbursed in cash.
There is a third exposure to legal malpractice that is just as certain to occur
as did the other two predictions. The next cause of a legal malpractice claim
will be the failure to survey the available markets to offer the claimant the
most competitive price of benefits from an annuity issuer, assignee and
guarantor that are acceptable to the claimant. If you think you have avoided the
other two pitfalls, watch out for this third exposure. It is just as much a
malpractice exposure as not offering a structure or allowing the adversary to
foist its settlement broker on the injury victim and relying on representations
of the defendant or its insurer as to the settlement offer's value.
Don't Allow Limitation of Choices
Since 1983, when the liability to make future payments that was created in the
settlement agreement could first be transferred to a third-party obligor, the
defendant or liability insurer has had no legitimate reason to dictate which
annuity company, obligor or secondary guarantor should be selected. Largely for
political reasons, liability insurers maintain lists of "approved markets," just
like they maintain lists of "approved brokers" to handle the structured
settlement transactions. Once the periodic payment obligation is assumed by the
assignment company, the original obligor is released not only from the original
tort liability, which occurs in the settlement agreement, but also from the
periodic payment obligation, which is created in the settlement agreement. If
there is the possibility of a recourse to the original obligor, it would be only
for such things as misrepresentation of value on which the claimant has relied
or for dictating the choice of annuity markets and guarantors, should there ever
be a default on the future payments. It is the claimant that assumes all risk
once the periodic payment obligation is assigned to the third party. What
possible legitimate reason could the defendant or liability insurer have for
choosing the annuity issuer or limiting the claimant's choice? None.
If a liability (property and casualty) insurer restricts the choice of markets
to about seven or eight, when there are approximately 25 to 30 viable,
highly-rated companies in the marketplace, the chances are good that the
claimant will be deprived of the opportunity to have the future benefits come
from a more competitive company. The effect is that those annuity issuers on a
list of "approved markets" do not need to be as competitive as the rest of the
marketplace, which tends to keep their prices high. It would seem that such
restrictions on markets would be vulnerable to a challenge on the basis that
they are per se illegal under federal antitrust laws. Agreements of a type that
always or almost always tend to raise the price or to reduce output are
conclusively presumed by the courts to be illegal, without inquiring into their
claimed business purposes, anticompetitive harms, procompetitive benefits, or
overall competitive effects. The "Rule of Reason" is not applied.
If a liability insurer represents that the present value of a structured
settlement is so much, it should be willing to pay that much in cash to obtain
the same release and dismissal. If the insurer balks at the suggestion of a cash
settlement instead of one that includes future payments, that should serve as
your warning that the value of the structured settlement being offered likely is
less than represented. In a perfect world, the defendant or liability insurer
would negotiate in terms of cash. If the claimant engages a settlement broker
prior to those negotiations, the broker can assist by presenting future payment
options that truly match the anticipated future needs of the claimant and other
family members, allowing the claimant to arrive at a minimum acceptable dollar
amount that falls within the reasonable range of a potential settlement offer.
The broker can determine in advance whether a rated age for an impaired life
expectancy will be a factor. Then, in that perfect world, if the parties agree
on an amount that the defendant or insurer will pay for the benefit of the
claimant, the defendant or insurer would invite the claimant to have his or her
broker work through counsel for parties on both sides to set up the periodic
payments.
This article was written by Richard B. Risk, JD |
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