By Representative Guin
Rd 1 20-FEB-2001
Under existing law, a lawsuit or workers’ compensation claim may be settled by the injured person receiving a structured settlement which pays benefits over a period of time.This bill would establish the Structured Settlement Protection Act.This bill would establish and require a review process for a proposed transfer of structured settlement payment benefits and provide certain requirements for the transfer of structured settlement payment rights to be effective.
TO BE ENTITLED
To establish the Alabama Structured Settlement Protection Act; to provide for the transfer of structured settlement payment rights; to provide protection for a payee under certain circumstances; to provide specific disclosure requirements; to provide the procedure and standards for the approval of transfers; to require advance authorization by a court or administrative authority for a transfer of structured settlement payment rights; and to provide requirements and conditions for a transfer to be effective.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. This act shall be known and referred to as the “Alabama Structured Settlement Protection Act.”
Section 2. For purposes of this act, the following terms shall have the following meanings:
(1) ANNUITY ISSUER. An insurer that has issued a contract to fund periodic payments under a structured settlement.
(2) DEPENDENTS. Includes a payee’s spouse and minor children and all other persons for whom the payee is legally obligated to provide support, including alimony.
(3) DISCOUNTED PRESENT VALUE. The present value of future payments determined by discounting the payments to the present using the most recently published applicable federal rate for determining the present value of an annuity, as issued by the United States Internal Revenue Service.
(4) GROSS ADVANCE AMOUNT. The sum payable to the payee or for the payee’s account as consideration for a transfer of structured settlement payment rights before any reductions for transfer expenses or other deductions to be made from the consideration.
(5) INDEPENDENT PROFESSIONAL ADVICE. Advice of an attorney, certified public accountant, actuary, or other licensed professional advisor.
(6) INTERESTED PARTIES. The payee, any beneficiary irrevocably designated under the annuity contract to receive payments following the payee’s death, the annuity issuer, the structured settlement obligor, and any other party that has continuing rights or obligations under the structured settlement.
(7) NET ADVANCE AMOUNT. The gross advance amount less the aggregate amount of the actual and estimated transfer expenses required to be disclosed.
(8) PAYEE. An individual who is receiving tax-free payments under a structured settlement.
(9) PERIODIC PAYMENTS. Includes both recurring payments and scheduled future lump-sum payments.
(10) QUALIFIED ASSIGNMENT AGREEMENT. An agreement providing for a qualified assignment within the meaning of Section 130 of the United States Internal Revenue Code, United States Code Title 26, as amended.
(11) RESPONSIBLE ADMINISTRATIVE AUTHORITY. Any government authority vested by law with exclusive jurisdiction over the settled claim resolved by such structured settlement.
(12) SETTLED CLAIM. The original tort claim or workers’ compensation claim resolved by a structured settlement.
(13) STRUCTURED SETTLEMENT. An arrangement for periodic payment of damages for personal injuries or sickness established by settlement or judgment in resolution of a tort claim or for periodic payments in settlement of a workers’ compensation claim.
(14) STRUCTURED SETTLEMENT AGREEMENT. The agreement, judgment, stipulation, or release embodying the terms of a structured settlement.
(15) STRUCTURED SETTLEMENT OBLIGOR. The party that has the continuing obligation to make periodic payments to the payee under a structured settlement agreement or a qualified assignment agreement.
(16) STRUCTURED SETTLEMENT PAYMENT RIGHTS. Rights to receive periodic payments under a structured settlement, whether from the structured settlement obligor or the annuity issuer, in any of the following:
a. The payee is domiciled in, or the domicile or principal place of business of the structured settlement obligor or the annuity issuer is located in Alabama.
b. The structured settlement agreement was approved by a court or responsible administrative authority in Alabama.
c. The structured settlement agreement is expressly governed by the laws of Alabama.
(17) TERMS OF THE STRUCTURED SETTLEMENT. Includes, the terms of the structured settlement agreement, the annuity contract, any qualified assignment agreement, and any order or other approval of any court or responsible administrative authority or other government authority that authorized or approved the structured settlement.
(18) TRANSFER. Any sale, assignment, pledge, hypothecation, or other alienation or encumbrance of structured settlement payment rights made by a payee for consideration; but does not include the creation or perfection of a security interest in structured settlement payment rights under a blanket security agreement entered into with an insured depository institution, in the absence of any action to redirect the structured settlement payments to such insured depository institution, or an agent or successor in interest thereof, or otherwise to enforce such blanket security interest against the structured settlement payment rights.
(19) TRANSFER AGREEMENT. The agreement providing for a transfer of structured settlement payment rights.
(20) TRANSFER EXPENSES. All expenses of a transfer that are required under the transfer agreement to be paid by the payee or deducted from the gross advance amount, including, without limitation, court filing fees, attorneys’ fees, escrow fees, lien recordation fees, judgment and lien search fees, finders’ fees, commissions, and other payments to a broker or other intermediary; and does not include preexisting obligations of the payee payable for the payee’s account from the proceeds of a transfer.
(21) TRANSFEREE. A party acquiring or proposing to acquire structured settlement payment rights through a transfer.
Section 3. Not less than three days prior to the date on which a payee signs a transfer agreement, the transferee shall provide to the payee a separate disclosure statement, in bold type no smaller than 14 points, stating all of the following:
(1) The amounts and due dates of the structured settlement payments to be transferred.
(2) The aggregate amount of such payments.
(3) The discounted present value of the payments to be transferred, which shall be identified as the “calculation of current value of the transferred structured settlement payments under federal standards for valuing annuities,” and the amount of the applicable federal rate used in calculating the discounted present value.
(4) The gross advance amount.
(5) An itemized listing of all applicable transfer expenses, other than attorneys’ fees and related disbursements payable in connection with the transferee’s application for approval of the transfer, and the transferee’s best estimate of the amount of any fees and disbursements.
(6) The net advance amount.
(7) The amount of any penalties or liquidated damages payable by the payee in the event of any breach of the transfer agreement by the payee.
(8) A statement that the payee has the right to cancel the transfer agreement, without penalty or further obligation, not later than the third business day after the date the agreement is signed by the payee.
Section 4. No direct or indirect transfer of structured settlement payment rights shall be effective and no structured settlement obligor or annuity issuer shall be required to make any payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been approved in advance by a final court order or an order of a responsible administrative authority. The approval shall be based on express findings by the court or responsible administrative authority determined after a factual hearing of all of the following:
(1) The transfer is in the best interest of the payee, taking into account the welfare and support of the payee’s dependents.
(2) The payee has been advised in writing by the transferee to seek independent professional advice regarding the transfer and has either received the advice or knowingly waived the advice in writing.
(3) The transfer does not contravene any applicable statute or the order of any court or other government authority.
Section 5. Following a transfer of structured settlement payment rights pursuant to this act, all of the following apply:
(1) The structured settlement obligor and the annuity issuer shall, as to all parties except the transferee, be discharged and released from any and all liability for the transferred payments.
(2) The transferee shall be liable to the structured settlement obligor and the annuity issuer in both of the following:
a. If the transfer contravenes the terms of the structured settlement, for any taxes incurred by such parties as a consequence of the transfer.
b. For any other liabilities or costs, including reasonable costs and attorneys’ fees, arising from compliance by such parties with the order of the court or the responsible administrative authority or arising as a consequence of the transferee’s failure to comply with this act.
(3) Neither the annuity issuer nor the structured settlement obligor may be required to divide any periodic payment between the payee and any transferee or assignee or between two or more transferees or assignees.
(4) Any further transfer of structured settlement payment rights by the payee may be made only after compliance with all of the requirements of this act.
Section 6. (a) An application under this act for approval of a transfer of structured settlement payment rights shall be made by the transferee and may be brought in the county in which the payee resides, in the county in which the structured settlement obligor or the annuity issuer maintains its principal place of business, or in any court or before any responsible administrative authority which approved the structured settlement agreement.
(b) Not less than 20 days prior to the scheduled hearing on any application for approval of a transfer of structured settlement payment rights, the transferee shall file with the court or responsible administrative authority and serve on all interested parties a notice of the proposed transfer and the application for its authorization. Included with the notice shall be a copy of all of the following:
(1) The transferee’s application.
(2) The transfer agreement.
(3) The required disclosure statement.
(4) A listing of the payee’s dependents, together with each dependent’s age.
(5) Notification that any interested party is entitled to support, oppose, or otherwise respond to the transferee’s application, either in person or by counsel, by submitting written comments to the court or responsible administrative authority or by participating in the hearing.
(6) Notification of the time and place of the hearing and notification of the manner in which and the time by which written responses to the application must be filed, which shall be not less than 15 days after service of the transferee’s notice, in order to be considered by the court or responsible administrative authority.
Section 7. (a) The provisions of this act may not be waived by any payee.
(b) Any transfer agreement entered into on or after the effective date of this act by a payee who resides in this state shall provide that disputes under the transfer agreement, including any claim that the payee has breached the agreement, shall be determined pursuant to the laws of Alabama. No transfer agreement shall authorize the transferee or any other party to confess judgment or consent to entry of judgment against the payee.
(c) No transfer of structured settlement payment rights shall extend to any payments that are life-contingent unless, prior to the date on which the payee signs the transfer agreement, the transferee has established and has agreed to maintain procedures reasonably satisfactory to the annuity issuer and the structured settlement obligor for periodically confirming the payee’s survival, and giving the annuity issuer and the structured settlement obligor prompt written notice in the event of the payee’s death.
(d) No payee who proposes to make a transfer of structured settlement payment rights shall incur any penalty, forfeit any application fee or other payment, or otherwise incur any liability to the proposed transferee or any assignee based on any failure of the transfer to satisfy the requirements of this act.
(e) Nothing contained in this act shall be construed to authorize any transfer of structured settlement payment rights in contravention of any law or to imply that any transfer under a transfer agreement entered into prior to the effective date of this act is valid or invalid.
(f) Compliance with the requirements in this act and fulfillment of the conditions in this act shall be solely the responsibility of the transferee in any transfer of structured settlement payments rights, and neither the structured settlement obligor nor the annuity issuer shall bear any responsibility for, or any liability arising from, noncompliance with such requirements or failure to fulfill such conditions.
Section 8. (a) This act shall become effective immediately following its passage and approval by the Governor, or its otherwise becoming law.
(b) This act shall apply to any transfer of structured settlement payment rights under a transfer agreement entered into on or after the thirtieth day after the effective date of this act; provided, however, that nothing contained herein shall imply that any transfer under a transfer agreement reached prior to such date is either effective or ineffective.
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