Litigation

Just finished Patrick Hindert's homage to himself on S2KM's Beyond Structured Settlements blog. You'd think that if Jeremy Babener thought anything of his interview with Hindert, HE'D have posted it on his own blog. But I guess that antsy pantsy Hindert couldn't wait.

Before I continue I want to tell you about an entertaining book I've been reading called "The Wonder of Whiffling and Other Extraordinary words in the English language", by Adam Jacot De Boinod.  Find those lost weird and wonderful words that make the English so rich. It is from this book that I draw the label of Hindert as a "seagull manager", defined therein as "one who flies in, makes alot of noise, shits all over everything, and then leaves".

Hindert comes alive for the second fall running, almost to the day. Last year it was a seagull job on AIG. This year it's Bab-oonery about Qualified Settlement Funds, er at least that's what the title of the post leads you to believe.

So why are we not surprised when the first question that Hindert purports that Babener asks is about "the secondary market"? Surely someone as bright as Babener would not be asking the co-author of the allegedly seminal text for structured settlements about that first. Hindert doesn't even get to that in the text until many chapters in. Me thinks that Hindert "seduced" Babener into asking this, how about you?

So Babener purportedly asked before anything else "How frequently do structured settlement consultants discuss the secondary market with injury victims?"

Hindert asserts:

While some settlement planners may discuss the secondary market with their clients, most primary market structured settlement advisers do not.

Most structured settlement annuity providers and their agents are not qualified to advise anyone about "structured settlement transfers" (aka "factoring").

Comments:

Hindert has long been a proponent of factoring. Although he has floated the hypothesis that factoring is the key to industry growth he has been a coward to debate the issue after throwng a challenge. His open advocacy of factoring while seated on important committees of the NSSTA serves as an egg on the face of the NSSTA, and a contradiction to the mission of the NSSTA branding committee, on which this author has served.

To hoist Hindert on his own petard, "Where is the independent, objective proof?"

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He then moves on to the subject of annuity commissions

• Babener: What is the typical commission for structured settlement annuities?
• Hindert:
  
  • The "standard" structured settlement annuity commission is four (4%) percent of premium which is paid by the product provider to its agents (aka "consultants" or "brokers") .
  • Frequently, multiple agents share the four percent commission.
  • Such "commission sharing" creates conflicts of interests which are rarely disclosed to the structured settlement recipient or his/her attorneys.

Comments

1. Does Hindert purposely ignore the fact that Rhonda Bentzen/ Bentzen Funding Solutions disclosed that 90% of her clientele, composed as she stated entirely from the structured settlement industry, take financial payments with respect to structured settlement factoring transactions?

2. Does Hindert suggest that commission sharing with Rhonda Bentzen ( and her ilk) is not a conflict of interest, or that it is fully disclosed all the time?  I beg to differ. I base MY opinion on published evidence, from factoring insiders, that such payments reduce the amount available to the selling annuitant; that only 5% of the industry was willing to swear under oath that they do not take such compensation; and few firms have published policies on the subject.

3. A number of settlement consultants, including but not limited to 4structures.com, LLC, Creative Capital and other consultants have for years used a  structured settlement affidavit (see #4) or declaration that includes the disclosure of commissions and co-broker arrangements, if any.

4.  While this author is in favor of such disclosure, the fact is that annuity commission disclosures do not reduce costs to annuitants because in most states there are anti-rebating laws. If an annuitant is concerned that a settlement consultant is making $40,000 on a $1,000,000 premium structure then what recourse does he or she have? They can ask for a kick back, but the consultant won't pay it unless they violate the law. Doing a QSF does not cure the problem that Hindert implies other than to enrich the structured settlement consultant hired by the QSF.

5. I don't know why HIndert needs to caption "standard" as it applies to structured settleannuity commission. The commission paid by annuity issuers is not variable.

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Taxing structured settlement recipients

• Babener: Many structured settlement consultants believe the majority of structured settlement recipients pay taxes - or would otherwise pay taxes but for the structured settlement tax subsidy.
• Hindert: Where is the objective proof? Many structured settlement industry "beliefs" don't square with the facts. Your dissipation paper helps to prove this thesis.

Comments

1. Did Babener actually ask a question?

2. What's the point here? Are the Bab-oons arguing AGAINST the tax subsidy?  

   

3. It is well established that structured settlement payment of damages under IRC 104(a)(2),whether as lump sum, or periodic payments, (or workers comp payments under 104(a)(1)) are income tax free.

4. Structured settlements offer more benefits for payees than a tax exclusion.

5. The future potential tax bracket of the payee is or should be a consideration in the settlement planning process.

Do defendants save money using structured settlements?

• Babener: Have defendants and their liability insurers historically saved money using structured settlements by negotiating based on nominal rather than present values?
• Hindert:
  • Many structured settlement agents and intermediaries proclaim defendants save money using structured settlements.
  • Where is the independent, objective proof?
  • If true, what are the reasons?
    
    • Misrepresentation?
    • Failure to disclose?
    • Unauthorized practice of law?
  • Most structured settlements are negotiated using lump sums which are subsequently transitioned into structured settlements.
  • Why would any informed plaintiff attorney ever knowingly accept a lower fee from his client for a structured settlement settlement costing defendants less than an alternative cash settlement?
  • Under current CMS rules for workers compensation Medicare set-aside agreements (WCMSA), annuities are valued more cost advantageously for defendants than lump sums because of the CMS required "set-off" method for calculating present value.
  • This CMS valuation method also means that annuities underfund WCMSAs because the annuities do not include any inflation provisions.

Comments

1. Hindert ran now defunct settlement general agency, Benefit Designs, Inc. ("BDI") unti 1998. One element of historical, objective proof could come from an examination of that company's case files, now presumably in the hands of EPS Settlements Group which was formed by a combination between BDI and two other companies. Particularly of interest would be marketing and training materials that BDI used in soliciting clientele such as Great American Insurance Company and HCA.

2. How does what Hindert characterizes as "unauthorized practice of law" save money for Defendants when it comes to structured settlements?

3. Is providing mathematical calculations, other numerical calculations or providing negotiation assistance "unauthorized practice of law?"

4. If a defendant frames its offer in the form of periodic payments without a corresponding cash offer, where is his point?

5. Is HIndert more concerned with CMS than plaintiffs? He states that "annuities are valued more cost advantageously for defendants than lump sums because of the CMS required "set-off" method for calculating present value". Isn't it better for the plaintiff if LESS is tied up in the MSA and negotiated recovery dollars can be reallocated elsewhere?

6. I do agree however, with the point of Hindert's question "Why would any informed plaintiff attorney ever knowingly accept a lower fee from his client for a structured settlement settlement costing defendants less than an alternative cash settlement?". Less than artful defense negotiating results in the "let's split the structured settlement tax subsidy gambit".

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Defendant savings -3

• Babener: What is your estimate of the amount of money defendants save using structured settlements?
• Hindert:
  • I have never seen an independent study demonstrating or explaining whether, or more importantly why, defendants save money using structured settlements.
  • Any cost savings results primarily from:
    
    • Misrepresentations;
    • Failure to disclose; or
    • Negotiation pressure.
  • One of the results of high pressure structured settlement sales in a claim management context is to increase the likelihood the recipient will subsequently attempt to sell their payment rights.
  • If you ignore profits from product sales and assume full disclosure of compensation and costs with no misrepresentations and no unauthorized practice of law ( he defines as agents providing legal services to save defendants legal costs), how do defendants save money using structured settlements?

Comments

1. How can Hindert state as fact that any cost savings results primarily from misrepresentations failure to disclose; or negotiation pressure, when he has never seen an independent study?

2. Negotiating pressure can be applied from both sides

3. I fully agree that certain types of "high pressure structured settlement sales in a claim management context is to increase the likelihood the recipient will subsequently attempt to sell their payment rights". For example forcing a plaintiff to structure a certain amount of money in a certain way, the operative point being that the forced structure has no bearing on their needs (and the underlying reason is the structured settlement's factor in the adjuster's compensation) is totally bogus. WE all knwo this goes on. But I'm confident that these situations are not the majority.

4. Continuing the point in #3, the "CT Woman saga" actually involved a broker for the plaintiff who, according to the plaintiff, pushed the plaintiff into a structure that DID NOT meet all of her cash needs  (over structured). She was subsequently referred to Rhonda Bentzen within a month or so of settlement and took an estimated 30% plus hit to the principal cost of the sold annuity payment rights and it took 6 months to get paid.

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Approved lists

• Babener: Have defendants and their liability insurers historically saved money on structured settlement costs by insisting on purchasing annuities from affiliates and particular life insurance companies?
• Hindert:
  • For the best evidence of defendant savings, and the best explanation for such savings, review the allegations of misrepresentation and non-disclosure in the Spencer v Hartford case.
  • In calculating "defense savings", it is important to differentiate:
    • claim savings;
    • profits from structured settlement annuity sales; and
    • future liabilities resulting from structured settlement annuity sales.

Comments

Perhaps Hindert is unaware of the fact that The Hartford BAP program has changed. Current guidelines provide that "If a structured settlement annuity is being considered, the broker must provide to the claimant at least two different annuity company quotes for the claimant to make a decision. There is no requirement to place (or quote) a Hartford Life annuity. There will be no approved life company list. The broker will determine (based on jurisdiction) whether there is a requirement for A+ vs A ratings".

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Qualified Settlement Funds

• Babener: Assuming there are no defendant savings, do you think that structuring a settlement with a QSF is superior to structuring directly with a defendant?
• Hindert:
  • Yes, I believe structuring a settlement with a QSF is inherently superior to structuring with a defendant in a claim management model.
  • The objectives, processes and knowledge resources are completely different in these two settings.
  • Both the plaintiff and defendant receive judicial protection and a trustee/administrator whose role is to develop settlement solutions for all QSF beneficiaries.
  • QSFs permit and require allocation among claimant beneficiaries and lien holders - including Medicare and Medicaid. Claimants and their advisers can objectively consider plaintiff needs, resources and best interests.
  • The primary (only) negative of QSFs for plaintiffs is the cost.
  • Key questions about QSFs are the costs - and how to substantial decrease those costs and the time necessary for QSF disbursements and termination.

Comments

1. Incredibly the only question of the alleged Patrick Hindert interview by Jeremy Babener that deals with the topic advertised.

2. Hindert's answers dance over the fact that Babener's paper is about single claimant qualified settlement funds. Many of his answers seem to apply to such funds where there is more than one claimant.

3. As a Registered Settlement Planner I recognize the situations where a qualified settlement fund may be helpful. I also disagree with Hindert's mischaracterization of any structured settlement that is created without a qualified settlement fund as being part of a "claim management model".

4. I agree that the objectives, processes and knowledge requirements and resources are different between alternative methods of recovery.

5. The financial reward to the plaintiff's broker is also doubled as a result of using a qualified settlement fund before structuring, with such remuneration unavailable to the plaintiff due to anti rebating laws. One wonders if some plaintiffs and plaintiff attorneys are being pressured into using QSFs without valid reasons.

6. The cost of a qualified settlement fund is a factor and anti rebating laws in some states prevent cost shaving from the agent's commission.

7. Some life insurance companies will not currently accept a qualified assignment from a single claimant QSF, thus refuting claims of full market access espoused by QSF jockeys. Hindert omits this as a negative.

Given the pedantic writing style it would be helpful to readers if Hindert could stay on point.