Having worked in civil justice for 21 years, my experience with trial lawyers and judges is profoundly unique. I’ve witnessed the effort and risk associated with settlements in all manners of torts throughout the world. No party to a personal injury settlement wants to be there in the first place. The tenor and emotion associated with causing the injury, death or permanent disability of a person is profound for business owners, doctors and even execs when faced directly with the people they affected. Families too are often reticent to race toward finality in litigation. The end of that chapter just opens a new, bigger chapter called “the rest of your life”, with some payment stream or lump sum that supposedly represents justice while reminding you constantly of what you lost.
No matter the amount of money paid, or in what form, settlement is always a compromise, and it’s a bitter end for almost all people who participate in it. Litigation takes a toll on families emotionally and physically. The strength of the partnership between trial lawyer and family is often a tender and complicated bond of trust and reliance.
Trial lawyers might invest 6 years of their life in a birth trauma, or a wrongful death case to see it successfully resolved in a structured settlement. Hopefully, that trial lawyer, and perhaps the Judge who approves the settlement, feels positive about the outcome. Although a compromise, they are likely buoyed by the fact that the resulting settlement allows the family to live in dignity and to be financially secure. A good resolution of a difficult situation from many perspectives.
This professional toil and success informs and creates the framework for how trial lawyers and the judges who preside over catastrophic cases feel professionally about the Structured Settlement factoring industry enabling transfers of future payment rights under IRS Section 5891 and State Structured Settlement Protection Acts. I imagine they may feel that a lot of the hard work they put in to support and enable a family is being undone. I imagine the lawyers involved may feel that a victimized family is becoming financial victim to an industry that has historically had limited conscience and consumer protections. I know I have felt that way as a settlement planner who has worked on many such cases and who has learned after the fact when some get sold to “factoring companies”.
In 2002, IRC 5891 was passed into law paving the way for recipients of structured settlements to sell their assets through a court ordered process. Having the right to sell your asset seems like a good thing. And it has helped many families react to unforeseen issues. The historical rub of this is, with no active consumer protection, the business of originating or marketing to structured settlement annuitants has earned a heavily negative reputation. That is principally due to bad actors, and aggressive discount rates. Just take a look at the steps taken by the Maryland Attorney General in 2015, suing companies that were predatory and committing fraud in the structured settlement space.
Lawyers and settlement planners involved in the original case are rarely notified. With little chance to advise clients, the people we fought so hard for, good outcomes are difficult to achieve. Did they shop for multiple quotes? Did they made sure they were getting a great discount rate and working with a reputable company? Did they confirm if there were more economical options such as getting traditional financing or short term loan?
Lawyers, judges, and settlement planners who dedicated time, energy, and emotion to helping an individual or family, don’t generally get to advise before someone sells for 9%, 15%, or even 20% discount rates. There are lots of articles on what is a good discount rate, but suffice it to say that for someone receiving $1,200 a month for 20 years, the difference between 9% and 15% is the difference between getting $133,000 and getting $91,000.
When I see that someone I worked with in the past lost $40,000 and I wasn’t there to help them, that makes me frustrated and angry. I have to imagine that is how the lawyers and judges feel as well. Maybe that is why the legal community often expresses disdain for transfers. It’s easy to understand why people may accept these rates, as they are often lower than they may be accustomed to paying on their credit cards. The difference is stark however due to the length of time most structured settlements pay out over.
But what if the rate was fair? What if that family was getting $189,000 at 4.5% rate instead? That might be a different story. That’s a better rate than they would have gotten from all but the best commercially available loans. That’s a better deal than most insurance companies would give if it was possible to surrender the annuity. In fact, it is a better deal than they would get if they were selling a house and had to pay realtors.
If all structured settlement transfers looked more like 6%, 5%, or even 4.5% discount rates, would lawyers still dislike them? Or would they embrace it as a tool to help the clients they fought so hard for deal with unanticipated emergencies?
CrowFly aims to change the paradigm for structured settlement transfers. The website’s homepage has a simple calculator that is easy to use and instantly gives anyone in the industry, lawyers, law clerks, judges, annuitants, and family members, a tool to evaluate the value of structured settlement payments for free. There is no call to an aggressive sales person, or need to dig 10 layers deep into a website; the calculation is immediately represented on crowfly.com. And the results speak for themselves.
Transfers should still be a last resort. Lawyers and planners should still work with their clients to ensure they have what they need for life and emergencies. But if families run into unexpected issues and need immediate funds, CrowFly is working to make sure there is an ethical, transparent, and efficient tool they can use to understand what their payments are worth, and to ultimately have access to fair market pricing for their asset. Competition, markets, and even more importantly, efficient markets are good for consumers. People with structured settlement deserve better outcomes, and a much more transparent marketplace.
I recommend you visit crowfly.com and see for yourself.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).