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John Bair
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A Call to Action: Increasing Plaintiff Protection in Settlement

2 comments

As printed in the Women Trial Lawyers Caucus Connections Count | Summer 2014, www.justice.org/wtlcnewsletters

A reader of our firm’s blog recently commented on a guest post written by constitutional and legal expert John Vail. Vail wrote about the introduction of Bill H.R. 3699, the Structured Settlement Claimants Rights Act. If written into law, H.R. 3699 would provide claimants with important consumer protections that currently elude them in the context of structured settlements. In response to Vail’s support of the bill, the reader wrote,

“This bill makes no sense. If I’m a trial lawyer and need my own structure broker, I just pick up the phone and bring him in like any other expert. […]. Then my broker and the defense broker work it out. This bill is telling me that trial lawyers are too dumb or too afraid to use their own experts? Ridiculous.”

This mindset represents a school of thought that continues to harm plaintiffs. Status quo assumes that 1) plaintiffs and/or their attorneys know that they can use their own settlement expert instead of the defense’s and 2) plaintiffs and/or their attorneys recognize the benefit of using their own settlement expert. Unfortunately, this isn’t always the case.

Support Growing for Plaintiff Protection

In a perfect world, plaintiffs would understand the importance of having a settlement expert on their side. The fact is that a number of the bigger insurance companies mandate that in order to settle, the plaintiff must get a structured settlement and that the transaction is completed with a broker tied to the insurance company.

There are those like Vail who recognize this issue, and who have begun to voice their support for increasing plaintiff protection in settlement. Burton LeBlanc, current president of the American Association for Justice (AAJ) is another proponent of the bill. In a November 27, 2013 letter in support of H.R. 3699[1], LeBlanc wrote,

“Unfortunately, there are few consumer protections in place to help protect the interests of the injured claimant. Frequently, the defendant, who negotiated the settlement with the claimant, insists that the claimant use a structured settlement company that is affiliated with the defendant and may not represent the best interests of the claimant.”

Vail and LeBlanc understand what the blog commenter does not—that defendants are skilled in the practice of developing settlements that suit their own agendas, and that plaintiffs, as a whole, are not aware of their right to retain their own settlement experts, or the fundamental importance of making such a decision.

Legal Precedent Demonstrates Need for Plaintiff Expert

Previous cases have repeatedly demonstrated that the lack of a plaintiff broker can lead to a settlement that does not meet the needs of the plaintiff, but rather, one that supports the best interests of the defense:

In Spencer et. al. v. Hartford Financial Services Group, Inc. et. al. (2010), the plaintiffs were personal injury and workers’ compensation claimants who received structured settlements from Hartford Life. The plaintiffs alleged that Hartford Life committed fraud by paying claimants involved in those suits 15% less than the promised value of their structured settlements.

One of the attorneys for the class of plaintiffs, Richard Risk, said, “most of the 21,000+ class members were represented by legal counsel who allowed the defense to handle, in many cases, the largest financial transaction of their client’s life.”[2]

Risk went on to more explicitly state the connection between those individuals who used a plaintiff broker and those who did not:

Those claimants who settled with The Hartford subsidiaries during the same period and were represented by a plaintiff-advocate structured settlement producer were excluded from the class, presumably because they had knowledge or constructive knowledge of some of the practices used by the defense.” (emphasis added)

In a previous case, Lyons v. Medical Malpractice Insurance Association (2001), the plaintiff alleged that the insurer had its structured settlement broker use information that misled the plaintiff into believing that his case was worth hundreds of thousands of dollars more than it actually was. In addition to suing the insurer, the plaintiff also sued his attorney for failing to determine the actual value of the structured settlement and for taking attorney fees on the inflated value.

Settlement Planning: It’s More Than Just Structures

A settlement represents the largest amount of money that most plaintiffs will ever see at one time, and the money is intended to provide for their financial and medical needs. Although Bill H.R. 3699 is a step towards protecting plaintiffs in settlement, it highlights only a small piece of the larger picture.

Settlement planning, as a practice, is much more comprehensive than just structured settlements. With the current low rates, a structure may not always be the best option, and it should not be used as a blanket solution.   The plaintiff needs a plaintiff-loyal settlement expert who will propose the best way to manage their settlement (e.g. protect government benefits, set up a special needs trust, determine if a Medicare Set-Aside is necessary and what the allocation should be, etc.) so that it will last. A skilled settlement planner will look at all of the factors that the defense might not consider, including medical and financial needs, risk factors, familial implications, and government benefit status and eligibility.

Plaintiffs involved in personal injury and workers’ compensation cases have experienced events that have profoundly changed their lives. They deserve the opportunity to explore the options that work best for them, not for the defense. Plaintiffs’ attorneys would never consider relying on the defense’s experts to win a case. Why use the defense’s experts to settle it.

[1] Burton LeBlanc. Letter to Hon. Brian Higgins. November 13, 2013.

[2] Spencer v. Hartford- Hartford Agrees to Pay $72.5 Million in Structured Settlement Class Action. www.specialneedsfirm.com/post-detail.php?id=106

2 Comments

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    Let me lay out why I support the bill, the protections, and this discussion. Over the past 40 years of practice, I have seen an evolution of case management, as all of us in practice have. Year by year, step by silent step, the insurance carriers craft their advantage …. read that again: THEIR advantage.

    For consumers, the injured, it is a pandemic. Individually, we fight, we advocate, be work very hard in trying to protect them and seek the best outcome. However, we are lawyers, advocates, not financial advisors.

    It truth, there is a much larger aspect to “settlement planning” than just bringing some structures consultant in at the last minute. I have found a tremendous monetary difference in appropriate cases when I have involved the consultant early and bringing the client into the conversation well ahead of that anticipated day.

    Doing so can reduce much of the concern not only on the part of the client and family, but any which arise challenging the successful outcome.

    Thanks for this piece, John. Very important discussion. I believe we should join together as always, shoulder-to-shoulder fighting a common enemy – deception.

  2. John Bair says:
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    Thank you for those who have read the article and provided their perspective. Dialogue on these issues is healthy. We recognize that regulation intends to curb abuses of the few, and it’s the people’s role, through their representatives to provide consumer protection, even if it only affects a small percentage of the population.
    Many major insurance carriers and general counsel cling to the belief that leveraging future value in the context of a structure ensures a systemic value to their overall risk. A few additional points to consider;
    1. Conflicts of interest can exist even when a plaintiff broker is engaged. Approved lists maintained by major commercial carriers are often not disclosed until after a settlement is reached. Leaving a challenging path to achieve a fair and open marketplace. Unless negotiated upfront, plaintiffs post settlement must threaten the very settlement they just achieved, or continue litigation. This is a good example of the conflict inherent between the insurance industry and plaintiffs. This bill puts into question whether the tax benefits(existing as longstanding public policy affecting children, the elderly and the disabled) are a right, or something that must be negotiated. I’m thankful that 2 of the 4 sponsors of this bill are Trial Lawyers and personally understand it’s value, and that the leadership of AAJ has continued to support it.

    2. Although this article isn’t just about legislation, one perhaps overlooked component is the notice requirement. In cases like the Vioxx settlement, an insignificant number of claims were resolved in periodic payment. The reason? Few knew it was an option. Litigants in Federal Court with Mass Tort or Class Actions claims, or claims before the Federal Court of Claims would benefit from this notice provision. Although this won’t affect state court cases, the Federal Rules of Civil Procedure are reviewed by each and every state, and could be adopted by the governing bodies of the courts at the state level.