Thank you for sharing!

Your article was successfully shared with the contacts you provided.
The aggressive settlement-buying industry — those folks who advertise on TV to turn an income stream into cash — just scored a narrow victory in Connecticut’s top court. In the latest battle of an ongoing national war between insurers and factors, both sides declared victory. Washington-based Safeco Life Insurance Co. has been waging coast-to-coast court contests in 18 states so far, attempting to stop the progress of “factors” like J.G. Wentworth, Singer Asset Finance, and Peachtree Finance. In a 3-2 decision dated August 15, the state supreme court embraced case law rules of assignment, holding that people can cash in settlement annuities if the clause forbidding assignment uses the wrong language. A consumer-protection statute that requires court approval of liquidation deals doesn’t transform anti-assignment clauses into meaningless words, the high court held. And in drafting a clause against assignment, words have to be picked with great precision to have effect, the majority held. If it says the annuity holder “may not” assign, he still can do so, but is liable for damages due to the breach of the agreement. The magic words state the annuitant does not have the power to assign, or that the agreement will be void if assigned, wrote justice Christine A. Vertefeuille, joined by David M. Borden and Richard N. Palmer. TWO SCENARIOS Whether settlement-buying is seen as basically good or basically bad may depend on the case. Insurers give examples of accident victims whose payments provide a reliable, if modest, income stream, providing financial independence. The settlement buyers tell of people who can’t get money that is theirs — despite emergencies, such as a critical medical procedure. “People have literally died waiting,” says Michael Walsh, of Hartford, Conn.’s Moukawsher & Walsh, who represents J. G. Wentworth. Wentworth intervened with plaintiff Marco Rumbin, who was trying to cash out his settlement annuity. Safeco intervened with Rumbin’s liability insurer, Utica Mutual Insurance Co., which purchased the annuity from Safeco. Annuities used in satisfaction of personal injury claims get a government subsidy, in the form of favorable tax treatment. Safeco is waging its coast-to-coast battle to preserve this status, maintains Thomas G. Rohback, of the Hartford office of LeBoeuf, Lamb, Greene & MacRae, who argued Safeco’s case on appeal. Katherine A. Scanlon, also on the appellate team, says six Hartford LeBoeuf lawyers have been battling for Safeco for over three years now, in cases around the country. The concern that drives this litigation push, she says, is that Congress could change the tax-advantaged status if purportedly long-term settlements ceased to be stable income streams and instead became a jackpot. Elliot B. Gersten, of Hartford’s Gersten & Clifford, filed an amicus curiae brief on behalf of the National Association of Settlement Purchasers, a new and growing industry. Because the high court ruled that Wentworth can buy Rumbin’s annuity, Gersten sees the case as a clear victory for the settlement buyers. “This is going to force the insurance industry to prove that there were damages,” he says. Walsh, the appellate advocate for Wentworth, says, “There are no damages to Safeco — they just send the check to a different address.” He says the IRS has never threatened the insurers with loss of the tax benefit, and to worry that Congress may someday change the law is “speculative.” Rohback says U.S. senators have already called for a re-examination of the policy of tax breaks for issuers of long-term settlements. SHUT IT DOWN? Scanlon is one of six lawyers in LeBoeuf’s Hartford group, which tries Safeco cases nationally. She says Safeco has three more contested cases in the pipeline in Connecticut alone, and the anti-assignment clause in each is phrased in the stronger “no power” language that she predicts will prevent assignment. Because insurers now have clear instruction on how to draft annuities to prevent assignment, Rumbin v. Utica will eventually doom the settlement-buying business in Connecticut, she predicts. Rohback notes that the case will apply to annuities issued by Connecticut-based issuers, “which include The Hartford, Aetna, and Travelers.” It certainly has not put an end to the controversy, which was evident in the high court’s divided result. Joette Katz joined Flemming L. Norcott, Jr. in dissent. They considered the anti-assignment clause to be valid — freely bargained for by the parties and plain in its meaning. “May not assign, pledge or sell to any third party” is a phrase dissenters Norcott and Katz consider clear. It’s “simple, easily understood language that clearly prohibits the assignment of any of the periodic payments.”

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.