How much does that structured settlement really cost the defense?

Macomber v. Travelers Property and Casualty Corp., 261 Conn 620 (2002)

A recent decision from the Connecticut Supreme Court is opening the eyes of plaintiff attorneys across the country. The decision provides a rare glimpse into the way many defense brokers and casualty companies manipulate the structured settlement business in an effort to squeeze additional profits out of unsuspecting plaintiffs.

In Macomber, the plaintiffs agreed to settle their case for cash and periodic payments (a structured settlement annuity). Plaintiffs alleged that Travelers Casualty misrepresented the fundamental nature and terms of the settlements because they did not disclose the true cost or value of the annuity that was to fund the structured settlement. Plaintiffs alleged that Travelers engaged in practices that enabled them to pay less for the annuities than what they represented to the plaintiffs. The Connecticut Supreme Court labeled these practices “rebating and short-changing schemes.”

According to the opinion the “rebating scheme” worked like this. Travelers enlisted an insurance broker to arrange the purchase of annuities from life insurance companies to fund the structured settlements. The life company would then pay the broker a commission. The broker then returned between 25%-75% of the commission back to Travelers Casualty. According to the opinion, Travelers entered into this type of arrangement with Ringler Associates and Wells and Associates (currently EPS Settlements Groups) in January of 1998. The rebating scheme was never disclosed to plaintiffs.

The “short-changing scheme” the Court referred to also enabled Travelers Casualty to frequently spend less than it had agreed for the annuities it purchased. This was accomplished by overstating the present net worth of the annuities.

The Connecticut Supreme Court overturned the Summary Judgement granted by the trial court, and remanded the case for further proceedings. The Court pointed out the “…the payment plan that the plaintiffs had agreed to was induced by a representation as to its cost , and that the cost was not accurately reported to the plaintiffs in good faith.”

In virtually every case where there is litigation over the represented value of a structured settlement, there are to constants: 1) the plaintiffs or their counsel did not hire or consult with their own structured settlement planner, and 2) the defense adamantly argues and the courts almost always agree that “the defendants did not owe the plaintiffs a single duty of loyalty characteristic of the relationship that exists between a principal and his agent.”

You have litigated with these people for years. They have fought you on every issue, even when it seemed obvious. You have hired experts to counter theirs, and you have avoided anything that looked like a conflict of interest. Now why are you willing to hand over your client to the defense for his structured settlement?