Delaware General Assembly

Signed 5/26/00

The General Assembly has ended, the current status is the final status.

6/29/99

VanSant

AN ACT TO AMEND PART IV, TITLE 10 OF THE DELAWARE CODE RELATING TO SETTLEMENTS IN CIVIL ACTIONS; AND PROVIDING FOR A STRUCTURED SETTLEMENT PROTECTION ACT.

In the last several years specialized financing firms, sometimes called factoring companies, have promoted unregulated secondary market "purchases" of structured settlement payments from injury victims, often at steep discounts. These purchases, referred to as factoring transactions, harm both the settlement recipients and the other parties to structured settlements. The Model Structured Settlement Protection Act, which has provided the pattern for statutes enacted in Kentucky, Virginia and West Virginia and under consideration in other states, protects all parties to structured settlements by regulating transfers of structured settlement payments while upholding their fundamental purpose. This Act is the Model Structured Settlement Act. It requires Court approval as a pre-condition to the effectiveness of any transfer of "structured settlement payment rights," and sets forth the findings that the Court must make in order to approve a transfer. For example, the Court must find that: 1) The structured settlement recipient has established that the transfer is necessary to enable the recipient and/or his dependents to avoid imminent financial hardship. 2) The structured settlement recipient has received a disclosure statement setting out the key economic terms of the proposed transfer, including the amount of the discount. 3) The recipient has received "independent professional advice" concerning the proposed transfer. 4) The proposed transfer complies with the requirements of this Act and will not contravene other applicable law. This Act would also explicitly protect annuity issuers and owners from tax and double liability risks by assuring that all appropriate parties have approved any transfer of structured settlement payments. Structured settlements are widely used to provide long-term financial security to victims of serious injuries. Lump sum payments in compensation for serious personal injuries are often dissipated, leaving the injury victims to depend on state and federal assistance programs. Structured settlements provided a better choice, permitting injury victims to receive assured tax-free payments tailored to meet their continuing needs and backed by annuity contracts issued by highly rated insurers. Because structured settlements are intended to protect injury victims against dissipation risks and potential tax liability based on "constructive receipt" of annuity values, structured settlement recipients are prohibited by contract from transferring their payments, and ownership of the annuity contracts is vested in insurance companies or their affiliates.

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Takes effect upon being signed into law

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