By: Patrick Farber
As published in 3 Litigation Commentary & Rev. (Jan./Feb. 2010)
Selecting a competent and efficient broker to help create a structured settlement for an injured client can mean the difference between a financially worry-free future for the injured party or one fraught with financial anxiety.
Structured settlement brokers come with all levels of expertise. Finding a capable broker (for plaintiff or defense), can take some digging. At a minimum, a broker should be a licensed health, life and disability insurance agent and carry Errors & Omission insurance coverage.
In addition, the brokerage company should be licensed with all life insurance carriers offering structured settlement annuities. The broker then has access to a multitude of annuity options. A broker who does business with only a handful of insurance companies may not be able to offer the best annuity for the client.
When to Bring In A Broker
The optimal time to bring a broker into a settlement is before settlement negotiations begin–as soon as plaintiff and defense know an injury will result in current and future medical costs, loss of earnings, loss of retirement contributions or other expenses. Plaintiff and defense must determine, in present-value dollars, the cost of taking care of the needs of an injured party over time–whether for one year, five years or for the rest of the claimant’s life. The plaintiff’s attorney needs this information before presenting a settlement demand. The defense must be armed with the information so it can tell its insurance company client what is expected as a payout and the reasons why. In both cases, a structured settlement broker for each side can help.
Brokers review the injured party’s life-care plans created by both plaintiff and defense and the related costs. Brokers will also meet with experts who can provide cost estimates for specific expenses. The defense side’s broker analyzes the data so the costs are factored into the settlement offer. For plaintiffs, the broker meets with the injured party to get a firsthand account of the financial issues that lie ahead. Each side will have its own estimates–with the plaintiff’s side naturally seeking a higher settlement and the defense side seeking to keep costs down.
Armed with the life-care plans, economic data and the injured party’s own words, brokers can then make a recommendation as to the kinds of annuities the individual needs. The brokers can help find the middle ground. Brokers from both sides should attend the settlement mediation to ensure an accurate financial assessment of the injured party is presented before a settlement is finalized.
Committed to the Process
For brokers to be of the most value, they have to be committed to the case, seeing that it is resolved fairly and equitably–and not be satisfied by just giving a quote on the cost of an annuity. They should be in tune with the daily interest rate marketplace, looking for the best rate, and be willing to lock in that rate for a minimum of 30 days.
The broker must also be experienced in working with all types of injury cases, be familiar with how government agencies pay for medical care, the structured settlement tax ramifications and how to set up special needs trusts. In other words, the broker has to have seen it all. Because brokers review medical records, W-2 forms and other sensitive material, they must respect the attorney-client privilege and keep all communication and case discussion confidential.
Structured settlement broker services are client driven. Brokers should be available whenever attorneys or their clients need them, even if it is after hours and on weekends. There is no cost to either side–plaintiff or defense. This works to the advantage of all parties. Attorneys should use brokers to the fullest and expect them to work as hard on a case settlement as they do.