BILL NUMBER: AB 982 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 4, 2009
AMENDED IN ASSEMBLY APRIL 23, 2009
AMENDED IN ASSEMBLY APRIL 13, 2009
INTRODUCED BY Assembly Member Tran
FEBRUARY 27, 2009
An act to amend Sections 10134, 10138, and 10139.5 of the
Insurance Code, relating to structured settlements.
LEGISLATIVE COUNSEL'S DIGEST
AB 982, as amended, Tran. Structured settlements: transfers.
Existing law provides definitions, including for "interested
parties," for purposes of the provisions regulating the transfer of
structured settlement payment rights.
This bill would revise the definition of "interested parties" for
purposes of those provisions.
Existing law prohibits the inclusion of various provisions in an
agreement for the transfer of structured settlement payment rights
and would make an agreement void and unenforceable if a prohibited
provision is included. Among the provisions prohibited from being
included in those agreements are any forum selection provision
providing for jurisdiction to be in a court outside of California for
any action arising under the contract and any choice-of-law
provision that provides for controlling law to be other than
California law in any action arising under the contract.
This bill would prohibit those 2 provisions if the payee is
domiciled in California at the time that the transfer agreement is
signed by the payee.
Existing law provides that a transfer of structured settlement
payment rights is not effective unless the transfer has been approved
in advance in a final court order based on certain findings.
Existing law provides where such an application for approval shall be
filed and provides for a certain notice, which is to include
specified documents, to be filed with the court and served on
interested parties not less than 20 days prior to the scheduled
hearing on the application for approval of a transfer of structured
settlement payment rights.
This bill would make specified changes to the requirements
regarding the court's written findings, the county where a transfer
approval application is required to be filed, and the documents to be
included with the notice.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10134 of the Insurance Code is amended to read:
10134. For the purposes of this article, the following terms have
the following meanings:
(a) "Buyer's first right of refusal" means any provision in the
transfer agreement or related documents that obligate the payee to
give to the buyer the first choice or option to purchase any
remaining structured settlement rights belonging to the payee.
(b) "Dependents" include the payee's spouse and minor children and
all other family members and other persons for whom the payee is
legally obligated to provide support, including alimony.
(c) "Discounted present value" means the fair present value of
future payments, as determined by discounting those payments to the
present using the most recently published applicable federal rate for
determining the present value of an annuity, as issued by the United
States Internal Revenue Service.
(d) "Effective equivalent interest rate," with respect to a
transfer of structured settlement payment rights, means the
annualized rate of interest on the net advance amount, calculated by
treating the transferred structured settlement payments as if they
were installment payments on a loan, with each payment applied first
to accrued unpaid interest and then to principal.
(e) "Expenses" means all broker's commissions, service charges,
application or processing fees, closing costs, filing or
administrative charges, legal fees, notary fees and other
commissions, fees, costs, and charges that a payee would have to pay
to transfer the structured settlement payment rights of a structured
settlement agreement or that would be deducted from the gross
consideration that would be paid to the payee in connection with the
transfer of the structured settlement payment rights of a structured
settlement agreement.
(f) "Independent professional advice" means advice of an attorney,
certified public accountant, actuary, or other licensed professional
adviser meeting all of the following requirements:
(1) The adviser is engaged by a claimant or payee to render advice
concerning the legal, tax, or financial implications of a structured
settlement or a transfer of structured settlement payment rights.
(2) The adviser's compensation for rendering independent
professional advice is not affected by occurrence or lack of
occurrence of a settlement or transfer.
(3) A particular adviser is not referred to the payee by the
transferee or its agent, except that the transferee may refer the
payee to a lawyer referral service or agency operated by a state or
local bar association.
(g) "Interested parties" means, with respect to a structured
settlement agreement, the payee, the payee's attorney, any
beneficiary irrevocably designated under the
annuity contract to receive payments following the payee's death, the
annuity issuer, the structured settlement obligor, and any other
party who has continuing rights or obligations under the structured
settlement agreement if those continuing rights or obligations could
be affected by the proposed transfer. If the designated beneficiary
is a minor, the beneficiary's parent or guardian shall be an
interested party.
(h) "Payee" means an individual who received tax-free payments
pursuant to a structured settlement agreement.
(i) "Qualified assignment agreement" means an agreement providing
for a qualified assignment within the meaning of Section 130 of Title
26 of the United States Code, as amended from time to time.
(j) "Structured settlement agreement" means an arrangement for
periodic payment of damages established by settlement or judgment in
resolution of a tort claim in which the payment of the judgment or
award is paid in whole, or in part, in periodic tax-free payments
rather than a lump-sum payment. A structured settlement agreement
entered into pursuant to Section 667.7 of the Code of Civil Procedure
or Section 970.6 or 984 of the Government Code is not subject to the
provisions of this article other than the requirements of Section
10138.
(k) "Structured settlement obligor" means the party that has the
continuing periodic payment obligation to the payee under a
structured settlement agreement or a qualified assignment agreement.
(l) "Structured settlement payment rights" means rights to receive
periodic payments, including lump-sum payments, pursuant to a
structured settlement agreement, whether from the settlement obligor
or an annuity issuer.
(m) "Terms of the structured settlement" include, with respect to
a structured settlement agreement, the terms of the structured
settlement agreement, annuity contract, qualified assignment
agreement, and any order or approval of a court or responsible
administrative authority or other governmental authority authorizing
or approving the structured settlement.
(n) "Transfer" means any sale, assignment, pledge, hypothecation,
or other form of alienation or encumbrance made for consideration.
(o) "Transfer agreement" means the agreement providing for the
transfer, and any other document used to effectuate the transfer,
from the payee to the transferee of structured settlement payment
rights of a structured settlement agreement.
(p) "Transferee" means any person receiving structured settlement
payment rights resulting from a transfer.
SEC. 2. Section 10138 of the Insurance Code is amended to read:
10138. (a) A transfer agreement, as defined in subdivision (o) of
Section 10134, shall not include any provision described in the
paragraphs below. Any inclusion of a prohibited provision, with
respect to a seller who is a California resident, shall make the
contract void and unenforceable.
(1) Any provision that waives the seller's right to sue under any
law, or in which the seller agrees not to sue, or that waives
jurisdiction or standing to sue under the contract.
(2) Any provision that requires the seller to indemnify and hold
harmless the buyer, or to pay the buyer's costs of defense, in any
claim or action brought by the seller or on the seller's behalf
contesting the sale for any reason.
(3) Any provision that waives benefits or rights conferred by law
with respect to garnishment of wages.
(4) Any provision providing that the contract is confidential or
proprietary, belonging to the buyer.
(5) Any provision in which the seller stipulates to a confession
of judgment.
(6) Any provision requiring the seller to pay the buyer's attorney'
s fees and costs if the purchase agreement is not completed.
(7) Any provision requiring the seller to pay any tax liability
arising under the federal tax laws, other than the seller's own tax
liability, if any, that results from the transfer.
(8) Any provision providing for brokerage fees incurred in the
contract to be deducted from the purchase price disclosed pursuant to
paragraph (5) of subdivision (b) of Section 10136.
(9) If the payee is domiciled in California at the time that the
transfer agreement is signed by the payee, any forum selection
provision providing for jurisdiction to be in a court or other
forum outside of California for any action arising under the
contract.
(10) If the payee is domiciled in California at the time that the
transfer agreement is signed by the payee, any choice-of-law
provision that provides for controlling law to be other than
California law in any action arising under the contract.
(11) A provision that provides the transferee with a security
interest or collateral interest in any structured settlement payment
rights that exceed the actual dollar amount of the structured
settlement payment rights being transferred.
(12) Any provision that creates a "buyer's first right of refusal"
to purchase any remaining structured payment rights that the payee
may desire to sell in the future.
(b) The provisions in this section may not be waived by agreement
of the parties.
SEC. 3. Section 10139.5 of the Insurance Code is amended to read:
10139.5. (a) A direct or indirect transfer of structured
settlement payment rights is not effective and a structured
settlement obligor or annuity issuer is not required to make any
payment directly or indirectly to any transferee of structured
settlement payment rights unless the transfer has been approved in
advance in a final court order based on express written findings by
the court that:
(1) The transfer is in the best interest of the payee, taking into
account the welfare and support of the payee's dependents.
(2) The payee has been advised in writing by the transferee to
seek independent professional advice regarding the transfer and has
either received that advice or knowingly waived the opportunity to
seek and receive that advice in writing.
(3) The transferee has provided the payee with a disclosure form
that complies with Section 10136 and the transfer agreement complies
with Sections 10136 and 10138.
(4) The transfer does not contravene any applicable statute or the
order of any court or other government authority.
(5) The payee reasonably understands the terms of the transfer
agreement, including the terms set forth in the disclosure statement
required by Section 10136.
(6) The payee reasonably understands and does not wish to exercise
the payee's right to cancel the transfer agreement.
(b) Following a transfer of structured settlement payment rights
under this article:
(1) The structured settlement obligor and the annuity issuer
shall, as to all parties except the transferee, be discharged and
released from any and all liability for the transferred payments.
(2) The transferee shall be liable to the structured settlement
obligor and the annuity issuer if the transfer contravenes the terms
of the structured settlement for the following:
(A) Any taxes incurred by those parties as a consequence of the
transfer.
(B) Any other liabilities or costs, including reasonable costs and
attorney's fees, arising from compliance by those parties with the
order of the court or arising as a consequence of the transferee's
failure to comply with this article.
(3) Neither the annuity issuer nor the structured settlement
obligor may be required to divide any periodic payment between the
payee and any transferee or assignee or between two, or more,
transferees or assignees.
(4) Any further transfer of structured settlement payment rights
by the payee may be made only after compliance with all of the
requirements of this article.
(c) (1) An application under this article for approval of a
transfer of structured settlement payment rights shall be made by the
transferee and brought in the county in which the payee resides at
the time the transfer agreement is signed by the payee or, if the
payee is not domiciled in California at the time the transfer
agreement is signed by the payee , the county where
the structured settlement obligor or annuity issuer is domiciled.
(2) Not less than 20 days prior to the scheduled hearing on any
application for approval of a transfer of structured settlement
payment rights under this article, the transferee shall file with the
court and serve on all interested parties a notice of the proposed
transfer and the application for its authorization, and shall include
the following with that notice:
(A) A copy of the transferee's application.
(B) A copy of the transfer agreement.
(C) A listing of each of the payee's dependents, together with
each dependent's age.
(D) A copy of the disclosure required in subdivision (b) of
Section 10136.
(E) A copy of the annuity contract, if available.
contract.
(F) A copy of any qualified assignment agreement, if
available. agreement.
(G) A copy of the underlying structured settlement
agreement, if available. agreement.
(H) Notification that any interested party is entitled to support,
oppose, or otherwise respond to the transferee's application, either
in person or by counsel, by submitting written comments to the court
or by participating in the hearing.
(I) Notification of the time and place of the hearing and
notification of the manner in which and the time by which written
responses to the application must be filed, which may not be less
than 15 days after service of the transferee's notice, in order to be
considered by the court.
(d) All court costs and filing fees shall be paid by the
transferee.
(e) No later than the time of filing the petition for court
approval, the transferee shall advise the payee of the payee's right
to seek independent counsel and financial advice in connection with
the transferee's petition for court approval of the transfer
agreement, and shall further advise the payee that if the payee
retains counsel, a licensed certified public accountant, or a
licensed actuary in connection with a petition for an order approving
the transfer agreement, that the transferee shall pay the fees of
the payee's counsel, accountant, or actuary, regardless of whether
the transfer agreement is approved, and regardless of whether the
attorney, accountant, or actuary files any document or appears at the
hearing on the application for transfer, in an aggregate amount not
to exceed one thousand five hundred dollars ($1,500). The transferee'
s accountant, counsel, or actuary may not advise the payee.
(f) The court shall retain continuing jurisdiction to interpret
and monitor the implementation of the transfer agreement as justice
requires.