BILL ANALYSIS
AB 982
Page 1
Date of Hearing: April 22, 2009
ASSEMBLY COMMITTEE ON INSURANCE
Joe Coto, Chair
AB 982 (Tran) - As Amended: April 13, 2009
SUBJECT : Structured settlements: payment transfers.
SUMMARY : Modifies state law governing the sale or transfer of
structured settlement payment agreements funded by an insurance
contract. Specifically, this bill :
1)Defines "interested parties" in a structured settlement
agreement as 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.
2)Specifies in the definition of "interested parties" that if
the designated beneficiary is a minor, the beneficiary's
parent or guardian shall be an interested party for purposes
of notification of interested parties.
3)Provides that the set of existing rights in connection with
transfers of structured settlement agreements apply if either
of the following is met:
a) The payee is domiciled in California at the time the
transfer agreement is signed by the payee.
b) The payee is not domiciled in California at the time the
transfer agreement is signed and the state where the payee
is domiciled does not have a structured settlement transfer
statute, but either the structured settlement obligor or
annuity issuer are (sic) domiciled in California. (The
condition that the payee entitled to receive payments under
a structured settlement funded by an insurance contract is
eliminated.)
4)Modifies two protections for payees domiciled in California at
the time that the transfer agreement is signed by the payee,
as follows:
AB 982
Page 2
a) Specifies that any forum selection provision providing
for jurisdiction to be a court outside of California for
any action arising under the contract is prohibited and
would render the contract void.
b) Specifies that any choice-of-law provision that provides
for controlling law to be other than California law in any
action arising under the contract is prohibited and would
render the contract void.
5)Requires that an application for approval of a transfer of
structured settlement payment rights be made by the transferee
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, the county where the structured
settlement obligor or annuity issuer is domiciled.
"Structured settlement obligor" is the party that has the
continuing periodic payment obligation to the payee under the
structured settlement agreement.
EXISTING LAW :
1)Defines a "structured settlement agreement" as 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.
2)Provides that no transfer of structured settlement payment
rights shall be effective by a payee domiciled in this state,
or by a payee entitled to receive payments under a structured
settlement funded by an insurance contract issued by an
insurer domiciled in this state or owned by an insurer or
corporation domiciled in this state, and no structured
settlement obligor or annuity issuer shall be required to make
any payment to a transferee unless the rights described in #4,
below, are satisfied.
3)Defines a "payee" as an individual who received tax-free
payments pursuant to a structured settlement agreement.
4)Establishes a set of rights in connection with transfers of
structured settlement payments, including the following:
AB 982
Page 3
a) 10 days before the execution of the transfer agreement,
the person shall receive a written disclosure statement of
the terms of the transfer agreement including:
i) disclosing that the person is selling his or her
right to receive the payments under a structured
settlement,
ii) the total dollar amount of payments the person is
selling,
iii) the present value of the amount the person is
selling,
iv) the net amount that will be paid to the person,
v) the interest rate that would be charged if the
person borrowed the amount,
vi) the total expenses being charged,
vii) notification that the person should obtain
independent professional advice to determine if the
transfer is a good idea for him or her, and
viii) notification that the person should get independent
professional advice from an accountant or lawyer
experienced in tax matters about any income tax
consequences from selling his or her structured settlement
payments.
b) Requires that a court approve the transfer agreement.
c) The person has the right to cancel the transfer
agreement without cost before court approval. The court
approval process can take 30 days or longer.
d) Prohibits the transfer agreement from containing
language that waives the right of the seller to sue, that
requires the seller to indemnify and hold harmless the
buyer, and other specific legal protections.
5)Requires that an application for approval of a transfer of
structured settlement payment rights be made by the transferee
and brought in the county in which the payee resides.
Transferee means any person receiving structured settlement
payment rights resulting from a transfer.
FISCAL EFFECT : Undetermined.
COMMENTS :
1)Purpose. The author states this bill makes technical
AB 982
Page 4
clarifications to existing law regarding judicial settlement
awards, and conforms state law to current federal regulations.
The author also states this measure clarifies that this law
applies only to California residents, except in specified
circumstances, and ensures that proper notice is given to
vested parties.
2)Background. The author provides the following information as
background:
Existing law contains burdensome and confusing language for
the process of judicial settlement awards, thus delaying
settlements and tying up court proceedings. Because of the
confusion in existing law, uncertainty is created for all
parties participating in judicial settlements. This
results in increased costs due to uncertainties in how to
comply with the law. This bill corrects these issues.
3)Role of insurance contracts. Under existing law, the transfer
of structured settlement payment rights is in connection with
structured settlements funded by an insurance contract issued
by an insurer domiciled in this state or owned by an insurer
or corporation domiciled in this state. This bill eliminates
all references to structured settlements funded by an
insurance contract issued by domestic insurers.
Is the removal of the reference to insurance contracts
intended, or not?
4)Right of minor beneficiary parents. The bill states that if
the designated beneficiary is a minor, that the beneficiary's
parent or guardian will be an interested party for purposes of
notification of interested parties. The language in italics
is proposed to be added by the bill. It is not clear if that
amendment will limit the current rights of parents or
guardians of minors who are beneficiaries under a structured
settlement agreement.
Does the phrasing "for purposes of notification of interested
parties" limit the ability of these parents or guardians to
cancel these transfer agreements or reduce other rights?
5)Legislation affecting same subject. SB 510 (Corbett) proposes
to specify circumstances which the court must consider before
approving the transfer of structured settlement payments. SB
AB 982
Page 5
510 would affect one provision being proposed to be amended by
this bill (see Section 4 of AB 982). SB 510 is scheduled for
hearing in the Senate Judiciary Committee on April 28, 2009.
REGISTERED SUPPORT / OPPOSITION :
Support
National Association of Settlement Purchasers (Sponsor)
Opposition
None received.
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086