BILL ANALYSIS
SB 510
Page 1
SENATE THIRD READING
SB 510 (Corbett)
As Amended August 20, 2009
Majority vote
SENATE VOTE :24-13
JUDICIARY 10-0
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|Ayes:|Feuer, Tran, Brownley, | | |
| |Evans, Jones, Knight, | | |
| |Krekorian, Lieu, Monning, | | |
| |Silva | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Revises the structured settlement approval laws.
Specifically, this bill :
1)Limits application of the transfer approval statute to
transfers where the payee (person selling settlement payment
rights) is domiciled in California at the time the transfer
agreement is signed by the payee or 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 is domiciled
in California.
2)Limits the class of beneficiaries who are entitled to court
notice of a proposed sale of structured settlement rights to
only those beneficiaries irrevocably designated in the
underlying annuity agreement.
3)Provides new notice of the proposed transfers to the payee's
former attorney if the payee sells his or her structured
settlement rights within five years of the date of the
structured settlement agreement.
4)Provides new notice and disclosure to proposed payees.
5)Further specifies the factors and circumstances the court must
consider before approving the transfer.
SB 510
Page 2
6)Provides that every application for approval of a transfer of
structured settlement payment rights shall contain specified
information including notably, for the first time, whether the
payee completed previous transactions involving the payee's
structured settlement payments and the timing and size of the
previous transactions, and whether the payee was satisfied
with any previous transaction, as well as whether the
transferee attempted previous transactions involving the
payee's structured settlement payments that were denied or
that were dismissed or withdrawn prior to a decision on the
merits, within the past five years, and whether the payee is
currently obligated under any child support or spousal support
order.
7)Exempts proposed purchasers of settlement rights (transferees)
from providing certain documentary evidence to the court if it
is unavailable, subject to a contractual non-disclosure
requirement, or if it is provided to the court orally.
FISCAL EFFECT : None
COMMENTS : According to the sponsor, Consumer Attorneys of
California:
While current law requires that the transfer of
structured settlement payment rights be in the best
interest of the payee, current law does not
specifically enumerate the factors a court should
consider in determining whether a transfer is in the
best interest of a payee and his or her dependants, if
any. This bill would enumerate the factors a court
would be required to consider in a best interest
analysis. Under SB 510, the required best interest
analysis would include consideration of the reasonable
preference of the payee; the purpose of the transfer;
whether the structured settlement was intended to
cover future income loss and/or medical expenses; the
intention of the periodic payments; the potential need
for future coverage of medical treatment; whether the
payee has other means of support; whether the periodic
payments are in the best interest of the payee's
dependents; whether the payee is in a hardship
situation; and whether the payee has received
independent legal and financial advice.
SB 510
Page 3
A structured settlement is generally defined as a financial or
insurance arrangement, including periodic payments, that a
plaintiff accepts to settle a personal injury action or to
compromise a statutory periodic payment obligation. A
structured settlement is used as an alternative to a lump sum
settlement in order to provide for a claimant's medical,
financial, personal, and familial needs over time. Structured
settlements usually are funded by single-premium annuity
contracts held by the party, the "structured settlement
obligor," that has the continuing periodic payment obligation to
the payee under a structured settlement agreement. Structured
settlements are favored as a means of assuring continuing
financial support to injury victims and minimizing the risk that
lump sum recoveries will be dissipated, leaving injury victims
to turn to public assistance to meet their medical and financial
needs.
A secondary market, commonly referred to as structured
settlement factoring companies, has since emerged. According to
the sponsor, these factoring companies aggressively advertise to
convince those with structured settlements to transfer or sell
future payments for present cash. As a result of the emergence
of the secondary market and its concomitant problems and
negative effects on consumers, many states, including
California, enacted structured settlement transfer protection
acts that require that a transfer be in the best interest of the
payee, be fair and reasonable, and be approved by the court.
(SB 491 (Johnston), Chapter 742, Statutes of 1999); Insurance
Code Section 10134 et seq.) This measure is intended to provide
further substantive and procedural protections, as well as
provisions negotiated by the structured settlement industry.
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334
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