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Structured Settlement Protection Act (“SSPA”)…cont

Initially, the Court must consider whether the instant Petition comports with all of the procedural requirements set forth in the SSPA, which reads in pertinent part as follows: (a) the transfer complies with the requirements of this title; (b) the transfer is in the best interest of the payee, taking into account the welfare and support of the payee’s dependants; and whether the transaction, including the discount rate used to determine the gross advance amount and the fees and expenses used to determine the net advance amount, are fair and reasonable. Provided the court makes the findings as outlined in this subdivision, there is no requirement for the court to find that an applicant is suffering from a hardhsip to approve the transfer of structured settlement payments under this subdivision; (c) the payee has been advised in writing by the transferee to seek independent professional advice regarding the transfer and has either received such advice or knowingly waived such advice in writing; (d) the transfer does not contravene any applicable statute or the order of any bike accident court or other government authority; and (e) is written in plain language and in compliance with section 5-702 of this article.

Although the initial legislative intent of the SSPA was to curtail the practice of selling or transferring periodic payments to third parties and limiting same to true hardship cases that was amended in 2004. Currently, there is no need for the Court to make an initial finding that the payee is suffering a true hardship, if it finds that the transfer otherwise comports with the requirements of the SSPA.

A perusal of the submissions reveals that the petitioner properly served all interested parties within the statutory period. Also annexed were: a copy of the transfer agreement which was written in plain language, a disclosure statement, Mr. EV’s affidavit declining to seek independent professional advice and a copy of Stephanie EV’s spousal consent to the transfer. Apart from Mrs. EV, who appears to be a homemaker, Mr. EV has no other dependents. Accordingly, this petition is procedurally sound.

As the true hardship criteria is no longer critical in the evaluation of the proposed transfer the next and most important consideration is assessing whether the proposed transfer would be consistent with the letter and spirit of SSPA is an critique of the transfer with respect to the best interest of the payee. Therefore, before the Court can approve an otherwise procedurally conforming transfer application, the Court must determine that:

The transfer is in the best interest of the payee, taking into account the welfare and support of the payee’s dependents; and whether the transaction, including the discount rate used to determine the gross amount and the fees and expenses used to determine the net advance amount, are fair and reasonable.

Turning first to the “fair and reasonable” analysis of this transfer: Petitioner annexed the settlement agreement and release, dated October 14, 2005, which reflected the settlement amount of $795,674.00, along with documents reflecting the funding of the subject structure in the amount of $204,206.00 by the respondents. However, since there was no opposition from respondents there is no price quote readily available with regard to the original annuity.
Instead, the petitioner faxed price quotes from two annuity issuers reflecting the cost for purchasing a comparable annuity in the aggregate amount sought to be transferred herein.
The quote form New York Life Ins. Co. re personal injury does not list a rate of return and so no projections are set forth with regard to the expected/guaranteed payments. American General lists the rate of return as 4.23% with projected guaranteed payments in the amount of $174,000.00.

As noted, the disclosure statement sets out that no assessments will be made for costs, fees, or commissions. Therefore, the gross and net amount of $111,553.00 was calculated utilizing 13.1% as the annual discount rate.

However, conspicuously absent from petitioner’s submission is an affirmation from a financial consultant setting forth that the subject transfer is fair and reasonable. Significant in this regard would be an analysis of the factors considered by such an expert in arriving at the selected discount rate. For instance: whether the discount rate is within the range of reasonableness as compared to the prevailing marketplace; whether petitioner considered Mr. EV’s credit worthiness. This factor alone may have great bearing on the discount rate since ultimately the purchaser assumes the risk that the seller will not “make good” on any misrepresentations made in the subject agreement. Given Mr. EV’s penchant for gambling, his potential foreclosure, and his averment that he understands the transaction absent independent financial advice, such an omission is glaring.

In the absence of such evidence, this Court is unable to make the required statutory finding.
Turning next to the “best interest” analysis of this transfer: While the SSPA does not set forth a definition of best interest, developing case law and the expressed intent of the statute suggest a case-by-case evaluation by the Court of the following factors: (1) the payees age, mental capacity, maturity level, independent income and ability to support dependents; (2) purpose of the intended use of the funds; (3) potential need for future medical treatment; (4) the financial acumen of the Payee; (5) the ability of the Payee to appreciate financial consequences based upon independent legal and financial advise; and (6) the timing of the injury application.

To Be Cont…

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