HBA-ATS C.S.S.B. 731 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 731 By: Harris Civil Practices 5/22/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Currently, no clear requirements exist for an attorney to convey information to a claimant about an offer of a structured settlement after the claimant has filed a personal injury suit. This failing may force the claimant to accept a settlement that may not be in the claimant's best interest. C.S.S.B. 731 establishes procedures under which a structured settlement is presented to help a client make an informed decision. C.S.S.B. 731 provides that an offer of a structured settlement made after a suit on a claim for damages arising from personal injury (injury) to an incapacitated person or in which the injury has resulted in the substantial disablement of the injured person has been filed must be made in writing and presented to the attorney for the claimant. The attorney receiving the offer is required to present it to the claimant or the claimant's personal representative. In addition, to the extent reasonably necessary to permit the claimant or the claimant's personal representative to make an informed decision regarding the acceptance or rejection of a proposed structured settlement, the attorney must advise the claimant or the claimant's personal representative about the terms, conditions, and other attributes of the proposed structured settlement, and the appropriateness of the structured settlement under the circumstances. This bill establishes several regulations regarding transfers of structured settlement payment rights. For any transfer of structured settlement payments established by a judgment or settled claim arising out of a civil action filed in a federal court, or a court of this state or another state, or an administrative proceeding of another state to resolve a claim for workers' compensation, a settlement recipient is prohibited from entering into a structured settlement transfer agreement and transferring structured settlement payment rights to a transfer recipient before the fifth anniversary of the date of the original structured settlement or the date that the settlement recipient becomes 25 years of age, whichever is later. The direct or indirect transfer of structured settlement payment rights made before either of these dates is not effective and a structured settlement obligor or annuity issuer is not required to make a payment directly or indirectly to a transfer recipient unless the transfer has been approved by the court or a responsible administrative authority based on specific findings by the court or a responsible administrative authority. For any other transfers of structured settlement payment rights, 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 a payment directly or indirectly to any transfer recipient of structured settlement payment rights unless the transfer complies with certain requirements and the transfer recipient has provided to the settlement recipient a disclosure statement within a specific time frame. A settlement recipient is authorized to rescind and cancel without penalty or further obligation an agreement to transfer structured settlement payment rights before the end of the seventh business day after the date of the agreement. The settlement recipient may exercise the right to rescind and cancel the agreement by giving notice to the transfer recipient by registered mail postmarked not later than the seventh day after the date of the agreement. A transfer is void and unenforceable unless these requirements are satisfied. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Title 6, Civil Practice and Remedies Code, by adding Chapter 140, as follows: CHAPTER 140. STRUCTURED SETTLEMENT SUBCHAPTER A. GENERAL PROVISIONS Sec. 140.001. DEFINITIONS. Defines "annuity issuer," "interested party," "periodic payments," "qualified assignment agreement," "responsible administrative authority," "settled claim," "settlement recipient," "structured settlement," "structured settlement agreement," "structured settlement obligor," "structured settlement payment rights," "transfer," "transfer recipient," and "transfer agreement." SUBCHAPTER B. STRUCTURED SETTLEMENT OFFER Sec. 140.051. DEFINITIONS. Defines "claimant" and "incapacitated person." Sec. 140.052. SCOPE OF SUBCHAPTER. Provides that this subchapter applies only to a suit on a claim for damages arising from personal injury (injury) to an incapacitated person or in which the injury has resulted in the substantial disablement of the injured person. Sec. 140.053. WRITTEN OFFER REQUIRED. Provides that an offer of a structured settlement made after a suit to which this chapter applies has been filed must be made in writing and presented to the attorney for the claimant. Sec. 140.054. PRESENTATION TO CLAIMANT. Requires the attorney receiving the offer to present it to the claimant or the claimant's personal representative as soon as practicable after receiving the offer under Section 140.053, but not later than any expiration date that may accompany the quotation that outlines the terms of the structured settlement offered. Requires the attorney, to the extent reasonably necessary to permit the claimant or the claimant's personal representative to make an informed decision regarding the acceptance or rejection of a proposed structured settlement, to advise the claimant or the claimant's personal representative about the terms, conditions, and other attributes of the proposed structured settlement, and the appropriateness of the structured settlement under the circumstances. SUBCHAPTER C. STRUCTURED SETTLEMENT TRANSFERS Sec. 140.101. TRANSFERS OF STRUCTURED SETTLEMENTS ARISING FROM CERTAIN ACTIONS. (a) Provides that this section applies to any transfer of structured settlement payment rights established by a judgment or settled claim arising out of a civil action filed in a federal court, or a court of this state or another state, or an administrative proceeding of another state to resolve a claim for workers' compensation. (b) Prohibits a settlement recipient from entering into a structured settlement transfer agreement and transferring structured settlement payment rights to a transfer recipient before the fifth anniversary of the date of the original structured settlement or the date that the settlement recipient becomes 25 years of age, whichever is later, except as provided by Subsection (c). (c) Provides that a direct or indirect transfer of structured settlement payment rights made before the date under Subsection (b) is not effective and a structured settlement obligor or annuity issuer is not required to make a payment directly or indirectly to a transfer recipient unless the transfer has been approved by a court or a responsible administrative authority based on specific findings by the entity. Sets forth the findings. Sec. 140.102. APPROVAL OF TRANSFERS. (a) Requires an application under Section 140.101 for authorization of a transfer of structured settlement payment rights to be made by the transfer recipient. Authorizes the application to be brought in the appropriate state court of original jurisdiction, a statutory county court in the county in which the settlement recipient resides, or before any responsible administrative authority that approved the structured settlement agreement. (b) Requires a transfer recipient, within a specific time frame, to file with the court or responsible administrative authority and to serve on any other government authority that previously approved the structured settlement, and each interested party, a notice of the proposed transfer and the application for authorization, including specific information. (c) Prohibits the deadline provided for written responses to the application from being before the 15th day after the date the notice is served. Sec. 140.103. DUTY TO INDEMNIFY. Defines "loss." Requires a transfer recipient to indemnify and hold harmless a settlement recipient against loss arising out of the transfer of the structured settlement payment rights. Provides that the duty to indemnify applies regardless of the manner in which the action is concluded and is in addition to any duty to indemnify established by law, contract, or otherwise. Requires a settlement recipient eligible for indemnification to give reasonable notice to the transfer recipient of any claim that the transfer of the structured settlement payment rights has resulted in additional taxes, penalties, or interest to the settlement recipient, annuity issuer, or settlement obligor, unless the transfer recipient has been served as a party or otherwise has actual notice of the action in which the taxes, penalties, or interest are imposed. Sec. 140.104. TRANSFERS OF STRUCTURED SETTLEMENTS NOT ARISING FROM JUDICIAL OR ADMINISTRATIVE ACTION. (a) Provides that this section applies to a transfer of structured settlement payment rights to which Section 140.101 does not apply. (b) Establishes that a direct or indirect transfer of structured settlement payment rights to which this section applies is not effective, and a structured settlement obligor or annuity issuer is not required to make a payment directly or indirectly to any transfer recipient of structured settlement payment rights unless the transfer complies with the requirements of this section and the transfer recipient has provided to the settlement recipient a disclosure statement within a specific time frame. (c) Authorizes a settlement recipient of a structured settlement to which this section applies to rescind and cancel without penalty or further obligation an agreement to transfer structured settlement payment rights before the end of the seventh business day after the date of the agreement. Authorizes the settlement recipient to exercise the right to rescind and cancel the agreement by giving notice to the transfer recipient by registered mail postmarked not later than the seventh day after the date of the agreement. (d) Provides that a transfer to which this section applies is void and unenforceable unless the requirements of this section are satisfied. Sec. 140.105. WAIVER; PENALTIES. Prohibits the provisions of this chapter from being waived. Prohibits a settlement recipient from incurring a penalty, forfeiting any application fee or other payment, or otherwise incurring any liability to the proposed transfer recipient based on any failure of the transfer to satisfy the conditions of Section 140.101. Sec. 140.106. CONSTRUCTION. Prohibits this chapter from being construed to authorize a transfer of structured settlement payment rights in contravention of applicable law or to give effect to any transfer of structured settlement payment rights that is invalid under applicable law. SECTION 2. Amends Section 25.0003, Government Code, by adding Subsection (f), to provide that a statutory county court has jurisdiction in cases brought under Subchapter C, Chapter 140, Civil Practice and Remedies Code. SECTION 3. (a) Effective date: September 1, 1999. (b) Makes application of Subchapter B, Chapter 140, Civil Practice and Remedies Code, prospective. (c) Makes application of Subchapter C, Chapter 140, Civil Practice and Remedies Code, prospective. SECTION 4. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.S.B. 731 differs from the original in the caption by providing that this Act relates to structured settlements, rather than to suits for damages for personal injury to certain persons. C.S.S.B. 731 differs from the original by providing that SECTION 1 amends Title 6, Civil Practice and Remedies Code, by adding Chapter 140 (Structured Settlement), rather than Chapter 139 (Personal Injury to Certain Persons). The substitute differs from the original by defining "annuity issuer," "interested party," "periodic payments," "qualified assignment agreement," "responsible administrative authority," "settled claim," "settlement recipient," "structured settlement," "structured settlement agreement," "structured settlement obligor," "structured settlement payment rights," "transfer," "transfer recipient," and "transfer agreement" in proposed Subchapter A. The substitute differs from the original by redesignating proposed Section 139.001 of the original to Section 140.051 and by making a conforming change to the definition of "claimant." The substitute also redesignates proposed Section 139.002 of the original to Section 140.052 and changes the title of the section from "Scope of Chapter" to "Scope of Subchapter." Accordingly, the redesignated section provides that this subchapter, rather than this chapter, applies only to a suit on a claim for damages arising from personal injury (injury) to an incapacitated person or in which the injury has resulted in the substantial disablement of the injured person. The substitute differs from the original by removing proposed Section 139.051 (and proposed Subchapter B since Section 139.051 was the only section in Subchapter B) of the original, authorizing a court, on the application of the claimant's next friend, to order the appointment of an attorney ad litem (attorney) for the claimant if the court found that any guardian ad litem (guardian) appointed for the claimant was not adequately performing the guardian's duties or the claimant would have otherwise been benefitted by the appointment of the attorney. The substitute differs from the original by redesignating proposed Subchapter C of the original to Subchapter B in the substitute. The substitute also redesignates proposed Sections 139.101 and 139.102 of the original (of Subchapter C) to Sections 140.053 and 140.054, respectively, in Subchapter B of the substitute. In redesignated Section 140.054, the substitute makes a conforming change. The substitute differs from the original by removing proposed Section 139.103 of the original, providing that a guardian who had been appointed by the court to participate in the case as necessary to protect the interests of the claimant owed to the claimant a fiduciary duty of integrity, loyalty, and the utmost good faith, and requiring the guardian to obtain, before any structured settlement offer was accepted, competent counsel from a person qualified to analyze and explain structured settlement offers and make suggestions for tailoring the structured settlement to meet the needs of the claimant. The substitute differs from the original by adding a new Subchapter C to Chapter 140. For a complete analysis of Subchapter C, please see the Section-by-Section Analysis portion of this document. C.S.S.B. 731 differs from the original bill by adding a new SECTION 2 that amends Section 25.0003, Government Code, by adding Subsection (f), to provide that a statutory county court has jurisdiction in cases brought under proposed Subchapter C, Chapter 140, Civil Practice and Remedies Code. The substitute redesignates SECTION 2 (effective date) of the original to SECTION 3 in the substitute by incorporating it as Subsection (a). C.S.S.B. 731 differs from the original in SECTION 3 by providing that Subchapters B and C, Chapter 140, Civil Practice and Remedies Code, rather than this Act, are prospective in their applications.