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.