The Risk Manager, Summer 1998
In April Governor Patton signed into law HB 312/HCS, "AN ACT relating to structured settlements." This new law severely limits the ability of payees to sell structured settlements. It was passed in response to reports of high pressure tactics by settlement purchasers that resulted in unsophisticated payees selling at a considerable disadvantage. The new law applies to payment transfer agreements reached after its effective date. Key points are:
- No transfer of a structured settlement may be made unless the transfer has been approved in advance by the appropriate circuit court.
- The payee must show that the transfer is necessary to avoid imminent financial hardship.
- Written disclosure must be made by the purchaser to the payee that includes:
- Amount and due dates of payments to be transferred;
- The aggregate amount of payments;
- The discounted present value of payments;
- The gross amount payable to the payee;
- An itemized list of all fees, charges, and commissions; and
- Any penalties if the payee breaches the transfer agreement.
- The payee must consent to the transfer in writing.
- These requirements may not be waived.
Clients negotiating a structured settlement should be advised of the limitations of HB 312 as part of the settlement evaluation process. Consider informing former clients with structured settlements about this law to help them avoid problems. You can obtain the text of the law on the internet at the Kentucky Legislature Home Page.