By Counts H.B. No. 2691
76R14003 DLF-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the sale, assignment, or transfer of structured
1-3 settlements.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Title 6, Civil Practice and Remedies Code, is
1-6 amended by adding Chapter 140 to read as follows:
1-7 CHAPTER 140. STRUCTURED SETTLEMENT TRANSFERS
1-8 Sec. 140.001. DEFINITIONS. In this chapter:
1-9 (1) "Annuity issuer" means an insurer that has issued
1-10 an insurance contract used to fund periodic payments under a
1-11 structured settlement.
1-12 (2) "Interested party" means, with respect to a
1-13 structured settlement:
1-14 (A) the settlement recipient; and
1-15 (B) a beneficiary irrevocably designated under
1-16 the annuity contract to receive payments following the settlement
1-17 recipient's death.
1-18 (3) "Periodic payments" include scheduled future lump
1-19 sum payments.
1-20 (4) "Qualified assignment agreement" means an
1-21 agreement providing for a qualified assignment within the meaning
1-22 of Section 130, Internal Revenue Code of 1986 (26 U.S.C. Section
1-23 130), as amended.
1-24 (5) "Responsible administrative authority" means, with
2-1 respect to a structured settlement, a government authority vested
2-2 by law with exclusive jurisdiction over the settled claim resolved
2-3 by the structured settlement.
2-4 (6) "Settled claim" means the original tort claim or
2-5 workers' compensation claim resolved by a structured settlement.
2-6 (7) "Settlement recipient" means an individual who is
2-7 receiving tax-free payments under a structured settlement agreement
2-8 and proposes to transfer payment rights under the agreement.
2-9 (8) "Structured settlement" means an arrangement for
2-10 periodic payment of damages for personal injuries established by
2-11 settlement or judgment in resolution of a tort claim or for
2-12 periodic payments in settlement of a workers' compensation claim.
2-13 (9) "Structured settlement agreement" means the
2-14 agreement, judgment, stipulation, or release embodying the terms of
2-15 a structured settlement.
2-16 (10) "Structured settlement obligor" means, with
2-17 respect to any structured settlement, the party who has the
2-18 continuing obligation to make periodic payments to the settlement
2-19 recipient under a structured settlement agreement or a qualified
2-20 assignment agreement.
2-21 (11) "Structured settlement payment rights" means
2-22 rights to receive periodic payments under a structured settlement,
2-23 whether from the structured settlement obligor or the annuity
2-24 issuer.
2-25 (12) "Transfer" means any sale, assignment, or other
2-26 form of alienation or encumbrance made by a settlement recipient
2-27 for consideration.
3-1 (13) "Transfer recipient" means a party acquiring or
3-2 proposing to acquire structured settlement payment rights through a
3-3 transfer of the rights.
3-4 (14) "Transfer agreement" means the agreement
3-5 providing for transfer of structured settlement payment rights from
3-6 a settlement recipient to a transfer recipient.
3-7 Sec. 140.002. TRANSFERS OF STRUCTURED SETTLEMENTS ARISING
3-8 FROM CERTAIN ACTIONS. (a) This section applies to any transfer of
3-9 structured settlement payment rights established by a judgment or
3-10 settled claim arising out of a civil action filed in a federal
3-11 court, or a court of this state or another state, or an
3-12 administrative proceeding of another state to resolve a claim for
3-13 workers' compensation.
3-14 (b) Except as provided by Subsection (c), a settlement
3-15 recipient may not enter into a structured settlement transfer
3-16 agreement and transfer structured settlement payment rights to a
3-17 transfer recipient before the later of:
3-18 (1) the fifth anniversary of the date of the original
3-19 structured settlement; or
3-20 (2) the date that the settlement recipient becomes 25
3-21 years of age.
3-22 (c) A direct or indirect transfer of structured settlement
3-23 payment rights made before the date specified by Subsection (b) is
3-24 not effective and a structured settlement obligor or annuity issuer
3-25 is not required to make a payment directly or indirectly to a
3-26 transfer recipient, unless the transfer has been approved by the
3-27 court of original jurisdiction, a statutory county court, or a
4-1 responsible administrative authority, based on findings by the
4-2 court or responsible administrative authority that:
4-3 (1) the transfer complies with the requirements of
4-4 this chapter;
4-5 (2) at least 10 days before the date on which the
4-6 settlement recipient first incurred any obligation with respect to
4-7 the transfer, the transfer recipient provided to the settlement
4-8 recipient a disclosure statement in bold type, at least 14 points
4-9 in size, that states:
4-10 (A) the amounts and due dates of the structured
4-11 settlement payments to be transferred;
4-12 (B) the aggregate amount of the payments;
4-13 (C) the discounted present value of the
4-14 payments, with the discount rate used in determining the discounted
4-15 present value;
4-16 (D) the gross amount payable to the settlement
4-17 recipient in exchange for the payments;
4-18 (E) an itemized listing of all commissions,
4-19 fees, costs, expenses, and charges payable by the settlement
4-20 recipient or deductible from the gross amount otherwise payable to
4-21 the settlement recipient;
4-22 (F) the net amount payable to the settlement
4-23 recipient after deduction of all commissions, fees, costs,
4-24 expenses, and charges described in Paragraph (E); and
4-25 (G) the amount of any penalty and the aggregate
4-26 amount of any liquidated damages, inclusive of penalties, payable
4-27 by the settlement recipient in the event of any breach of the
5-1 transfer agreement by the settlement recipient;
5-2 (3) the transfer is fair and reasonable and in the
5-3 best interest of the settlement recipient; and
5-4 (4) the transfer recipient has given written notice of
5-5 the transfer recipient's name, address, and taxpayer identification
5-6 number to the annuity issuer and the structured settlement obligor
5-7 and has filed a copy of the notice with the court or responsible
5-8 administrative authority.
5-9 Sec. 140.003. APPROVAL OF TRANSFERS. (a) An application
5-10 under Section 140.002 for authorization of a transfer of structured
5-11 settlement payment rights shall be made by the transfer recipient
5-12 and may be brought in the appropriate state court of original
5-13 jurisdiction, a statutory county court in the county in which the
5-14 settlement recipient resides, or before any responsible
5-15 administrative authority that approved the structured settlement
5-16 agreement.
5-17 (b) At least 20 days before the date of the scheduled
5-18 hearing on an application for authorization of a transfer of
5-19 structured settlement payment rights under Section 140.002, the
5-20 transfer recipient shall file with the court or responsible
5-21 administrative authority and serve on any other government
5-22 authority that previously approved the structured settlement, and
5-23 each interested party, a notice of the proposed transfer and the
5-24 application for authorization, including:
5-25 (1) a copy of the transfer recipient's application;
5-26 (2) a copy of the disclosure statement required under
5-27 Section 140.002(c)(2);
6-1 (3) notice that any interested party is entitled to
6-2 support, oppose, or otherwise respond to the transfer recipient's
6-3 application, either in person or by counsel, by submitting written
6-4 comments to the court or responsible administrative authority or by
6-5 participating in the hearing; and
6-6 (4) notice of the time and place of the hearing and
6-7 notification of the manner in which and the time by which written
6-8 responses to the application must be filed to be considered by the
6-9 court or responsible administrative authority.
6-10 (c) The deadline provided for written responses to the
6-11 application under Subsection (b)(4) may not be before the 15th day
6-12 after the date the notice is served.
6-13 Sec. 140.004. DUTY TO INDEMNIFY. (a) In this section,
6-14 "loss" means additional taxes owed as a result of the transfer of
6-15 structured settlement payment rights and any interest or penalties
6-16 that the settlement recipient may be obligated to pay or reimburse
6-17 the annuity issuer or settlement obligor.
6-18 (b) A transfer recipient shall indemnify and hold harmless a
6-19 settlement recipient against loss arising out of the transfer of
6-20 structured settlement payment rights.
6-21 (c) The duty to indemnify under this section:
6-22 (1) applies without regard to the manner in which the
6-23 action is concluded; and
6-24 (2) is in addition to any duty to indemnify
6-25 established by law, contract, or otherwise.
6-26 (d) A settlement recipient eligible for indemnification
6-27 under this section shall give reasonable notice to the transfer
7-1 recipient of any claim that the transfer of the structured
7-2 settlement payment rights has resulted in additional taxes,
7-3 penalties, or interest to the settlement recipient, annuity issuer,
7-4 or settlement obligor, unless the transfer recipient has been
7-5 served as a party or otherwise has actual notice of the action in
7-6 which the taxes, penalties, or interest are imposed.
7-7 Sec. 140.005. TRANSFERS OF STRUCTURED SETTLEMENTS NOT
7-8 ARISING FROM JUDICIAL OR ADMINISTRATIVE ACTION. (a) This section
7-9 applies to a transfer of structured settlement payment rights to
7-10 which Section 140.002 does not apply.
7-11 (b) A direct or indirect transfer of structured settlement
7-12 payment rights to which this section applies is not effective, and
7-13 a structured settlement obligor or annuity issuer is not required
7-14 to make a payment directly or indirectly to any transfer recipient
7-15 of structured settlement payment rights, unless:
7-16 (1) the transfer complies with the requirements of
7-17 this section; and
7-18 (2) at least 10 days before the date on which the
7-19 settlement recipient first incurred any obligation with respect to
7-20 the transfer, the transfer recipient has provided to the settlement
7-21 recipient a disclosure statement described by Section
7-22 140.002(c)(2).
7-23 (c) A settlement recipient of a structured settlement to
7-24 which this section applies may rescind and cancel without penalty
7-25 or further obligation, an agreement to transfer structured
7-26 settlement payment rights before the end of the seventh business
7-27 day after the date on which the agreement is made. The settlement
8-1 recipient may exercise the right to rescind and cancel the
8-2 agreement by giving notice to the transfer recipient by registered
8-3 mail postmarked not later than the seventh day after the date that
8-4 the agreement is made.
8-5 (d) A transfer to which this section applies is void and
8-6 unenforceable unless the requirements of this section are
8-7 satisfied.
8-8 Sec. 140.006. WAIVER; PENALTIES. (a) The provisions of
8-9 this chapter may not be waived.
8-10 (b) A settlement recipient who proposes to make a transfer
8-11 of structured settlement payment rights may not incur any penalty,
8-12 forfeit any application fee or other payment, or otherwise incur
8-13 any liability to the proposed transfer recipient based on any
8-14 failure of the transfer to satisfy the conditions of Section
8-15 140.002.
8-16 Sec. 140.007. CONSTRUCTION. This chapter may not be
8-17 construed to authorize a transfer of structured settlement payment
8-18 rights in contravention of applicable law or to give effect to any
8-19 transfer of structured settlement payment rights that is invalid
8-20 under applicable law.
8-21 SECTION 2. Section 25.0003, Government Code, is amended by
8-22 adding Subsection (f) to read as follows:
8-23 (f) A statutory county court has jurisdiction in cases
8-24 brought under Chapter 140, Civil Practice and Remedies Code.
8-25 SECTION 3. This Act takes effect September 1, 1999, and
8-26 applies only to a transfer of structured settlement payment rights
8-27 under a transfer agreement entered into on or after that date.
9-1 SECTION 4. The importance of this legislation and the
9-2 crowded condition of the calendars in both houses create an
9-3 emergency and an imperative public necessity that the
9-4 constitutional rule requiring bills to be read on three several
9-5 days in each house be suspended, and this rule is hereby suspended.