76R14003 DLF-F By Counts H.B. No. 2691 Substitute the following for H.B. No. 2691: By Smithee C.S.H.B. No. 2691 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.