By Smithee H.B. No. 3040
Line and page numbers may not match official copy.
Bill not drafted by TLC or Senate E&E.
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the enactment of the Structured Settlement Protection
1-3 Act as an amendment to the Texas Insurance Code; providing an
1-4 effective date; and declaring an emergency.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Chapter 3, Texas Insurance Code, is amended by
1-7 adding thereto SUBCHAPTER K, Structured Settlement Protection Act,
1-8 Article 3.97, to read as follows:
1-9 Art. 3.97. STRUCTURED SETTLEMENT PROTECTION ACT.
1-10 Sec. 1. Conditions to Transfers of Structured Settlement
1-11 Payment Rights. No direct or indirect transfer of structured
1-12 settlement payment rights shall be effective and no structured
1-13 settlement obligor or annuity issuer shall be required to make any
1-14 payment directly or indirectly to any transferee of structured
1-15 settlement payment rights unless the transfer has been authorized
1-16 in advance in a final order of a court of competent jurisdiction or
1-17 a responsible administrative authority, based on express findings
1-18 by such court or responsible administrative authority that:
1-19 (a) the transfer complies with the requirements of this Act and
1-20 will not contravene other applicable law;
1-21 (b) not less than ten (10) days prior to the date on which
2-1 the payee first incurred any obligation with respect to the
2-2 transfer, the transferee has provided to the payee a disclosure
2-3 statement in bold type, no smaller than 14 points, setting forth:
2-4 (i) the amounts and due dates of the structured
2-5 settlement payments to be transferred;
2-6 (ii) the aggregate amount of such payments;
2-7 (iii) the discounted present value of such payments,
2-8 together with the discount rate used in determining such discounted
2-9 present value;
2-10 (iv) the gross amount payable to the payee in exchange
2-11 for such payments;
2-12 (v) an itemized listing of all commissions, fees,
2-13 costs, expenses and charges payable by the payee or deductible from
2-14 the gross amount otherwise payable to the payee;
2-15 (vi) the net amount payable to the payee after
2-16 deduction of all commissions, fees, costs, expenses and charges
2-17 described in subparagraph (v) of this paragraph;
2-18 (vii) the quotient (expressed as a percentage)
2-19 obtained by dividing the net payment amount by the discounted
2-20 present value of the payments; and
2-21 (viii) the amount of any penalty and the aggregate
2-22 amount of any liquidated damages (inclusive of penalties) payable
2-23 by the payee in the event of any breach of the transfer agreement
2-24 by the payee;
2-25 (c) the extraordinary, unanticipated and imminent means of
3-1 the payee or his or her dependents render the transfer appropriate;
3-2 (d) the payee has received independent professional advice
3-3 regarding the legal, tax and financial implications of the
3-4 transfer;
3-5 (e) if the transfer would contravene the terms of the
3-6 structured settlement:
3-7 (i) the transfer has been expressly approved in
3-8 writing by:
3-9 (A) each interested party; provided, however,
3-10 that if, at the time the payee and the transferee entered into the
3-11 transfer agreement, a favorable tax determination was in effect,
3-12 then the approval of the annuity issuer and the structured
3-13 settlement obligor shall not be required if all other interested
3-14 parties approve the transfer and waive any and all rights to
3-15 require that the transferred payments be made to the payee in
3-16 accordance with the terms of the structured settlement; and
3-17 (B) any court or government authority, other
3-18 than the court or responsible administrative authority from which
3-19 authorization of the transfer is sought under this Act, which
3-20 previously approved the structured settlement; and
3-21 (ii) signed originals of all approvals required under
3-22 subparagraph (i) of this paragraph have been filed with the court
3-23 or responsible administrative authority from which authorization of
3-24 the transfer is sought under this Act, and originals or copies have
3-25 been furnished to all interested parties; and
4-1 (f) the transferee has given written notice of the
4-2 transferee's name, address and taxpayer identification number to
4-3 the annuity issuer and the structured settlement obligor and has
4-4 filed a copy of such notice with the court or responsible
4-5 administrative authority.
4-6 Sec. 2. Definitions. For purposes of this Act:
4-7 (a) "annuity issuer" means an insurer that has issued an
4-8 insurance contract used to fund periodic payments under a
4-9 structured settlement;
4-10 (b) "applicable law" means:
4-11 (i) the federal laws of the United States;
4-12 (ii) the laws of this State, including principles of
4-13 equity applied in the courts of this State; and
4-14 (iii) the laws of any other jurisdiction:
4-15 (A) which is the domicile of the payee or any
4-16 other interested party; or
4-17 (B) under whose laws a structured settlement
4-18 agreement was approved by a court or responsible administrative
4-19 authority;
4-20 (c) "dependents" include a payee's spouse and minor children
4-21 and all other family members and other persons for whom the payee
4-22 is legally obligated to provide support, including alimony;
4-23 (d) "discounted present value" means the fair present value
4-24 of future payments, as determined by discounting such payments to
4-25 the present using the most recently published applicable federal
5-1 rate for determining the present value of an annuity, as issued by
5-2 the United States Internal Revenue Service;
5-3 (e) "favorable tax determination" means, with respect to a
5-4 proposed transfer of structured settlement payment rights, any of
5-5 the following authorities that definitely establishes that the
5-6 federal income tax treatment of the structured settlement for the
5-7 parties to the structured settlement agreement and any qualified
5-8 assignment agreement, other than the payee, will not be affected by
5-9 such transfer:
5-10 (i) a provision of the United States Internal Revenue
5-11 Code, United States Code Title 26, as amended from time to time, or
5-12 a United States Treasury regulation adopted pursuant thereto;
5-13 (ii) a revenue ruling or revenue procedure issued by
5-14 the United States Internal Revenue Service; or
5-15 (iii) a private letter ruling by the United States
5-16 Internal Revenue Service with respect to such transfer; or
5-17 (iv) a decision of the United States Supreme Court or
5-18 a decision of a lower federal court in which the United States
5-19 Internal Revenue Service has acquiesced;
5-20 (f) independent professional advice" means advice of an
5-21 attorney, certified public accountant, actuary or other licensed
5-22 professional adviser:
5-23 (i) who is engaged by a payee to render advice
5-24 concerning the legal, tax and financial implications of a transfer
5-25 of structured settlement payment rights;
6-1 (ii) who is not in any manner affiliated with or
6-2 compensated by the transferee of such transfer; and
6-3 (iii) whose compensation for rendering such advice is
6-4 not affected by whether a transfer occurs or does not occur;
6-5 (g) "interested parties" means, with respect to any
6-6 structured settlement, the payee, any beneficiary designated under
6-7 the annuity contract to receive payments following the payee's
6-8 death, the annuity issuer, the structured settlement obligor, and
6-9 any other party that has continuing rights or obligations under
6-10 such structured settlement;
6-11 (h) "payee" means an individual who is receiving tax free
6-12 payments under a structured settlement and proposes to make a
6-13 transfer of payment rights thereunder;
6-14 (i) "periodic payments" include scheduled future lump sum
6-15 payments;
6-16 (j) "qualified assignment agreement" means an agreement
6-17 providing for a qualified assignment within the meaning of section
6-18 130 of the United States Internal Revenue Code, United States Code
6-19 Title 26, as amended from time to time;
6-20 (k) "responsible administrative authority" means, with
6-21 respect to a structured settlement, any government authority vested
6-22 by law with exclusive jurisdiction over the settled claim resolved
6-23 by such structured settlement;
6-24 (l) "settled claim" means the original tort claim or
6-25 workers' compensation claim resolved by a structured settlement;
7-1 (m) "structured settlement" means an arrangement for
7-2 periodic payment of damages for personal injuries established by
7-3 settlement or judgment in resolution of a tort claim or for
7-4 periodic payments in settlement of a workers' compensation claim;
7-5 (n) "structured settlement agreement" means the agreement,
7-6 judgment, stipulation, or release embodying the terms of a
7-7 structured settlement;
7-8 (o) "structured settlement obligor" means, with respect to
7-9 any structured settlement, the party that has the continuing
7-10 obligation to make periodic payments to the payee under a
7-11 structured settlement agreement or a qualified assignment
7-12 agreement;
7-13 (p) "structured settlement payment rights" means rights to
7-14 receive periodic payments under a structured settlement, whether
7-15 from the structured settlement obligor or the annuity issuer,
7-16 where:
7-17 (i) the payee or the structured settlement obligor or
7-18 the annuity issuer or any other party to the structured settlement
7-19 agreement or any other interested party is domiciled in this State;
7-20 or
7-21 (ii) the structured settlement agreement was approved
7-22 by a court or responsible administrative authority in this State;
7-23 (q) "terms of the structured settlement" include, with
7-24 respect to any structured settlement, the terms of the structured
7-25 settlement agreement, the annuity contract, any qualified
8-1 assignment agreement and any order or approval of any court or
8-2 responsible administrative authority or other government authority
8-3 authorizing or approving such structured settlement;
8-4 (r) "transfer" means any sale, assignment, pledge,
8-5 hypothecation, or other form of alienation or encumbrance made by a
8-6 payee for consideration;
8-7 (s) "transferee" means a party acquiring or proposing to
8-8 acquire structured settlement payment rights through a transfer of
8-9 such rights; and
8-10 (t) "transfer agreement" means the agreement providing for
8-11 transfer of structured settlement payment rights from a payee to a
8-12 transferee.
8-13 Sec. 3. Approval of Transfers. (a) An application under
8-14 this Act for authorization of a transfer of structured settlement
8-15 payment rights shall be made by the transferee and may be brought
8-16 in the appropriate state court of original jurisdiction in the
8-17 county in which the payee or the structured settlement obligor or
8-18 the annuity issuer or any other party to the structured settlement
8-19 agreement or any other interested party resides or in any court or
8-20 before any responsible administrative authority which approved the
8-21 structured settlement agreement.
8-22 (b) Not less than twenty (20) days prior to the scheduled
8-23 hearing on any application for authorization of a transfer of
8-24 structured settlement payment rights under Section 1 of this Act,
8-25 the transferee shall file with the court or responsible
9-1 administrative authority and serve on any other government
9-2 authority which previously approved the structured settlement, on
9-3 all interested parties, a notice of the proposed transfer and the
9-4 application for its authorization, including in such notice:
9-5 (i) a copy of the transferee's application;
9-6 (ii) a copy of the transfer agreement;
9-7 (iii) a copy of the disclosure statement required
9-8 under Section 1(b) of this Act;
9-9 (iv) notification that any interested party is
9-10 entitled to support, oppose or otherwise respond to the
9-11 transferee's application, either in person or by counsel, by
9-12 submitting written comments to the court or responsible
9-13 administrative authority or by participating in the hearing; and
9-14 (v) notification of the time and place of the hearing
9-15 and notification of the manner in which and the time by which
9-16 written responses to the application must be filed (which shall be
9-17 not less than fifteen (15) days after service of the transferee's
9-18 notice) in order to be considered by the court or responsible
9-19 administrative authority.
9-20 (c) The interested parties (as identified in Sec. 3(b)
9-21 above) shall have standing to raise, appear and be heard on any
9-22 matter relating to an application for authorization of a transfer
9-23 of structured settlement payment rights under this Act.
9-24 Sec. 4. No Waiver; No Penalties. (a) The provisions of
9-25 this Act may not be waived.
10-1 (b) No payee who proposes to make a transfer of structured
10-2 settlement payment rights shall incur any penalty, forfeit any
10-3 application fee or other payment, or otherwise incur any liability
10-4 to the proposed transferee based on any failure of such transfer to
10-5 satisfy the conditions of Section 1 of this Act.
10-6 Sec. 5. Construction. Nothing contained in this Act shall
10-7 be construed to authorize any transfer of structured settlement
10-8 payment rights in contravention of applicable law or to give effect
10-9 to any transfer of structured settlement payment rights that is
10-10 invalid under applicable law.
10-11 Sec. 6. Effective Date. This Act shall apply to any
10-12 transfer of structured settlement payment rights under a transfer
10-13 agreement entered into on or after the date of enactment of this
10-14 Act; provided, however, that nothing contained herein shall imply
10-15 that any transfer under a transfer agreement reached prior to such
10-16 date is effective.
10-17 SECTION 2. This Act takes effect September 1, 1999.
10-18 SECTION 3. The importance of this legislation and the
10-19 crowded condition of the calendars in both houses create an
10-20 emergency and an imperative public necessity that the
10-21 constitutional rule requiring bills to be read on three several
10-22 days in each house be suspended, and this rule is hereby suspended.