77R10285 AJA-F By Counts H.B. No. 1920 Substitute the following for H.B. No. 1920: By Bosse C.S.H.B. No. 1920 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the transfer, sale, or assignment 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 141 to read as follows: 1-7 CHAPTER 141. STRUCTURED SETTLEMENT PROTECTION ACT 1-8 Sec. 141.001. SHORT TITLE. This chapter may be cited as the 1-9 Structured Settlement Protection Act. 1-10 Sec. 141.002. DEFINITIONS. In this chapter: 1-11 (1) "Annuity issuer" means an insurer that has issued 1-12 a contract to fund periodic payments under a structured settlement. 1-13 (2) "Court" means: 1-14 (A) the court of original jurisdiction that 1-15 authorized or approved a structured settlement; or 1-16 (B) if the court that authorized or approved the 1-17 structured settlement no longer has jurisdiction to approve a 1-18 transfer of payment rights under the structured settlement under 1-19 this chapter, a statutory county court or a district court located 1-20 in the county in which the payee resides. 1-21 (3) "Dependents" includes a payee's spouse, minor 1-22 children, and all other persons for whom the payee is legally 1-23 obligated to provide support, including alimony. 1-24 (4) "Discounted present value" means the present value 2-1 of future payments determined by discounting the payments to the 2-2 present using the most recently published Applicable Federal Rate 2-3 for determining the present value of an annuity, as issued by the 2-4 United States Internal Revenue Service. 2-5 (5) "Gross advance amount" means the sum payable to 2-6 the payee or for the payee's account as consideration for a 2-7 transfer of structured settlement payment rights before any 2-8 reductions for transfer expenses or other deductions to be made 2-9 from the consideration. 2-10 (6) "Independent professional advice" means advice of 2-11 an attorney, certified public accountant, actuary, or other 2-12 licensed professional adviser. 2-13 (7) "Interested party" means, with respect to any 2-14 structured settlement: 2-15 (A) the payee; 2-16 (B) any beneficiary irrevocably designated under 2-17 the annuity contract to receive payments following the payee's 2-18 death; 2-19 (C) the annuity issuer; 2-20 (D) the structured settlement obligor; and 2-21 (E) any other party that has continuing rights 2-22 or obligations under the structured settlement. 2-23 (8) "Net advance amount" means the gross advance 2-24 amount less the aggregate amount of the actual and estimated 2-25 transfer expenses required to be disclosed under Section 2-26 141.003(5). 2-27 (9) "Payee" means an individual who is receiving 3-1 tax-free payments under a structured settlement and proposes to 3-2 transfer payment rights under the structured settlement. 3-3 (10) "Periodic payments" includes both recurring 3-4 payments and scheduled future lump-sum payments. 3-5 (11) "Qualified assignment agreement" means an 3-6 agreement providing for a qualified assignment within the meaning 3-7 of Section 130, Internal Revenue Code of 1986 (26 U.S.C. Section 3-8 130), as amended. 3-9 (12) "Settled claim" means the original tort claim or 3-10 workers' compensation claim resolved by a structured settlement. 3-11 (13) "Structured settlement" means an arrangement for 3-12 periodic payment of damages for personal injuries or sickness 3-13 established by settlement or judgment in resolution of a tort claim 3-14 or for periodic payments in settlement of a workers' compensation 3-15 claim. 3-16 (14) "Structured settlement agreement" means the 3-17 agreement, judgment, stipulation, or release embodying the terms of 3-18 a structured settlement. 3-19 (15) "Structured settlement obligor" means, with 3-20 respect to any structured settlement, the party that has the 3-21 continuing obligation to make periodic payments to the payee under 3-22 a structured settlement agreement or a qualified assignment 3-23 agreement. 3-24 (16) "Structured settlement payment rights" means 3-25 rights to receive periodic payments under a structured settlement, 3-26 whether from the structured settlement obligor or the annuity 3-27 issuer, if: 4-1 (A) the payee is domiciled in or the domicile or 4-2 principal place of business of the structured settlement obligor or 4-3 the annuity issuer is located in this state; 4-4 (B) the structured settlement agreement was 4-5 authorized or approved by a court located in this state; or 4-6 (C) the structured settlement agreement is 4-7 expressly governed by the laws of this state. 4-8 (17) "Terms of the structured settlement" include, 4-9 with respect to any structured settlement, the terms of the 4-10 structured settlement agreement, the annuity contract, any 4-11 qualified assignment agreement, and any order or other approval of 4-12 the court. 4-13 (18) "Transfer" means any sale, assignment, pledge, 4-14 hypothecation, or other alienation or encumbrance of structured 4-15 settlement payment rights made by a payee for consideration, except 4-16 that the term does not include the creation or perfection of a 4-17 security interest in structured settlement payment rights under a 4-18 blanket security agreement entered into with an insured depository 4-19 institution, in the absence of any action to redirect the 4-20 structured settlement payments to the insured depository 4-21 institution, or its agent or successor in interest, or to enforce 4-22 the blanket security interest against the structured settlement 4-23 payment rights. 4-24 (19) "Transfer agreement" means the agreement 4-25 providing for a transfer of structured settlement payment rights. 4-26 (20) "Transfer expenses" means all the expenses of a 4-27 transfer that are required under the transfer agreement to be paid 5-1 by the payee or deducted from the gross advance amount, including 5-2 court filing fees, attorney's fees, escrow fees, lien recording 5-3 fees, judgment and lien search fees, finders' fees, commissions, 5-4 and other payments to a broker or other intermediary, except that 5-5 the term does not include preexisting obligations of the payee 5-6 payable for the payee's account from the proceeds of a transfer. 5-7 (21) "Transferee" means a party acquiring or proposing 5-8 to acquire structured settlement payment rights through a transfer. 5-9 Sec. 141.003. REQUIRED DISCLOSURES TO PAYEE. At least three 5-10 days before the date on which the payee signs a transfer agreement, 5-11 the transferee shall provide to the payee a separate disclosure 5-12 statement, in bold type at least 14 points in size, that states: 5-13 (1) the amounts and due dates of the structured 5-14 settlement payments to be transferred; 5-15 (2) the aggregate amount of the payments; 5-16 (3) the discounted present value of the payments to be 5-17 transferred, which shall be identified as the "calculation of 5-18 current value of the transferred structured settlement payments 5-19 under federal standards for valuing annuities," and the amount of 5-20 the Applicable Federal Rate used in calculating the discounted 5-21 present value; 5-22 (4) the gross advance amount; 5-23 (5) an itemized listing of all applicable transfer 5-24 expenses, other than attorney's fees and related disbursements 5-25 payable in connection with the transferee's application for 5-26 approval of the transfer, and the transferee's best estimate of the 5-27 amount of those expenses; 6-1 (6) the net advance amount; 6-2 (7) the amount of any penalties or liquidated damages 6-3 payable by the payee in the event of any breach of the transfer 6-4 agreement by the payee; and 6-5 (8) a statement that the payee has the right to cancel 6-6 the transfer agreement, without penalty or further obligation, not 6-7 later than the third business day after the date the agreement is 6-8 signed by the payee. 6-9 Sec. 141.004. APPROVAL OF TRANSFERS OF STRUCTURED SETTLEMENT 6-10 PAYMENT RIGHTS. No direct or indirect transfer of structured 6-11 settlement payment rights shall be effective and no structured 6-12 settlement obligor or annuity issuer shall be required to make any 6-13 payment directly or indirectly to any transferee of structured 6-14 settlement payment rights unless the transfer has been approved in 6-15 advance in a final court order based on express findings by the 6-16 court that: 6-17 (1) the transfer is in the best interest of the payee, 6-18 taking into account the welfare and support of the payee's 6-19 dependents; 6-20 (2) the payee has been advised in writing by the 6-21 transferee to seek independent professional advice regarding the 6-22 transfer and has either received the advice or knowingly waived the 6-23 advice in writing; and 6-24 (3) the transfer does not contravene any applicable 6-25 statute or an order of any court or other governmental authority. 6-26 Sec. 141.005. EFFECTS OF TRANSFER OF STRUCTURED SETTLEMENT 6-27 PAYMENT RIGHTS. Following a transfer of structured settlement 7-1 payment rights under this chapter: 7-2 (1) the structured settlement obligor and the annuity 7-3 issuer shall, as to all parties except the transferee, be 7-4 discharged and released from any and all liability for the 7-5 transferred payments; 7-6 (2) the transferee shall be liable to the structured 7-7 settlement obligor and the annuity issuer: 7-8 (A) if the transfer contravenes the terms of the 7-9 structured settlement, for any taxes incurred by the parties as a 7-10 consequence of the transfer; and 7-11 (B) for any other liabilities or costs, 7-12 including reasonable costs and attorney's fees, arising from 7-13 compliance by the parties with the order of the court or arising as 7-14 a consequence of the transferee's failure to comply with this 7-15 chapter; 7-16 (3) the transferee shall be liable to the payee: 7-17 (A) if the transfer contravenes the terms of the 7-18 structured settlement, for any taxes incurred by the payee as a 7-19 consequence of the transfer; and 7-20 (B) for any other liabilities or costs, 7-21 including reasonable costs and attorney's fees, arising as a 7-22 consequence of the transferee's failure to comply with this 7-23 chapter; 7-24 (4) neither the structured settlement obligor nor the 7-25 annuity issuer may be required to divide any periodic payment 7-26 between the payee and any transferee or assignee or between two or 7-27 more transferees or assignees; and 8-1 (5) any further transfer of structured settlement 8-2 payment rights by the payee may be made only after compliance with 8-3 all of the requirements of this chapter. 8-4 Sec. 141.006. PROCEDURE FOR APPROVAL OF TRANSFERS. (a) An 8-5 application under this chapter for approval of a transfer of 8-6 structured settlement payment rights shall be made by the 8-7 transferee and shall be brought in the court. 8-8 (b) At least 20 days before the date of the scheduled 8-9 hearing on any application for approval of a transfer of structured 8-10 settlement payment rights under Section 141.004, the transferee 8-11 shall file with the court and serve on all interested parties a 8-12 notice of the proposed transfer and the application for 8-13 authorization, including with the notice: 8-14 (1) a copy of the transferee's application; 8-15 (2) a copy of the transfer agreement; 8-16 (3) a copy of the disclosure statement required under 8-17 Section 141.003; 8-18 (4) a listing of each of the payee's dependents, 8-19 together with each dependent's age; 8-20 (5) notice that any interested party is entitled to 8-21 support, oppose, or otherwise respond to the transferee's 8-22 application, either in person or by counsel, by submitting written 8-23 comments to the court or by participating in the hearing; and 8-24 (6) notice of the time and place of the hearing and 8-25 notification of the manner in which and the time by which written 8-26 responses to the application must be filed to be considered by the 8-27 court. 9-1 (c) Written responses to the application under Subsection 9-2 (b)(6) must be filed on or after the 15th day after the date the 9-3 transferee's notice is served. 9-4 Sec. 141.007. GENERAL PROVISIONS; CONSTRUCTION. (a) The 9-5 provisions of this chapter may not be waived by any payee. 9-6 (b) Any transfer agreement entered into by a payee who 9-7 resides in this state must provide that disputes under the transfer 9-8 agreement, including any claim that the payee has breached the 9-9 agreement, shall be determined in and under the laws of this state. 9-10 The transfer agreement may not authorize the transferee or any 9-11 other party to confess judgment or consent to entry of judgment 9-12 against the payee. 9-13 (c) Transfer of structured settlement payment rights may not 9-14 extend to any payments that are life-contingent unless, prior to 9-15 the date on which the payee signs the transfer agreement, the 9-16 transferee has established and agreed to maintain procedures 9-17 reasonably satisfactory to the structured settlement obligor and 9-18 the annuity issuer for: 9-19 (1) periodically confirming the payee's survival; and 9-20 (2) giving the structured settlement obligor and the 9-21 annuity issuer prompt written notice in the event of the payee's 9-22 death. 9-23 (d) A payee who proposes to make a transfer of structured 9-24 settlement payment rights may not incur any penalty, forfeit any 9-25 application fee or other payment, or otherwise incur any liability 9-26 to the proposed transferee or any assignee based on any failure of 9-27 the transfer to satisfy the conditions of this chapter. 10-1 (e) Nothing contained in this chapter may be construed to 10-2 authorize any transfer of structured settlement payment rights in 10-3 contravention of any law or to imply that any transfer under a 10-4 transfer agreement entered into before the effective date of this 10-5 chapter is valid or invalid. 10-6 (f) Compliance with the requirements in Section 141.003 and 10-7 fulfillment of the conditions in Section 141.004 are solely the 10-8 responsibility of the transferee in any transfer of structured 10-9 settlement payment rights, and neither the structured settlement 10-10 obligor nor the annuity issuer bear any responsibility for, or any 10-11 liability arising from, noncompliance with the requirements or 10-12 failure to fulfill the conditions. 10-13 SECTION 2. This Act takes effect September 1, 2001, and 10-14 applies only to a transfer of structured settlement payment rights 10-15 under a transfer agreement entered into on or after that date.