By: Harris S.B. No. 277
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 the court of original jurisdiction
1-14 that authorized or approved a structured settlement.
1-15 (3) "Dependents" includes a payee's spouse, minor
1-16 children, and all other persons for whom the payee is legally
1-17 obligated to provide support, including alimony.
1-18 (4) "Discounted present value" means the present value
1-19 of future payments determined by discounting the payments to the
1-20 present using the most recently published Applicable Federal Rate
1-21 for determining the present value of an annuity, as issued by the
1-22 United States Internal Revenue Service.
1-23 (5) "Gross advance amount" means the sum payable to
1-24 the payee or for the payee's account as consideration for a
1-25 transfer of structured settlement payment rights before any
2-1 reductions for transfer expenses or other deductions to be made
2-2 from the consideration.
2-3 (6) "Independent professional advice" means advice of
2-4 an attorney, certified public accountant, actuary, or other
2-5 licensed professional adviser.
2-6 (7) "Interested party" means, with respect to any
2-7 structured settlement:
2-8 (A) the payee;
2-9 (B) any beneficiary irrevocably designated under
2-10 the annuity contract to receive payments following the payee's
2-11 death;
2-12 (C) the annuity issuer;
2-13 (D) the structured settlement obligor; and
2-14 (E) any other party that has continuing rights
2-15 or obligations under the structured settlement.
2-16 (8) "Net advance amount" means the gross advance
2-17 amount less the aggregate amount of the actual and estimated
2-18 transfer expenses required to be disclosed under Section
2-19 141.003(5).
2-20 (9) "Payee" means an individual who is receiving
2-21 tax-free payments under a structured settlement and proposes to
2-22 transfer payment rights under the structured settlement.
2-23 (10) "Periodic payments" includes both recurring
2-24 payments and scheduled future lump-sum payments.
2-25 (11) "Qualified assignment agreement" means an
2-26 agreement providing for a qualified assignment within the meaning
3-1 of Section 130, Internal Revenue Code of 1986 (26 U.S.C. Section
3-2 130), as amended.
3-3 (12) "Settled claim" means the original tort claim or
3-4 workers' compensation claim resolved by a structured settlement.
3-5 (13) "Structured settlement" means an arrangement for
3-6 periodic payment of damages for personal injuries or sickness
3-7 established by settlement or judgment in resolution of a tort claim
3-8 or for periodic payments in settlement of a workers' compensation
3-9 claim.
3-10 (14) "Structured settlement agreement" means the
3-11 agreement, judgment, stipulation, or release embodying the terms of
3-12 a structured settlement.
3-13 (15) "Structured settlement obligor" means, with
3-14 respect to any structured settlement, the party that has the
3-15 continuing obligation to make periodic payments to the payee under
3-16 a structured settlement agreement or a qualified assignment
3-17 agreement.
3-18 (16) "Structured settlement payment rights" means
3-19 rights to receive periodic payments under a structured settlement,
3-20 whether from the structured settlement obligor or the annuity
3-21 issuer, if:
3-22 (A) the payee is domiciled in or the domicile or
3-23 principal place of business of the structured settlement obligor or
3-24 the annuity issuer is located in this state;
3-25 (B) the structured settlement agreement was
3-26 authorized or approved by a court located in this state; or
4-1 (C) the structured settlement agreement is
4-2 expressly governed by the laws of this state.
4-3 (17) "Terms of the structured settlement" include,
4-4 with respect to any structured settlement, the terms of the
4-5 structured settlement agreement, the annuity contract, any
4-6 qualified assignment agreement, and any order or other approval of
4-7 the court.
4-8 (18) "Transfer" means any sale, assignment, pledge,
4-9 hypothecation, or other alienation or encumbrance of structured
4-10 settlement payment rights made by a payee for consideration, except
4-11 that the term does not include the creation or perfection of a
4-12 security interest in structured settlement payment rights under a
4-13 blanket security agreement entered into with an insured depository
4-14 institution, in the absence of any action to redirect the
4-15 structured settlement payments to the insured depository
4-16 institution, or its agent or successor in interest, or to enforce
4-17 the blanket security interest against the structured settlement
4-18 payment rights.
4-19 (19) "Transfer agreement" means the agreement
4-20 providing for a transfer of structured settlement payment rights.
4-21 (20) "Transfer expenses" means all the expenses of a
4-22 transfer that are required under the transfer agreement to be paid
4-23 by the payee or deducted from the gross advance amount, including
4-24 court filing fees, attorney's fees, escrow fees, lien recording
4-25 fees, judgment and lien search fees, finders' fees, commissions,
4-26 and other payments to a broker or other intermediary, except that
5-1 the term does not include preexisting obligations of the payee
5-2 payable for the payee's account from the proceeds of a transfer.
5-3 (21) "Transferee" means a party acquiring or proposing
5-4 to acquire structured settlement payment rights through a transfer.
5-5 Sec. 141.003. REQUIRED DISCLOSURES TO PAYEE. At least three
5-6 days before the date on which the payee signs a transfer agreement,
5-7 the transferee shall provide to the payee a separate disclosure
5-8 statement, in bold type at least 14 points in size, that states:
5-9 (1) the amounts and due dates of the structured
5-10 settlement payments to be transferred;
5-11 (2) the aggregate amount of the payments;
5-12 (3) the discounted present value of the payments to be
5-13 transferred, which shall be identified as the "calculation of
5-14 current value of the transferred structured settlement payments
5-15 under federal standards for valuing annuities," and the amount of
5-16 the Applicable Federal Rate used in calculating the discounted
5-17 present value;
5-18 (4) the gross advance amount;
5-19 (5) an itemized listing of all applicable transfer
5-20 expenses, other than attorney's fees and related disbursements
5-21 payable in connection with the transferee's application for
5-22 approval of the transfer, and the transferee's best estimate of the
5-23 amount of those expenses;
5-24 (6) the net advance amount;
5-25 (7) the amount of any penalties or liquidated damages
5-26 payable by the payee in the event of any breach of the transfer
6-1 agreement by the payee; and
6-2 (8) a statement that the payee has the right to cancel
6-3 the transfer agreement, without penalty or further obligation, not
6-4 later than the third business day after the date the agreement is
6-5 signed by the payee.
6-6 Sec. 141.004. APPROVAL OF TRANSFERS OF STRUCTURED SETTLEMENT
6-7 PAYMENT RIGHTS. No direct or indirect transfer of structured
6-8 settlement payment rights shall be effective and no structured
6-9 settlement obligor or annuity issuer shall be required to make any
6-10 payment directly or indirectly to any transferee of structured
6-11 settlement payment rights unless the transfer has been approved in
6-12 advance in a final court order based on express findings by the
6-13 court that:
6-14 (1) the transfer is in the best interest of the payee,
6-15 taking into account the welfare and support of the payee's
6-16 dependents;
6-17 (2) the payee has been advised in writing by the
6-18 transferee to seek independent professional advice regarding the
6-19 transfer and has either received the advice or knowingly waived the
6-20 advice in writing; and
6-21 (3) the transfer does not contravene any applicable
6-22 statute or an order of any court or other governmental authority.
6-23 Sec. 141.005. EFFECTS OF TRANSFER OF STRUCTURED SETTLEMENT
6-24 PAYMENT RIGHTS. Following a transfer of structured settlement
6-25 payment rights under this chapter:
6-26 (1) the structured settlement obligor and the annuity
7-1 issuer shall, as to all parties except the transferee, be
7-2 discharged and released from any and all liability for the
7-3 transferred payments;
7-4 (2) the transferee shall be liable to the structured
7-5 settlement obligor and the annuity issuer:
7-6 (A) if the transfer contravenes the terms of the
7-7 structured settlement, for any taxes incurred by the parties as a
7-8 consequence of the transfer; and
7-9 (B) for any other liabilities or costs,
7-10 including reasonable costs and attorney's fees, arising from
7-11 compliance by the parties with the order of the court or arising as
7-12 a consequence of the transferee's failure to comply with this
7-13 chapter;
7-14 (3) neither the structured settlement obligor nor the
7-15 annuity issuer may be required to divide any periodic payment
7-16 between the payee and any transferee or assignee or between two or
7-17 more transferees or assignees; and
7-18 (4) any further transfer of structured settlement
7-19 payment rights by the payee may be made only after compliance with
7-20 all of the requirements of this chapter.
7-21 Sec. 141.006. PROCEDURE FOR APPROVAL OF TRANSFERS. (a) An
7-22 application under this chapter for approval of a transfer of
7-23 structured settlement payment rights shall be made by the
7-24 transferee and shall be brought in the court.
7-25 (b) At least 20 days before the date of the scheduled
7-26 hearing on any application for approval of a transfer of structured
8-1 settlement payment rights under Section 141.004, the transferee
8-2 shall file with the court and serve on all interested parties a
8-3 notice of the proposed transfer and the application for
8-4 authorization, including with the notice:
8-5 (1) a copy of the transferee's application;
8-6 (2) a copy of the transfer agreement;
8-7 (3) a copy of the disclosure statement required under
8-8 Section 141.003;
8-9 (4) a listing of each of the payee's dependents,
8-10 together with each dependent's age;
8-11 (5) notice that any interested party is entitled to
8-12 support, oppose, or otherwise respond to the transferee's
8-13 application, either in person or by counsel, by submitting written
8-14 comments to the court or by participating in the hearing; and
8-15 (6) notice of the time and place of the hearing and
8-16 notification of the manner in which and the time by which written
8-17 responses to the application must be filed to be considered by the
8-18 court.
8-19 (c) Written responses to the application under Subsection
8-20 (b)(6) must be filed on or after the 15th day after the date the
8-21 transferee's notice is served.
8-22 Sec. 141.007. GENERAL PROVISIONS; CONSTRUCTION. (a) The
8-23 provisions of this chapter may not be waived by any payee.
8-24 (b) Any transfer agreement entered into by a payee who
8-25 resides in this state must provide that disputes under the transfer
8-26 agreement, including any claim that the payee has breached the
9-1 agreement, shall be determined in and under the laws of this state.
9-2 The transfer agreement may not authorize the transferee or any
9-3 other party to confess judgment or consent to entry of judgment
9-4 against the payee.
9-5 (c) Transfer of structured settlement payment rights may not
9-6 extend to any payments that are life-contingent unless, prior to
9-7 the date on which the payee signs the transfer agreement, the
9-8 transferee has established and agreed to maintain procedures
9-9 reasonably satisfactory to the structured settlement obligor and
9-10 the annuity issuer for:
9-11 (1) periodically confirming the payee's survival; and
9-12 (2) giving the structured settlement obligor and the
9-13 annuity issuer prompt written notice in the event of the payee's
9-14 death.
9-15 (d) A payee who proposes to make a transfer of structured
9-16 settlement payment rights may not incur any penalty, forfeit any
9-17 application fee or other payment, or otherwise incur any liability
9-18 to the proposed transferee or any assignee based on any failure of
9-19 the transfer to satisfy the conditions of this chapter.
9-20 (e) Nothing contained in this chapter may be construed to
9-21 authorize any transfer of structured settlement payment rights in
9-22 contravention of any law or to imply that any transfer under a
9-23 transfer agreement entered into before the effective date of this
9-24 chapter is valid or invalid.
9-25 (f) Compliance with the requirements in Section 141.003 and
9-26 fulfillment of the conditions in Section 141.004 are solely the
10-1 responsibility of the transferee in any transfer of structured
10-2 settlement payment rights, and neither the structured settlement
10-3 obligor nor the annuity issuer bear any responsibility for, or any
10-4 liability arising from, noncompliance with the requirements or
10-5 failure to fulfill the conditions.
10-6 SECTION 2. This Act takes effect September 1, 2001, and
10-7 applies only to a transfer of structured settlement payment rights
10-8 under a transfer agreement entered into on or after that date.