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
1-25 of future payments determined by discounting the payments to the
2-1 present using the most recently published Applicable Federal Rate
2-2 for determining the present value of an annuity, as issued by the
2-3 United States Internal Revenue Service.
2-4 (5) "Gross advance amount" means the sum payable to
2-5 the payee or for the payee's account as consideration for a
2-6 transfer of structured settlement payment rights before any
2-7 reductions for transfer expenses or other deductions to be made
2-8 from the consideration.
2-9 (6) "Independent professional advice" means advice of
2-10 an attorney, certified public accountant, actuary, or other
2-11 licensed professional adviser.
2-12 (7) "Interested party" means, with respect to any
2-13 structured settlement:
2-14 (A) the payee;
2-15 (B) any beneficiary irrevocably designated under
2-16 the annuity contract to receive payments following the payee's
2-17 death;
2-18 (C) the annuity issuer;
2-19 (D) the structured settlement obligor; and
2-20 (E) any other party that has continuing rights
2-21 or obligations under the structured settlement.
2-22 (8) "Net advance amount" means the gross advance
2-23 amount less the aggregate amount of the actual and estimated
2-24 transfer expenses required to be disclosed under Section
2-25 141.003(5).
2-26 (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
4-1 issuer, if:
4-2 (A) the payee is domiciled in or the domicile or
4-3 principal place of business of the structured settlement obligor or
4-4 the annuity issuer is located in this state;
4-5 (B) the structured settlement agreement was
4-6 authorized or approved by a court located in this state; or
4-7 (C) the structured settlement agreement is
4-8 expressly governed by the laws of this state.
4-9 (17) "Terms of the structured settlement" include,
4-10 with respect to any structured settlement, the terms of the
4-11 structured settlement agreement, the annuity contract, any
4-12 qualified assignment agreement, and any order or other approval of
4-13 the court.
4-14 (18) "Transfer" means any sale, assignment, pledge,
4-15 hypothecation, or other alienation or encumbrance of structured
4-16 settlement payment rights made by a payee for consideration, except
4-17 that the term does not include the creation or perfection of a
4-18 security interest in structured settlement payment rights under a
4-19 blanket security agreement entered into with an insured depository
4-20 institution, in the absence of any action to redirect the
4-21 structured settlement payments to the insured depository
4-22 institution, or its agent or successor in interest, or to enforce
4-23 the blanket security interest against the structured settlement
4-24 payment rights.
4-25 (19) "Transfer agreement" means the agreement
4-26 providing for a transfer of structured settlement payment rights.
5-1 (20) "Transfer expenses" means all the expenses of a
5-2 transfer that are required under the transfer agreement to be paid
5-3 by the payee or deducted from the gross advance amount, including
5-4 court filing fees, attorney's fees, escrow fees, lien recording
5-5 fees, judgment and lien search fees, finders' fees, commissions,
5-6 and other payments to a broker or other intermediary, except that
5-7 the term does not include preexisting obligations of the payee
5-8 payable for the payee's account from the proceeds of a transfer.
5-9 (21) "Transferee" means a party acquiring or proposing
5-10 to acquire structured settlement payment rights through a transfer.
5-11 Sec. 141.003. REQUIRED DISCLOSURES TO PAYEE. At least three
5-12 days before the date on which the payee signs a transfer agreement,
5-13 the transferee shall provide to the payee a separate disclosure
5-14 statement, in bold type at least 14 points in size, that states:
5-15 (1) the amounts and due dates of the structured
5-16 settlement payments to be transferred;
5-17 (2) the aggregate amount of the payments;
5-18 (3) the discounted present value of the payments to be
5-19 transferred, which shall be identified as the "calculation of
5-20 current value of the transferred structured settlement payments
5-21 under federal standards for valuing annuities," and the amount of
5-22 the Applicable Federal Rate used in calculating the discounted
5-23 present value;
5-24 (4) the gross advance amount;
5-25 (5) an itemized listing of all applicable transfer
5-26 expenses, other than attorney's fees and related disbursements
6-1 payable in connection with the transferee's application for
6-2 approval of the transfer, and the transferee's best estimate of the
6-3 amount of those expenses;
6-4 (6) the net advance amount;
6-5 (7) the amount of any penalties or liquidated damages
6-6 payable by the payee in the event of any breach of the transfer
6-7 agreement by the payee; and
6-8 (8) a statement that the payee has the right to cancel
6-9 the transfer agreement, without penalty or further obligation, not
6-10 later than the third business day after the date the agreement is
6-11 signed by the payee.
6-12 Sec. 141.004. APPROVAL OF TRANSFERS OF STRUCTURED SETTLEMENT
6-13 PAYMENT RIGHTS. No direct or indirect transfer of structured
6-14 settlement payment rights shall be effective and no structured
6-15 settlement obligor or annuity issuer shall be required to make any
6-16 payment directly or indirectly to any transferee of structured
6-17 settlement payment rights unless the transfer has been approved in
6-18 advance in a final court order based on express findings by the
6-19 court that:
6-20 (1) the transfer is in the best interest of the payee,
6-21 taking into account the welfare and support of the payee's
6-22 dependents;
6-23 (2) the payee has been advised in writing by the
6-24 transferee to seek independent professional advice regarding the
6-25 transfer and has either received the advice or knowingly waived the
6-26 advice in writing; and
7-1 (3) the transfer does not contravene any applicable
7-2 statute or an order of any court or other governmental authority.
7-3 Sec. 141.005. EFFECTS OF TRANSFER OF STRUCTURED SETTLEMENT
7-4 PAYMENT RIGHTS. Following a transfer of structured settlement
7-5 payment rights under this chapter:
7-6 (1) the structured settlement obligor and the annuity
7-7 issuer shall, as to all parties except the transferee, be
7-8 discharged and released from any and all liability for the
7-9 transferred payments;
7-10 (2) the transferee shall be liable to the structured
7-11 settlement obligor and the annuity issuer:
7-12 (A) if the transfer contravenes the terms of the
7-13 structured settlement, for any taxes incurred by the parties as a
7-14 consequence of the transfer; and
7-15 (B) for any other liabilities or costs,
7-16 including reasonable costs and attorney's fees, arising from
7-17 compliance by the parties with the order of the court or arising as
7-18 a consequence of the transferee's failure to comply with this
7-19 chapter;
7-20 (3) the transferee shall be liable to the payee:
7-21 (A) if the transfer contravenes the terms of the
7-22 structured settlement, for any taxes incurred by the payee as a
7-23 consequence of the transfer; and
7-24 (B) for any other liabilities or costs,
7-25 including reasonable costs and attorney's fees, arising as a
7-26 consequence of the transferee's failure to comply with this
8-1 chapter;
8-2 (4) neither the structured settlement obligor nor the
8-3 annuity issuer may be required to divide any periodic payment
8-4 between the payee and any transferee or assignee or between two or
8-5 more transferees or assignees; and
8-6 (5) any further transfer of structured settlement
8-7 payment rights by the payee may be made only after compliance with
8-8 all of the requirements of this chapter.
8-9 Sec. 141.006. PROCEDURE FOR APPROVAL OF TRANSFERS. (a) An
8-10 application under this chapter for approval of a transfer of
8-11 structured settlement payment rights shall be made by the
8-12 transferee and shall be brought in the court.
8-13 (b) At least 20 days before the date of the scheduled
8-14 hearing on any application for approval of a transfer of structured
8-15 settlement payment rights under Section 141.004, the transferee
8-16 shall file with the court and serve on all interested parties a
8-17 notice of the proposed transfer and the application for
8-18 authorization, including with the notice:
8-19 (1) a copy of the transferee's application;
8-20 (2) a copy of the transfer agreement;
8-21 (3) a copy of the disclosure statement required under
8-22 Section 141.003;
8-23 (4) a listing of each of the payee's dependents,
8-24 together with each dependent's age;
8-25 (5) notice that any interested party is entitled to
8-26 support, oppose, or otherwise respond to the transferee's
9-1 application, either in person or by counsel, by submitting written
9-2 comments to the court or by participating in the hearing; and
9-3 (6) notice of the time and place of the hearing and
9-4 notification of the manner in which and the time by which written
9-5 responses to the application must be filed to be considered by the
9-6 court.
9-7 (c) Written responses to the application under Subsection
9-8 (b)(6) must be filed on or after the 15th day after the date the
9-9 transferee's notice is served.
9-10 Sec. 141.007. GENERAL PROVISIONS; CONSTRUCTION. (a) The
9-11 provisions of this chapter may not be waived by any payee.
9-12 (b) Any transfer agreement entered into by a payee who
9-13 resides in this state must provide that disputes under the transfer
9-14 agreement, including any claim that the payee has breached the
9-15 agreement, shall be determined in and under the laws of this state.
9-16 The transfer agreement may not authorize the transferee or any
9-17 other party to confess judgment or consent to entry of judgment
9-18 against the payee.
9-19 (c) Transfer of structured settlement payment rights may not
9-20 extend to any payments that are life-contingent unless, prior to
9-21 the date on which the payee signs the transfer agreement, the
9-22 transferee has established and agreed to maintain procedures
9-23 reasonably satisfactory to the structured settlement obligor and
9-24 the annuity issuer for:
9-25 (1) periodically confirming the payee's survival; and
9-26 (2) giving the structured settlement obligor and the
10-1 annuity issuer prompt written notice in the event of the payee's
10-2 death.
10-3 (d) A payee who proposes to make a transfer of structured
10-4 settlement payment rights may not incur any penalty, forfeit any
10-5 application fee or other payment, or otherwise incur any liability
10-6 to the proposed transferee or any assignee based on any failure of
10-7 the transfer to satisfy the conditions of this chapter.
10-8 (e) Nothing contained in this chapter may be construed to
10-9 authorize any transfer of structured settlement payment rights in
10-10 contravention of any law or to imply that any transfer under a
10-11 transfer agreement entered into before the effective date of this
10-12 chapter is valid or invalid.
10-13 (f) Compliance with the requirements in Section 141.003 and
10-14 fulfillment of the conditions in Section 141.004 are solely the
10-15 responsibility of the transferee in any transfer of structured
10-16 settlement payment rights, and neither the structured settlement
10-17 obligor nor the annuity issuer bear any responsibility for, or any
10-18 liability arising from, noncompliance with the requirements or
10-19 failure to fulfill the conditions.
10-20 SECTION 2. Section 142.009, Property Code, is amended to
10-21 read as follows:
10-22 Sec. 142.009. ANNUITY CONTRACT REQUIREMENTS FOR STRUCTURED
10-23 SETTLEMENT. (a) [An annuity contract that funds a structured
10-24 settlement as provided by Section 142.008 must be provided by an
10-25 insurance company that is not:]
10-26 [(1) an affiliate, as that term is defined by Article
11-1 21.49-1, Insurance Code, of a liability insurance carrier involved
11-2 in the suit for which the structured settlement is created; or]
11-3 [(2) connected in any way to a person obligated to
11-4 fund the structured settlement.]
11-5 [(b)] An insurance company providing an annuity contract for
11-6 a structured settlement as provided by Section 142.008 must:
11-7 (1) be licensed to write annuity contracts in this
11-8 state;
11-9 (2) have a minimum of $1 million of capital and
11-10 surplus; and
11-11 (3) be approved by the court and comply with any
11-12 requirements imposed by the court to ensure funding to satisfy
11-13 periodic settlement payments.
11-14 (b) [(c)] In approving an insurance company under Subsection
11-15 (a)(3) [(b)(3)], the court may consider whether the company:
11-16 (1) holds an industry rating equivalent to at least
11-17 two of the following rating organizations:
11-18 (A) [(1)] A. M. Best Company: A++ or A+;
11-19 (B) [(2)] Duff & Phelps Credit Rating Company
11-20 Insurance Company Claims Paying Ability Rating: AA-, AA, AA+, or
11-21 AAA;
11-22 (C) [(3)] Moody's Investors Service Claims
11-23 Paying Ability Rating: Aa3, Aa2, Aa1, or aaa; or
11-24 (D) [(4)] Standard & Poor's Corporation Insurer
11-25 Claims-Paying Ability Rating: AA-, AA, AA+, or AAA;
11-26 (2) is an affiliate, as that term is defined by
12-1 Article 21.49-1, Insurance Code, of a liability insurance carrier
12-2 involved in the suit for which the structured settlement is
12-3 created; or
12-4 (3) is connected in any way to a person obligated to
12-5 fund the structured settlement.
12-6 SECTION 3. This Act takes effect September 1, 2001, and
12-7 applies only to a transfer of structured settlement payment rights
12-8 under a transfer agreement entered into on or after that date.
_______________________________ _______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 277 passed the Senate on
April 5, 2001, by the following vote: Yeas 30, Nays 0, one
present, not voting; and that the Senate concurred in House
amendments on April 27, 2001, by a viva-voce vote.
_______________________________
Secretary of the Senate
I hereby certify that S.B. No. 277 passed the House, with
amendments, on April 24, 2001, by a non-record vote.
_______________________________
Chief Clerk of the House
Approved:
_______________________________
Date
_______________________________
Governor