1-1     By:  Harris                                            S.B. No. 277
 1-2           (In the Senate - Filed January 18, 2001; January 22, 2001,
 1-3     read first time and referred to Committee on Jurisprudence;
 1-4     March 28, 2001, reported adversely, with favorable Committee
 1-5     Substitute by the following vote:  Yeas 7, Nays 0; March 28, 2001,
 1-6     sent to printer.)
 1-7     COMMITTEE SUBSTITUTE FOR S.B. No. 277                   By:  Duncan
 1-8                            A BILL TO BE ENTITLED
 1-9                                   AN ACT
1-10     relating to the transfer, sale, or assignment of structured
1-11     settlements.
1-12           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13           SECTION 1.  Title 6, Civil Practice and Remedies Code, is
1-14     amended by adding Chapter 141 to read as follows:
1-15             CHAPTER 141.  STRUCTURED SETTLEMENT PROTECTION ACT
1-16           Sec. 141.001.  SHORT TITLE.  This chapter may be cited as the
1-17     Structured Settlement Protection Act.
1-18           Sec. 141.002.  DEFINITIONS.  In this chapter:
1-19                 (1)  "Annuity issuer" means an insurer that has issued
1-20     a contract to fund periodic payments under a structured settlement.
1-21                 (2)  "Court" means the court of original jurisdiction
1-22     that authorized or approved a structured settlement.
1-23                 (3)  "Dependents" includes a payee's spouse, minor
1-24     children, and all other persons for whom the payee is legally
1-25     obligated to provide support, including alimony.
1-26                 (4)  "Discounted present value" means the present value
1-27     of future payments determined by discounting the payments to the
1-28     present using the most recently published Applicable Federal Rate
1-29     for determining the present value of an annuity, as issued by the
1-30     United States Internal Revenue Service.
1-31                 (5)  "Gross advance amount" means the sum payable to
1-32     the payee or for the payee's account as consideration for a
1-33     transfer of structured settlement payment rights before any
1-34     reductions for transfer expenses or other deductions to be made
1-35     from the consideration.
1-36                 (6)  "Independent professional advice" means advice of
1-37     an attorney, certified public accountant, actuary, or other
1-38     licensed professional adviser.
1-39                 (7)  "Interested party" means, with respect to any
1-40     structured settlement:
1-41                       (A)  the payee;
1-42                       (B)  any beneficiary irrevocably designated under
1-43     the annuity contract to receive payments following the payee's
1-44     death;
1-45                       (C)  the annuity issuer;
1-46                       (D)  the structured settlement obligor; and
1-47                       (E)  any other party that has continuing rights
1-48     or obligations under the structured settlement.
1-49                 (8)  "Net advance amount" means the gross advance
1-50     amount less the aggregate amount of the actual and estimated
1-51     transfer expenses required to be disclosed under Section
1-52     141.003(5).
1-53                 (9)  "Payee" means an individual who is receiving
1-54     tax-free payments under a structured settlement and proposes to
1-55     transfer payment rights under the structured settlement.
1-56                 (10)  "Periodic payments" includes both recurring
1-57     payments and scheduled future lump-sum payments.
1-58                 (11)  "Qualified assignment agreement" means an
1-59     agreement providing for a qualified assignment within the meaning
1-60     of Section 130, Internal Revenue Code of 1986 (26 U.S.C. Section
1-61     130), as amended.
1-62                 (12)  "Settled claim" means the original tort claim or
1-63     workers' compensation claim resolved by a structured settlement.
1-64                 (13)  "Structured settlement" means an arrangement for
 2-1     periodic payment of damages for personal injuries or sickness
 2-2     established by settlement or judgment in resolution of a tort claim
 2-3     or for periodic payments in settlement of a workers' compensation
 2-4     claim.
 2-5                 (14)  "Structured settlement agreement" means the
 2-6     agreement, judgment, stipulation, or release embodying the terms of
 2-7     a structured settlement.
 2-8                 (15)  "Structured settlement obligor" means, with
 2-9     respect to any structured settlement, the party that has the
2-10     continuing obligation to make periodic payments to the payee under
2-11     a structured settlement agreement or a qualified assignment
2-12     agreement.
2-13                 (16)  "Structured settlement payment rights" means
2-14     rights to receive periodic payments under a structured settlement,
2-15     whether from the structured settlement obligor or the annuity
2-16     issuer, if:
2-17                       (A)  the payee is domiciled in or the domicile or
2-18     principal place of business of the structured settlement obligor or
2-19     the annuity issuer is located in this state;
2-20                       (B)  the structured settlement agreement was
2-21     authorized or approved by a court located in this state; or
2-22                       (C)  the structured settlement agreement is
2-23     expressly governed by the laws of this state.
2-24                 (17)  "Terms of the structured settlement" include,
2-25     with respect to any structured settlement, the terms of the
2-26     structured settlement agreement, the annuity contract, any
2-27     qualified assignment agreement, and any order or other approval of
2-28     the court.
2-29                 (18)  "Transfer" means any sale, assignment, pledge,
2-30     hypothecation, or other alienation or encumbrance of structured
2-31     settlement payment rights made by a payee for consideration, except
2-32     that the term does not include the creation or perfection of a
2-33     security interest in structured settlement payment rights under a
2-34     blanket security agreement entered into with an insured depository
2-35     institution, in the absence of any action to redirect the
2-36     structured settlement payments to the insured depository
2-37     institution, or its agent or successor in interest, or to enforce
2-38     the blanket security interest against the structured settlement
2-39     payment rights.
2-40                 (19)  "Transfer agreement" means the agreement
2-41     providing for a transfer of structured settlement payment rights.
2-42                 (20)  "Transfer expenses" means all the expenses of a
2-43     transfer that are required under the transfer agreement to be paid
2-44     by the payee or deducted from the gross advance amount, including
2-45     court filing fees, attorney's fees, escrow fees, lien recording
2-46     fees, judgment and lien search fees, finders' fees, commissions,
2-47     and other payments to a broker or other intermediary, except that
2-48     the term does not include preexisting obligations of the payee
2-49     payable for the payee's account from the proceeds of a transfer.
2-50                 (21)  "Transferee" means a party acquiring or proposing
2-51     to acquire structured settlement payment rights through a transfer.
2-52           Sec. 141.003.  REQUIRED DISCLOSURES TO PAYEE.  At least three
2-53     days before the date on which the payee signs a transfer agreement,
2-54     the transferee shall provide to the payee a separate disclosure
2-55     statement, in bold type at least 14 points in size, that states:
2-56                 (1)  the amounts and due dates of the structured
2-57     settlement payments to be transferred;
2-58                 (2)  the aggregate amount of the payments;
2-59                 (3)  the discounted present value of the payments to be
2-60     transferred, which shall be identified as the "calculation of
2-61     current value of the transferred structured settlement payments
2-62     under federal standards for valuing annuities," and the amount of
2-63     the Applicable Federal Rate used in calculating the discounted
2-64     present value;
2-65                 (4)  the gross advance amount;
2-66                 (5)  an itemized listing of all applicable transfer
2-67     expenses, other than attorney's fees and related disbursements
2-68     payable in connection with the transferee's application for
2-69     approval of the transfer, and the transferee's best estimate of the
 3-1     amount of those expenses;
 3-2                 (6)  the net advance amount;
 3-3                 (7)  the amount of any penalties or liquidated damages
 3-4     payable by the payee in the event of any breach of the transfer
 3-5     agreement by the payee; and
 3-6                 (8)  a statement that the payee has the right to cancel
 3-7     the transfer agreement, without penalty or further obligation, not
 3-8     later than the third business day after the date the agreement is
 3-9     signed by the payee.
3-10           Sec. 141.004.  APPROVAL OF TRANSFERS OF STRUCTURED SETTLEMENT
3-11     PAYMENT RIGHTS.  No direct or indirect transfer of structured
3-12     settlement payment rights shall be effective and no structured
3-13     settlement obligor or annuity issuer shall be required to make any
3-14     payment directly or indirectly to any transferee of structured
3-15     settlement payment rights unless the transfer has been approved in
3-16     advance in a final court order based on express findings by the
3-17     court that:
3-18                 (1)  the transfer is in the best interest of the payee,
3-19     taking into account the welfare and support of the payee's
3-20     dependents;
3-21                 (2)  the payee has been advised in writing by the
3-22     transferee to seek independent professional advice regarding the
3-23     transfer and has either received the advice or knowingly waived the
3-24     advice in writing; and
3-25                 (3)  the transfer does not contravene any applicable
3-26     statute or an order of any court or other governmental authority.
3-27           Sec. 141.005.  EFFECTS OF TRANSFER OF STRUCTURED SETTLEMENT
3-28     PAYMENT RIGHTS.  Following a transfer of structured settlement
3-29     payment rights under this chapter:
3-30                 (1)  the structured settlement obligor and the annuity
3-31     issuer shall, as to all parties except the transferee, be
3-32     discharged and released from any and all liability for the
3-33     transferred payments;
3-34                 (2)  the transferee shall be liable to the structured
3-35     settlement obligor and the annuity issuer:
3-36                       (A)  if the transfer contravenes the terms of the
3-37     structured settlement, for any taxes incurred by the parties as a
3-38     consequence of the transfer; and
3-39                       (B)  for any other liabilities or costs,
3-40     including reasonable costs and attorney's fees, arising from
3-41     compliance by the parties with the order of the court or arising as
3-42     a consequence of the transferee's failure to comply with this
3-43     chapter;
3-44                 (3)  neither the  structured settlement obligor nor the
3-45     annuity issuer may be required to divide any periodic payment
3-46     between the payee and any transferee or assignee or between two or
3-47     more transferees or assignees; and
3-48                 (4)  any further transfer of structured settlement
3-49     payment rights by the payee may be made only after compliance with
3-50     all of the requirements of this chapter.
3-51           Sec. 141.006.  PROCEDURE FOR APPROVAL OF TRANSFERS.  (a)  An
3-52     application under this chapter for approval of a transfer of
3-53     structured settlement payment rights shall be made by the
3-54     transferee and shall be brought in the court.
3-55           (b)  At least 20 days before the date of the scheduled
3-56     hearing on any application for approval of a transfer of structured
3-57     settlement payment rights under Section 141.004, the transferee
3-58     shall file with the court and serve on all interested parties a
3-59     notice of the proposed transfer and the application for
3-60     authorization, including with the notice:
3-61                 (1)  a copy of the transferee's application;
3-62                 (2)  a copy of the transfer agreement;
3-63                 (3)  a copy of the disclosure statement required under
3-64     Section 141.003;
3-65                 (4)  a listing of each of the payee's dependents,
3-66     together with each dependent's age;
3-67                 (5)  notice that any interested party is entitled to
3-68     support, oppose, or otherwise respond to the transferee's
3-69     application, either in person or by counsel, by submitting written
 4-1     comments to the court or by participating in the hearing; and
 4-2                 (6)  notice of the time and place of the hearing and
 4-3     notification of the manner in which and the time by which written
 4-4     responses to the application must be filed to be considered by the
 4-5     court.
 4-6           (c)  Written responses to the application under Subsection
 4-7     (b)(6) must be filed on or after the 15th day after the date the
 4-8     transferee's notice is served.
 4-9           Sec. 141.007.  GENERAL PROVISIONS; CONSTRUCTION.  (a)  The
4-10     provisions of this chapter may not be waived by any payee.
4-11           (b)  Any transfer agreement entered into by a payee who
4-12     resides in this state must provide that disputes under the transfer
4-13     agreement, including any claim that the payee has breached the
4-14     agreement, shall be determined in and under the laws of this state.
4-15     The transfer agreement may not authorize the transferee or any
4-16     other party to confess judgment or consent to entry of judgment
4-17     against the payee.
4-18           (c)  Transfer of structured settlement payment rights may not
4-19     extend to any payments that are life-contingent unless, prior to
4-20     the date on which the payee signs the transfer agreement, the
4-21     transferee has established and agreed to maintain procedures
4-22     reasonably satisfactory to the structured settlement obligor and
4-23     the annuity issuer for:
4-24                 (1)  periodically confirming the payee's survival; and
4-25                 (2)  giving the structured settlement obligor and the
4-26     annuity issuer prompt written notice in the event of the payee's
4-27     death.
4-28           (d)  A payee who proposes to make a transfer of structured
4-29     settlement payment rights may not incur any penalty, forfeit any
4-30     application fee or other payment, or otherwise incur any liability
4-31     to the proposed transferee or any assignee based on any failure of
4-32     the transfer to satisfy the conditions of this chapter.
4-33           (e)  Nothing contained in this chapter may be construed to
4-34     authorize any transfer of structured settlement payment rights in
4-35     contravention of any law or to imply that any transfer under a
4-36     transfer agreement entered into before the effective date of this
4-37     chapter is valid or invalid.
4-38           (f)  Compliance with the requirements in Section 141.003 and
4-39     fulfillment of the conditions in Section 141.004 are solely the
4-40     responsibility of the transferee in any transfer of structured
4-41     settlement payment rights, and neither the structured settlement
4-42     obligor nor the annuity issuer bear any responsibility for, or any
4-43     liability arising from, noncompliance with the requirements or
4-44     failure to fulfill the conditions.
4-45           SECTION 2.  This Act takes effect September 1, 2001, and
4-46     applies only to a transfer of structured settlement payment rights
4-47     under a transfer agreement entered into on or after that date.
4-48                                  * * * * *