by John Darer CLU ChFC MSSC RSP CLTC
The National Stuctured Settlements Trade Association (NSSTA) made a good faith attempt to address structured settlements during 2008 Financial crisis
The NSSTA website featured a good faith Financial Security document created at the height of the 2008 financial crisis, when factoring vultures loomed overhead. This document was available for download to both the public and members of the structured settlement trade association, who are subject to the insurance laws of the various states where they hold licenses.
An Opinion Sought from New York’s Insurance Department regulator concerning External Use of Trade Association Document produced for Its Members
- As I wrote in January 2009, NSSTA members must exercise extreme caution in downloading and using in a solicitation or offering of structured settlements,the financial security handout or they may face being in hot water with state insurance departments.
- This author sought and received an opinion on this very subject in October 2008 and the State of New York Insurance Department’s opinion in response in January 2009 was: ” Insurance Law Sec 7718 broadly prohibits any person from using the existence of the LIGCNY for the purpose of sales, solicitation or inducement to purchase annuity contracts, including structured settlement annuity contracts, However, the statute has no application to 1) the LIGCNY itself; 2) any other entity that does not sell or solicit insurance; or 3) an insurer that responds directly to a policyholder upon written request and on a form prepared by the corporation and approved by the Superintendent.
- New York’s law is not unique, but its law department is highly conscientious about providing timely responses to questions from agents, brokers, insurers, and others seeking clarification on regulations, even publishing many of these inquiries for the greater good. A big thank you goes out to New York Insurance Department attorney Sapna Maloor for her response to the query and the clarification provided.
Life insurance agents and brokers clearly come within the scope of the prohibition contained in Insurance Law 7718. The fact that the statement “state insurance guaranty funds provide additional level of protection for future structured settlement recipients” is general in nature, and does not specifically reference the LIGCNY is irrelevant. When the statement is directed at New York residents, whose only coverage is from the LIGCNY if a life insurer fails its obligations, it is an implied reference to LIGCNY, and thus prohibited by Insurance Law 7718 in the absence of any statute’s express exceptions. And based on the facts presented, none of the exceptions is applicable here”
Download Opinion About Use of LIGCNY in Solicitation of Structured Settlement Annuities 1-26-2009
For those who believe that the disclaimer at the bottom of the NSSTA brochure is a source of comfort, please consider the following. The New York State Insurance Department expressed to this author that it was not even comfortable with one structured settlement industry website that contained a list of state insurance guaranty funds and their phone numbers designed to help consumers get to those who can legally answer their questions AND which included a similar disclaimer to NSSTA about not being an offer or solicitation for the purchase of insurance.
Opinion Sought to Clarify What are and are not Permissible Actions of Members of the Profession
I’m sure there are those that did not appreciate my highlighting these points, but I didn’t write the law. I am just reporting what I know for those that seem to conduct their business in blissful ignorance of the law and “the seat of their pants”.
At the time of publication I had heard and e continued to hear from lawyers that members of the settlement profession are using the existence of guaranty funds in their solicitation of structured settlement annuities (in violation of state insurance law).
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