by John Darer CLU ChFC CSSC RSP
A Plaintiff cannot compel Defendant, or its insurer, to pay settlement proceeds into a Qualified Settlement Fund, says Florida Court
In the matter of Martinez v. Tampa Bay Academy, et al., Case No. 06-CA-007546 (Hillsborough Cir. Ct.), the Court on June 2, 2011, agreed with Tampa Bay Academy and found that the parties entered into an enforceable settlement … in cash from Tampa Bay Academy, in exchange for a full written release from Plaintiff as to all claims. The Court ruled that the settlement amount “shall be paid to Plaintiff, or the trust account of Plaintiff’s counsel, in exchange for a full written release from Plaintiff as to all claims.”
Despite the fact that the establishment of a qualified settlement fund had already been approved by the court in a settlement with a co-Defendant, the Court here stated
“… there was no agreement between Plaintiff and Tampa Bay Academy to pay the settlement amount into any [QSF], and that neither Tampa Bay Academy nor its insurer is obligated to consent to pay the settlement amount into any QSF. Therefore, the Court will not order Tampa Bay Academy or its insurer to pay the settlement into any QSF.”
An interesting aspect of this case is that Plaintiff settled with one of the co-Defendants and that co- Defendant agreed to pay those settlement proceeds into the QSF. On the other hand the Insurer for Tampa Bay Academy thought otherwise and hired the Philadelphia law firm of Drinker Biddle & Reath, LLP to argue its case.
Plaintiff argued that Tampa Bay Academy and its insurer should be required to pay the settlement proceeds into the QSF in order to satisfy Martinez’s alleged need for a “safe harbor” for settlement proceeds while Martinez and other interested parties negotiated the allocation of settlement proceeds, and while a special needs trust was established for the benefit of Martinez.
According to the write up by Drinker Biddle and Reath, LLP. the motion was opposed on the basis that
- payment into the QSF was not a term of the settlement agreed upon by Martinez and Tampa Bay Academy
- Tampa Bay Academy and its insurer could not be forced to pay into the particular QSF identified by Martinez because Tampa Bay Academy was given neither notice of the establishment of that QSF nor an opportunity to object to same
- payment into a QSF in the context of a single plaintiff case could result in adverse tax consequences to Martinez, Tampa Bay Academy, and its insurer; and Martinez’s purported reasons for wanting a QSF were unpersuasive.
Single claimant qualified settlement funds continue to be controversial among structured settlement stakeholders in recent years.
Despite the fact that the 468B statutory requirement is for “one or more claims”, some have argued that that’s not what Congres intended, or that there are issues related to structuring benefits out of a single claimant QSF due to the economic benefit rule
Clarification was sought from the United States Treasury Department in 2003 and was on the Priority Guidance plan for 6 years before being left off the 2009-2010 Guidance Plan. Nationally recognized tax expert Robert Wood has suggested avoiding single claimant QSFs until there is guidance.
A decade ago most of the qualified assignment companies for the life insurance companies issuing structured settlement annuities, freely took assignments from qualified settlement funds. Many settlement consultants advising plaintiffs would pitch the single claimant QSF route to get around a restrictive selection of annuity markets by a casualty insurer. Yet what was once a strong argument no longer is, as few companies will permit a qualified assignment out of a single claimant QSF.
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