SB-0541, As Passed Senate, March 16, 2006

SUBSTITUTE FOR

SENATE BILL NO. 541

     A bill to regulate the transfer of structured settlement

rights; to place conditions on the transfer of structured

settlement rights; to establish a procedure for approval of

transfer of structured settlement rights; and to repeal acts and

parts of acts.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 1. This act shall be known and may be cited as the

"revised structured settlement protection act".

     Sec. 2. As used in this act:

     (a) "Annuity issuer" means an insurer that has issued a

contract to fund periodic payments under a structured settlement.

     (b) "Dependent" means a payee's spouse, minor child, or any

other person for whom the payee is legally obligated to provide

support, including alimony.

     (c) "Discounted present value" means the present value of

future payments determined by discounting the payments to the

present using the most recently published applicable federal rate

for determining the present value of an annuity, as issued by the

internal revenue service.

     (d) "Gross advance amount" means the sum payable to the payee

or for the payee's account as consideration for a transfer of

structured settlement payment rights before reduction in that sum

for transfer expenses or other deductions.

     (e) "Imminent financial hardship" means the inability of the

payee, because of a change in the payee's circumstances after the

execution of the initial structured settlement agreement, to

purchase or pay for 1 or more of the following without the

transfer:

     (i) Medical care or a medical device for the payee or the

payee's dependents.

     (ii) Living quarters for the payee.

     (iii) A motor vehicle necessary for the payee's transportation

if the payee has no other suitable transportation options.

     (iv) Education or job training expenses.

     (v) Debts of the payee resulting from child support, alimony,

a tax lien, funeral expenses, or a judgment.

     (f) "Independent professional advice" means advice of an

attorney, certified public accountant, actuary, or other licensed

professional adviser.

     (g) "Interested party" means, with respect to a structured

settlement, the payee, a beneficiary irrevocably designated under

an annuity contract to receive payments following the payee's

death, an annuity issuer, a structured settlement obligor, or any

other person that has continuing rights or obligations under the

structured settlement.

     (h) "Net advance amount" means the gross advance amount less

the aggregate amount of the actual and estimated transfer expenses

required to be disclosed under section 3(e).

     (i) "Payee" means an individual who receives tax free payments

under a structured settlement and who proposes to make a transfer

of payment rights under the structured settlement.

     (j) "Periodic payments" means both recurring payments and

scheduled future lump sum payments.

     (k) "Qualified assignment agreement" means an agreement

providing for a qualified assignment as defined in section 130 of

the internal revenue code, 26 USC 130.

     (l) "Responsible administrative authority" means, with respect

to a structured settlement, a government authority vested by law

with exclusive jurisdiction over the settled claim resolved by the

structured settlement.

     (m) "Settled claim" means the original tort claim resolved by

a structured settlement.

     (n) "Structured settlement" means an arrangement for periodic

payment of damages for personal injuries or sickness established by

settlement or judgment to resolve a tort claim. Structured

settlement does not include an arrangement for periodic payments to

settle a worker's compensation claim.

     (o) "Structured settlement agreement" means an agreement,

judgment, stipulation, or release embodying the terms of a

structured settlement.

     (p) "Structured settlement obligor" means, with respect to a

structured settlement, a person that has a continuing obligation to

make periodic payments to a payee under the structured settlement

agreement or a qualified assignment agreement.

     (q) "Structured settlement payment rights" means rights to

receive periodic payments under a structured settlement, whether

from the structured settlement obligor or the annuity issuer, if 1

or more of the following conditions exist:

     (i) The payee is domiciled in, or the domicile or principal

place of business of the structured settlement obligor or the

annuity issuer is located in, this state.

     (ii) The structured settlement agreement was approved by a

court or responsible administrative authority in this state.

     (iii) The structured settlement agreement is expressly governed

by the laws of this state.

     (r) "Terms of the structured settlement" means, with respect

to a structured settlement, the terms of the structured settlement

agreement, an annuity contract, a qualified assignment agreement,

or an order or other approval of a court or responsible

administrative authority that authorized or approved the structured

settlement.

     (s) "Transfer" means a sale, assignment, pledge,

hypothecation, or other alienation or encumbrance of structured

settlement payment rights a payee makes for consideration; except

that "transfer" does not include the creation or perfection of a

security interest in structured settlement payment rights under a

blanket security agreement entered into with an insured depository

institution, unless action has been taken to redirect the

structured settlement payments to the insured depository

institution or to an agent or successor in interest of the

depository institution, or action has been taken to otherwise

enforce the blanket security interest against the structured

settlement payment rights.

     (t) "Transfer agreement" means an agreement providing for a

transfer of structured settlement payment rights.

     (u) "Transfer expenses" means all expenses of a transfer that

the transfer agreement requires the payee to pay or have deducted

from the gross advance amount, including, but not limited to, court

filing fees, attorney fees, escrow fees, lien recordation fees,

judgment and lien search fees, finders' fees, commissions, and

other payments to a broker or other intermediary. Transfer expenses

do not include preexisting obligations of the payee that are

payable for the payee's account from the proceeds of a transfer.

     (v) "Transferee" means a person acquiring or proposing to

acquire structured settlement payment rights through a transfer.

     Sec. 3. Not less than 3 days before the date on which a payee

signs a transfer agreement, the transferee shall provide to the

payee a separate disclosure statement in bold type no smaller than

14 points setting forth all of the following:

     (a) The amounts and due dates of the structured settlement

payments to be transferred.

     (b) The aggregate amount of the payments.

     (c) The discounted present value of the payments to be

transferred, which shall be identified as the calculation of

current value of the transferred structured settlement payments

under federal standards for valuing annuities, and the amount of

the applicable federal rate used in calculating the discounted

present value.

     (d) The gross advance amount.

     (e) An itemized listing of all applicable transfer expenses,

other than attorney fees and related disbursements payable in

connection with the transferee's application for approval of the

transfer, and the transferee's best estimate of the amount of the

fees and disbursements.

     (f) The net advance amount.

     (g) The amount of penalties or liquidated damages payable by

the payee if the payee breaches the transfer agreement.

     (h) A statement that the payee has the right to cancel the

transfer agreement without penalty or further obligation not later

than the third business day after the date that the payee signs the

agreement.

     Sec. 4. A direct or indirect transfer of structured settlement

payment rights is not effective and a structured settlement obligor

or annuity issuer is not required to make a payment directly or

indirectly to a transferee of structured settlement payment rights

unless the transfer has been approved in a final court order or

order of a responsible administrative authority and the order is

based on express findings of all of the following:

     (a) The transfer is in the best interest of the payee, taking

into account the welfare and support of the payee's dependents.

     (b) The transferee has advised the payee, in writing, to seek

independent professional advice regarding the transfer, and the

payee has either received independent professional advice or

knowingly waived in writing the opportunity to seek advice.

     (c) The transfer does not contravene an applicable statute or

order of the court or other government authority.

     (d) The discount rate or rates used in determining the

discounted present value of the structured settlement payments to

be transferred do not exceed 25% per year.

     (e) If the transfer is inconsistent with a restriction against

assignment in the structured settlement agreement and if the

structured settlement obligor objects to the transfer based on the

restriction against assignment before the hearing on the

application for approval of the transfer, all of the following:

     (i) The payee will suffer imminent financial hardship if the

transfer is not approved.

     (ii) The transfer will not render the payee unable to pay

current or future normal living expenses.

     (iii) The transfer order will restrict payment of the gross

advance amount to direct payment to the provider of the goods or

services that are the subject of the imminent financial hardship.

If the total cost of the goods or services cannot be readily

determined at the time of or within a reasonable time after the

transfer, the court may exercise reasonable discretion in ordering

such direct payments.

     Sec. 5. A transfer of structured settlement payment rights

under this act has all of the following effects:

     (a) The structured settlement obligor and the annuity issuer

are discharged and released from all liability for the transferred

payments as to any person except the transferee.

     (b) The transferee is liable to the structured settlement

obligor and the annuity issuer for both of the following:

     (i) If the transfer contravenes the terms of the structured

settlement, the taxes incurred by the structured settlement obligor

and the annuity issuer as a consequence of the transfer.

     (ii) Other liabilities or costs, including reasonable costs and

attorney fees, arising from the structured settlement obligor's and

the annuity issuer's compliance with the order of the court or

responsible administrative authority or from the transferee's

failure to comply with this act.

     (c) An annuity issuer or a structured settlement obligor is

not required to divide a periodic payment between the payee and a

transferee or assignee or between 2 or more transferees or

assignees.

     (d) A payee may make a further transfer of structured

settlement payment rights only after complying with all of the

requirements of this act.

     Sec. 6. (1) The transferee may apply for approval of a

transfer of structured settlement payment rights with the court or

responsible administrative authority in the county in which the

payee resides, in the county in which the structured settlement

obligor or the annuity issuer maintains its principal place of

business, or with the court or responsible administrative authority

that approved the structured settlement agreement.

     (2) Not less than 20 days before the scheduled hearing on an

application for approval of a transfer of structured settlement

payment rights under section 4, the transferee shall file with the

court or responsible administrative authority and serve on all

interested parties a notice of the proposed transfer and the

application for its authorization, and shall include with the

notice all of the following:

     (a) A copy of the transferee's application.

     (b) A copy of the transfer agreement.

     (c) A copy of the disclosure statement required under section

3.

     (d) A listing of each of the payee's dependents and each

dependent's age.

     (e) Notice that any interested party is entitled to support,

oppose, or otherwise respond to the transferee's application,

either in person or by counsel, by submitting written comments to

the court or responsible administrative authority or by

participating in the hearing.

     (f) Notice of the time and place of the hearing and of the

manner in which and the time by which written responses to the

application must be filed to be considered by the court or

responsible administrative authority. The time for filing written

responses shall be not less than 15 days after service of the

transferee's notice.

     Sec. 7. (1) A payee shall not waive a provision of this act.

     (2) A transfer agreement entered into on or after the

effective date of this act by a payee who resides in this state

shall provide that disputes under the transfer agreement, including

a claim that the payee has breached the agreement, shall be

determined in and under the laws of this state. A transfer

agreement shall not authorize the transferee or any other person to

confess judgment or consent to entry of judgment against the payee.

     (3) A transfer of structured settlement payment rights that

are life-contingent is not effective unless, before the date on

which the payee signs the transfer agreement, the transferee has

established and has agreed to maintain procedures reasonably

satisfactory to the annuity issuer and the structured settlement

obligor for both of the following:

     (a) Periodically confirming the payee's survival.

     (b) Giving the annuity issuer and the structured settlement

obligor prompt written notice in the event of the payee's death.

     (4) A payee who proposes to make a transfer of structured

settlement payment rights shall not incur a penalty, forfeit an

application fee or other payment, or otherwise incur liability to

the proposed transferee or assignee based on the failure of the

transfer to satisfy the conditions of this act.

     (5) This act does not authorize a transfer of structured

settlement payment rights in contravention of law or validate or

invalidate a transfer under a transfer agreement entered into

before the effective date of this act.

     (6) The transferee has sole responsibility for complying with

the requirements in section 3 and fulfilling the conditions in

section 4 in a transfer of structured settlement payment rights. A

structured settlement obligor or annuity issuer shall not bear any

responsibility or liability arising from a transferee's failure to

comply with those requirements or to fulfill those conditions.

     Sec. 8. This act applies to a transfer of structured

settlement payment rights under any transfer agreement entered into

on or after the thirtieth day after the effective date of this act.

     Enacting section 1. The structured settlement protection act,

2000 PA 330, MCL 691.1191 to 691.1197, is repealed effective 30

days after the effective date of this act.