SB298: Bill Text

LRB-1195/1

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1999 - 2000 LEGISLATURE

1999 Senate BILL 298

November 24, 1999 - Introduced by Senators Breske, Baumgart, Burke, Clausing and Darling, cosponsored by Representatives Hahn, Musser, Hasenohrl, Plale, M. Lehman, Ryba, Waukau, Underheim, Kreuser and Young. Referred to Committee on Judiciary and Consumer Affairs.

SB298,1,2 An Act to create chapter 787 of the statutes; relating to: structured settlement agreements.

Analysis by the Legislative Reference Bureau

Under current law, if a person is injured in a work-related incident and worker's compensation benefits are paid over an extended period of time, such as for a permanent disability, the payments may be made to the person on a monthly basis. In tort actions, such as medical malpractice or an automobile accident, if a person who is permanently injured is awarded damages, the court may require the responsible party to make periodic payments to the injured person over an extended period of time. These monthly or periodic payments are called structured settlement payments. Under current law, a person receiving structured settlement payments may sell the right to those payments to a third party in exchange for an immediate lump-sum payment.

This bill requires the approval of the court or the administrative agency that had exclusive jurisdiction over the original tort or worker's compensation claim before a transfer may be made of any structured settlement payments. The bill establishes certain conditions that the court or governmental agency must find before it may approve the transfer of structured settlement payments, including the following:

1. The person purchasing the structured settlement payments provided the injured party with a disclosure statement in large, bold print, at least ten days before the transfer of his or her rights to the periodic payments. The disclosure statement must list all of the following:

a. The amounts and due dates of the structured settlement payments to be transferred.

b. The total amount of the payments transferred.

c. The discounted present value of those payments.

d. The discount rate used to determine that discounted present value.

e. The gross amount payable to the injured party in exchange for those transferred payments.

f. A listing of all the charges, commissions and other expenses deductible from the gross amount payable.

g. The resulting net amount payable.

h. The percentage obtained by dividing the net amount payable by the discounted present value.

i. Any penalties for breaching the agreement to transfer the payments.

2. The extraordinary, unanticipated and imminent needs of the injured party or his or her dependents make the transfer of the payments appropriate.

3. The injured party has received independent professional advice regarding the legal, tax and financial implications of the transfer of the payments.

4. If the transfer would contravene the terms of the structured settlement, the transfer has been approved in writing by each interested party and by any other court or administrative agency that previously approved the structured settlement and copies of those approvals are filed with the approving court or administrative agency.

The bill also requires the person purchasing the structured settlement payments, not less than 20 days before the hearing on an application to approve the transfer of the structured settlement payments, to file a notice of the proposed transfer and application for approval with the appropriate court or administrative agency and to serve a copy of that notice on any other governmental unit that previously approved the structured settlement and on all interested parties. The notice, under the bill, must include a copy of the application for approval of the transfer, the proposed transfer agreement and the disclosure statement and a statement of the time and place of the hearing and that any interested party may submit written comments to the court or administrative agency regarding the proposed transfer.

For further information see the state and local fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB298, s. 1 Section 1. Chapter 787 of the statutes is created to read:

SB298,2,3 Chapter 787 Structured settlements

SB298,3,1 787.01 Definitions. In this chapter:

SB298,3,3 (1) "Annuity issuer" means an insurer that has issued an insurance contract used to fund periodic payments under a structured settlement.

SB298,3,5 (2) "Applicable law" means the law of the United States, the law of this state and the law of any jurisdictions other than this state:

SB298,3,6 (a) Where the payee or any other interested party is domiciled.

SB298,3,8 (b) Under which a structured settlement agreement was approved by a court or a responsible administrative authority.

SB298,3,11 (3) "Dependent" means the spouse and minor children of a payee and all other persons for whom the payee is legally obligated to provide support, maintenance or alimony.

SB298,3,16 (4) "Discounted present value" means the fair present value of future payments as determined by discounting the payments to the present time using the most recently published applicable federal rate for determining the present value of an annuity, as issued by the U.S. internal revenue service under section 7520 of the Internal Revenue Code.

SB298,3,21 (5) "Favorable tax determination" means a decision by a tax authority definitively establishing that the federal income tax treatment of a structured settlement and of any qualified assignment agreement for the interested parties to that settlement and agreement, other than the payee, will not be affected by a transfer of the structured settlement payment right.

SB298,3,24 (6) "Governmental unit" means the United States; the state; any county, city, village or town; or any political subdivision, department, division, board or agency of the United States, the state or any county, city, village or town.

SB298,4,3 (7) "Independent professional advice" means advice provided by an appropriate licensed professional adviser if the person providing the advice meets all of the following criteria:

SB298,4,5 (a) Is requested by the payee to render advice concerning the legal, tax and financial implications of a transfer of the structured settlement payment right.

SB298,4,7 (b) Is not affiliated with or compensated by the transferee of the structured settlement payment right.

SB298,4,10 (c) Receives compensation for rendering advice concerning the legal, tax and financial implications of a transfer of the structured settlement payment right that is not affected by the transfer occurring or not occurring.

SB298,4,14 (8) "Interested party" means the payee, any beneficiary designated under the annuity contract to receive payments following the payee's death, the annuity issuer, the structured settlement obligor and any other person who has continuing rights or obligations under the structured settlement.

SB298,4,15 (9) "Internal Revenue Code" has the meaning given in s. 71.01 (6).

SB298,4,17 (10) "Payee" means the individual who is receiving tax-free payments for injuries under a structured settlement.

SB298,4,18 (11) "Periodic payments" include scheduled future lump-sum payments.

SB298,4,21 (12) "Qualified assignment agreement" means an agreement providing for a qualified assignment within the meaning of section 130 of the Internal Revenue Code.

SB298,4,24 (13) "Responsible administrative authority" means any governmental unit vested by law with exclusive jurisdiction over the original tort claim or worker's compensation claim that was resolved by a structured settlement.

SB298,5,4 (14) "Structured settlement" means an arrangement for the periodic payments of damages for personal injuries that was established by a settlement or a court judgment that resolved a tort claim or for periodic payments in settlement of a worker's compensation claim.

SB298,5,6 (15) "Structured settlement agreement" means the agreement, judgment, stipulation or release that includes the terms of a structured settlement.