 Q. Why are settlements “structured”?
A. Settlements are “structured” for any one of a variety of reasons. Claims for catastrophic and debilitating injuries can be settled with a promise of payments over time so as to cover the anticipated costs of ongoing medical care or treatment. If the injured party is not yet an adult, settlements are usually structured so that payments can be paid out like an allowance, over time. In some instances, settlements are “structured” simply to make relatively small settlements look bigger. Thus, a promise of $333 per month ($4,000 per year) for 25 years might have been structured just so that it could be called a “$100,000 settlement.”
Q. Are structured payouts used only in “big” cases?
A. Absolutely not. They are now used in both “big” cases and in small ones. Indeed, the insurance industry markets annuities and structured payouts as a means of settling cases for as little as $5,000.
Q. Who is responsible for making the ongoing settlement payments?
A. When a “structured” settlement is agreed to, the injured party (the “plaintiff”) and the party sued (the “defendant”) enter into a contract with a settlement payment provider ‚ a special kind of company that is usually an affiliate of a life insurer. The injured party agrees to accept payments over time from the settlement payment provider and the settlement payment provider agrees to make payments to the injured party in accordance with the agreed schedule. The settlement payment provider gets a single lump-sum payment from the original defendant (or its liability insurer).The settlement payment provider then pre-funds its payment obligations by buying an annuity from a life insurance company. Thus, the party responsible for making the ongoing payments is generally an affiliate of a life insurance company that has purchased an annuity to fund its payment obligations to the injured party. |
|
