Q. What is a "structured" settlement? A. When a personal injury lawsuit is settled with a promise of payments scheduled over a course of years, there has been a "structured" settlement. Q. Why are settlements "strucrured"? 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. 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. 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. Does Ovation only deal with "million dollar" settlements? A. No. Ovation will fund transactions as small as $10,000 and as large as $1.5 million, but our "average" transaction is about $35,000. Q. Why do people sell their rights to remaining payments? A. Generally, the people who choose to sell some (or all) of their settlement payment rights do so because their life circumstances have changed since their payment schedule was first established. Consider the example of a twelve year old child awarded $333/month for 25 years in compensation for a dog bite. Twelve years later, that same individual (by then twenty-four years old and fully recovered) might prefer to receive a lump sum that could be used for education or for a down-payment on a home. Or, consider the example of the 70 year old man disabled in a serious car accident. Assume his resulting personal injury claim is settled for $30,000 a year for the remainder of his (the accident victim's life), with a 20 year guaranteed minimum payout. Then, assume that after four years, the accident victim passes away ‚ leaving four heirs to split an annual payout that serves no ongoing purpose other than to remind them of their loss. Under the circumstances, the heirs will want to consider a sale of the remaining payments. Similarly, take the example of the 35 year old woman with a settlement that includes a promised $100,000 payment that is not due for another ten years. If she elects to take time away from work to start a family, she would likely choose to sell the rights to that payment rather than waiting until she is 45 years old. Simply stated, there are as many different reasons for selling rights to payments as there are people with life circumstances that change with the passage of time. Q. Why do I need a judge's permission to sell remaining payments? A. A recently enacted federal law imposes a heavy tax on anyone who buys a settlement payout without a court's advance approval. Around the country, state laws now require court approval as well. Generally, before anyone can sell (or transfer) the settlement payment rights, a court must find that the transaction is in the consumer's "best interests." Q. How long does the process take? A. The process can take anywhere from four weeks to four months, depending on the jurisdiction. Initial underwriting and contract processing can be completed quickly. The key factor is the courts' calendar. In some jurisdictions, these transactions can be processed very quickly. In other jurisdictions, it can take longer. Ovation will work with the seller to make the process as efficient and uncomplicated as possible. Q. Can I sell some (rather than all) of my remaining payments? A. Typically, Ovation purchases only a portion of the remaining payments so as help a seller meet a defined near-term financial need. Whether the seller is seeking to raise ten thousand dollars or one million, Ovation can structure a transaction tailored to the individual seller's needs. Q. How does the law in my state work? A. Every state's law is slightly different learn more and we'll tell you more. If you wish, we'll even send you (or your lawyer) a copy of the applicable law in your state and a copy of our standard form agreement for review.

 

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