TEXAS 76TH LEGISLATURE

SENATE BILL 1740

BILL NUMBER: TX76RSB 1740 FILED: 3/12/99

AUTHOR: HARRIS

1999 Bill Text TX S.B. 1740

VERSION: Introduced

VERSION-DATE: March 12, 1999

SYNOPSIS:

A BILL TO BE ENTITLED

AN ACT

relating to the transfer of structured settlements.

NOTICE:

[A> UPPERCASE TEXT WITHIN THESE SYMBOLS IS ADDED <A]

TEXT: BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Chapter 3, Texas Insurance Code, is amended by adding Article 3.97, to read as follows:

[A> ART. 3.97. STRUCTURED SETTLEMENT PROTECTION ACT. <A]

[A> SEC. 1. DEFINITIONS. IN THIS ARTICLE: <A]

[A> (1) "ANNUITY ISSUER" MEANS AN INSURER THAT HAS ISSUED AN INSURANCE CONTRACT USED TO FUND PERIODIC PAYMENTS UNDER A STRUCTURED SETTLEMENT: <A]

[A> (2) "APPLICABLE LAW" MEANS: (A) THE FEDERAL LAWS OF THE UNITED STATES; (B) THE LAWS OF THIS STATE INCLUDING PRINCIPLES OF EQUITY APPLIED IN THE COURTS OF THIS STATE: AND (C) THE LAWS OF ANY OTHER JURISDICTION: <A]

[A> (I) WHICH IS THE DOMICILE OF THE PAYEE OR ANY OTHER INTERESTED PARTY; OR <A]

[A> (II) UNDER WHOSE LAWS A STRUCTURED SETTLEMENT AGREEMENT WAS APPROVED BY A COURT OR RESPONSIBLE ADMINISTRATIVE AUTHORITY: <A]

[A> (3) "DEPENDENTS" INCLUDE A PAYEE'S SPOUSE AND MINOR CHILDREN AND ALL OTHER FAMILY MEMBERS AND OTHER PERSONS FOR WHOM THE PAYEE IS LEGALLY OBLIGATED TO PROVIDE SUPPORT, INCLUDING ALIMONY: <A]

[A> (4) "DISCOUNTED PRESENT VALUE" MEANS THE FAIR PRESENT VALUE OF FUTURE PAYMENTS, AS DETERMINED BY DISCONTINUE SUCH PAYMENTS TO THE PRESENT USING THE MOST RECENTLY PUBLISHED APPLICABLE FEDERAL RATE FOR DETERMINING THE PRESENT VALUE OF AN ANNUITY, AS ISSUED BY THE UNITED STATES INTERNAL REVENUE SERVICE; <A]

[A> (5) "FAVORABLE TAX DETERMINATION" MEANS, WITH RESPECT TO A PROPOSED TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS, ANY OF THE FOLLOWING AUTHORITIES THAT DEFINITIVELY ESTABLISHES THAT THE FEDERAL INCOME TAX TREATMENT OF THE STRUCTURED SETTLEMENT FOR THE PARTIES TO THE STRUCTURED SETTLEMENT AGREEMENT AND ANY QUALIFIED ASSIGNMENT AGREEMENT, OTHER THAN THE PAYEE, WILL NOT BE AFFECTED BY SUCH TRANSFER: (A) A PROVISION OF THE UNITED STATES INTERNAL REVENUE CODE, UNITED STATES CODE TITLE 26, AS AMENDED FROM TIME TO TIME, OR A UNITED STATES TREASURY REGULATION ADOPTED PURSUANT THERETO: (B) A REVENUE RULING OR REVENUE PROCEDURE ISSUED BY THE UNITED STATES INTERNAL REVENUE SERVICE; OR (C) A PRIVATE LETTER RULING BY THE UNITED STATES INTERNAL REVENUE SERVICE WITH RESPECT TO SUCH TRANSFER; OR (D) A DECISION OF THE UNITED STATES SUPREME COURT OR A DECISION OF A LOWER FEDERAL COURT IN WHICH THE UNITED STATES INTERNAL REVENUE SERVICE HAS ACQUIESCED <A]

[A> (6) "INDEPENDENT PROFESSIONAL ADVICE" MEANS ADVICE OF AN ATTORNEY, CERTIFIED PUBLIC ACCOUNTANT, ACTUARY OR OTHER LICENSED PROFESSIONAL ADVISER: (A) WHO IS ENGAGED BY A PAYEE TO RENDER ADVICE CONCERNING THE LEGAL, TAX AND FINANCIAL IMPLICATIONS OF A TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS; (B) WHO IS NOT IN ANY MANNER AFFILIATED WITH OR COMPENSATED BY THE TRANSFEREE OF SUCH TRANSFER; AND (C) WHOSE COMPENSATION FOR RENDERING SUCH ADVICE IS NOT AFFECTED BY WHETHER A TRANSFER OCCURS OR DOES NOT OCCUR: <A]

[A> (7) "INTERESTED PARTIES" MEANS, WITH RESPECT TO ANY STRUCTURED SETTLEMENT, 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 PARTY THAT HAS CONTINUING RIGHTS OR OBLIGATIONS UNDER SUCH STRUCTURED SETTLEMENT; <A]

[A> (8) "PAYEE" MEANS AN INDIVIDUAL WHO IS RECEIVING TAX FREE PAYMENTS UNDER A STRUCTURED SETTLEMENT AND PROPOSES TO MAKE A TRANSFER OF PAYMENT RIGHTS THEREUNDER: <A]

[A> (9) "PERIODIC PAYMENTS" INCLUDE SCHEDULED FUTURE LUMP SUM PAYMENTS; <A]

[A> (10) "QUALIFIED ASSIGNMENT AGREEMENT" MEANS AN AGREEMENT PROVIDING FOR A QUALIFIED ASSIGNMENT WITHIN THE MEANING OF SECTION 130 OF THE UNITED STATES INTERNAL REVENUE CODE. UNITED STATES CODE TITLE 26, AS AMENDED FROM TIME TO TIME; <A]

[A> (11) "RESPONSIBLE ADMINISTRATIVE AUTHORITY" MEANS, WITH RESPECT TO A STRUCTURED SETTLEMENT, ANY GOVERNMENT AUTHORITY VESTED BY LAW WITH EXCLUSIVE JURISDICTION OVER THE SETTLED CLAIM RESOLVED BY SUCH STRUCTURED SETTLEMENT: <A]

[A> (12) "SETTLED CLAIM" MEANS THE ORIGINAL TORT CLAIM OR WORKERS' COMPENSATION CLAIM RESOLVED BY A STRUCTURED SETTLEMENT: <A]

[A> (13) "STRUCTURED SETTLEMENT" MEANS AN ARRANGEMENT FOR PERIODIC PAYMENT OF DAMAGES FOR PERSONAL INJURIES ESTABLISHED BY SETTLEMENT OR JUDGMENT IN RESOLUTION OF A TORT CLAIM OR FOR PERIODIC PAYMENTS IN SETTLEMENT OF A WORKERS' COMPENSATION CLAIM: <A]

[A> (14) "STRUCTURED SETTLEMENT AGREEMENT" MEANS THE AGREEMENT, JUDGMENT. STIMULATION, OR RELEASE EMBODYING THE TERMS OF A STRUCTURED SETTLEMENT: <A]

[A> (15) "STRUCTURED SETTLEMENT OBLIGOR" MEANS, WITH RESPECT TO ANY STRUCTURED SETTLEMENT, THE PARTY THAT HAS THE CONTINUING OBLIGATION TO MAKE PERIODIC PAYMENTS TO THE PAYEE UNDER A STRUCTURED SETTLEMENT AGREEMENT OR A QUALIFIED ASSIGNMENT AGREEMENT; <A]

[A> (16) "STRUCTURED SETTLEMENT PAYMENT RIGHTS" MEANS RIGHTS TO RECEIVE PERIODIC PAYMENTS UNDER A STRUCTURED SETTLEMENT, WHETHER FROM THE STRUCTURED SETTLEMENT OBLIGOR OR THE ANNUITY ISSUER, WHERE: (A) THE PAYEE OR THE STRUCTURED SETTLEMENT OBLIGOR OR THE ANNUITY ISSUER OR ANY OTHER PARTY TO THE STRUCTURED SETTLEMENT AGREEMENT OR ANY OTHER INTERESTED PARTY IS DOMICILED IN THIS STATE; OR (B) THE STRUCTURED SETTLEMENT AGREEMENT WAS APPROVED BY A COURT OR RESPONSIBLE ADMINISTRATIVE AUTHORITY IN THIS STATE: <A]

[A> (17) "TERMS OF THE STRUCTURED SETTLEMENT" INCLUDE, WITH RESPECT TO ANY STRUCTURED SETTLEMENT, THE TERMS OF THE STRUCTURED SETTLEMENT AGREEMENT, THE ANNUITY CONTRACT, ANY QUALIFIED ASSIGNMENT AGREEMENT AND ANY ORDER OR APPROVAL OF ANY COURT OR RESPONSIBLE ADMINISTRATIVE AUTHORITY OR OTHER GOVERNMENT AUTHORITY AUTHORIZING OR APPROVING SUCH STRUCTURED SETTLEMENT; <A]

[A> (18) "TRANSFER" MEANS ANY SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, OR OTHER FORM OF ALIENATION OR ENCUMBRANCE MADE BY A PAYEE FOR CONSIDERATION; <A]

[A> (19) "TRANSFEREE" MEANS A PARTY ACQUIRING OR PROPOSING TO ACQUIRE STRUCTURED SETTLEMENT PAYMENT RIGHTS THROUGH A TRANSFER OF SUCH RIGHTS; AND <A]

[A> (20) "TRANSFER AGREEMENT" MEANS THE AGREEMENT PROVIDING FOR TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS FROM A PAYEE TO A TRANSFEREE. <A]

[A> SEC. 2. CONDITIONS TO TRANSFERS OF STRUCTURED SETTLEMENT PAYMENT RIGHTS. NO DIRECT OR INDIRECT TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS SHALL BE EFFECTIVE AND NO STRUCTURED SETTLEMENT OBLIGOR OR ANNUITY ISSUER SHALL BE REQUIRED TO MAKE ANY PAYMENT DIRECTLY OR INDIRECTLY TO ANY TRANSFEREE OF STRUCTURED SETTLEMENT PAYMENT RIGHTS UNLESS THE TRANSFER HAS BEEN AUTHORIZED IN ADVANCE IN A FINAL ORDER OF A COURT OF COMPETENT JURISDICTION OR A RESPONSIBLE ADMINISTRATIVE AUTHORITY, BASED ON EXPRESS FINDINGS BY SUCH COURT OR RESPONSIBLE ADMINISTRATIVE AUTHORITY THAT: <A]

[A> (1) THE TRANSFER COMPLIES WITH THE REQUIREMENTS OF THIS ARTICLE AND WILL NOT CONTRAVENE OTHER APPLICABLE LAW: <A]

[A> (2) NOT LESS THAN TEN (10) DAYS PRIOR TO THE DATE ON WHICH THE PAYEE FIRST INCURRED ANY OBLIGATION WITH RESPECT TO THE TRANSFER, THE TRANSFEREE HAS PROVIDED TO THE PAYEE A DISCLOSURE STATEMENT IN BOLD TYPE, NO SMALLER THAN 14 POINTS, SETTING FORTH: (A) THE AMOUNTS AND DUE DATES OF THE STRUCTURED SETTLEMENT PAYMENTS TO BE TRANSFERRED; (B) THE AGGREGATE AMOUNT OF SUCH PAYMENTS; (C) THE DISCOUNTED PRESENT VALUE OF SUCH PAYMENTS, TOGETHER WITH THE DISCOUNT RATE USED IN DETERMINING SUCH DISCOUNTED PRESENT VALUE; (D) THE GROSS AMOUNT PAYABLE TO THE PAYEE IN EXCHANGE FOR SUCH PAYMENTS; (E) AN ITEMIZED LISTING OF ALL COMMISSIONS, FEES, COSTS, EXPENSES AND CHARGES PAYABLE BY THE PAYEE OR DEDUCTIBLE FROM THE GROSS AMOUNT OTHERWISE PAYABLE TO THE PAYEE; (F) THE NET AMOUNT PAYABLE TO THE PAYEE AFTER DEDUCTION OF ALL COMMISSIONS, FEES, COSTS, EXPENSES AND CHARGES; (G) THE QUOTIENT (EXPRESSED AS A PERCENTAGE) OBTAINED BY DIVIDING THE NET PAYMENT AMOUNT BY THE DISCOUNTED PRESENT VALUE OF THE PAYMENTS; AND (H) THE AMOUNT OF ANY PENALTY AND THE AGGREGATE AMOUNT OF ANY LIQUIDATED DAMAGES (INCLUSIVE OF PENALTIES) PAYABLE BY THE PAYEE IN THE EVENT OF ANY BREACH OF THE TRANSFER AGREEMENT BY THE PAYEE; <A]

[A> (3) THE EXTRAORDINARY, UNANTICIPATED AND IMMINENT MEANS OF THE PAYEE OR HIS OR HER DEPENDENTS RENDER THE TRANSFER APPROPRIATE: <A]

[A> (4) THE PAYEE HAS RECEIVED INDEPENDENT PROFESSIONAL ADVICE REGARDING THE LEGAL, TAX AND FINANCIAL IMPLICATIONS OF THE TRANSFER; <A]

[A> (5) IF THE TRANSFER WOULD CONTRAVENE THE TERMS OF THE STRUCTURED SETTLEMENT: (A) THE TRANSFER HAS BEEN EXPRESSLY APPROVED IN WRITING BY: <A]

[A> (I) EACH INTERESTED PARTY, PROVIDED, HOWEVER, THAT IF, AT THE TIME THE PAYEE AND THE TRANSFEREE ENTERED INTO THE TRANSFER AGREEMENT, A FAVORABLE TAX DETERMINATION WAS IN EFFECT, THEN THE APPROVAL OF THE ANNUITY ISSUER AND THE STRUCTURED SETTLEMENT OBLIGOR SHALL NOT BE REQUIRED IF ALL OTHER INTERESTED PARTIES APPROVE THE TRANSFER AND WAIVE ANY AND ALL RIGHTS TO REQUIRE THAT THE TRANSFERRED PAYMENTS BE MADE TO THE PAYEE IN ACCORDANCE WITH THE TERMS OF THE STRUCTURED SETTLEMENT: AND <A]

[A> (II) A COURT OR GOVERNMENT AUTHORITY, OTHER THAN, THE COURT OR RESPONSIBLE ADMINISTRATIVE AUTHORITY FROM WHICH AUTHORIZATION OF THE TRANSFER IS SOUGHT UNDER THIS ARTICLE, WHICH PREVIOUSLY APPROVED THE STRUCTURED SETTLEMENT; AND (B) SIGNED ORIGINALS OF ALL APPROVALS HAVE BEEN FILED WITH THE COURT OR RESPONSIBLE ADMINISTRATIVE AUTHORITY FROM WHICH AUTHORIZATION OF THE TRANSFER IS SOUGHT, AND ORIGINALS OR COPIES HAVE BEEN FURNISHED TO ALL INTERESTED PARTIES; AND <A]

[A> (6) THE TRANSFEREE HAS GIVEN WRITTEN NOTICE OF THE TRANSFEREE'S NAME, ADDRESS AND TAXPAYER IDENTIFICATION NUMBER TO THE ANNUITY ISSUER AND THE STRUCTURED SETTLEMENT OBLIGOR AND HAS FILED A COPY OF SUCH NOTICE WITH THE COURT OR RESPONSIBLE ADMINISTRATIVE AUTHORITY. <A]

[A> SEC. 3. APPROVAL OF TRANSFERS. (A) AN APPLICATION FOR AUTHORIZATION OF A TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS SHALL BE MADE BY THE TRANSFEREE AND MAY BE BROUGHT IN THE APPROPRIATE STATE COURT OF ORIGINAL JURISDICTION IN THE COUNTY IN WHICH THE PAYEE OR THE STRUCTURED SETTLEMENT OBLIGOR OR THE ANNUITY ISSUER OR ANY OTHER PARTY TO THE STRUCTURED SETTLEMENT AGREEMENT OR ANY OTHER INTERESTED PARTY RESIDES OR IN A COURT OR BEFORE A RESPONSIBLE ADMINISTRATIVE AUTHORITY WHICH APPROVED THE STRUCTURED SETTLEMENT AGREEMENT. <A]

[A> (B) NOT LESS THAN TWENTY (20) DAYS PRIOR TO THE SCHEDULED HEARING ON AN APPLICATION FOR AUTHORIZATION OF A TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS. THE TRANSFEREE SHALL FILE WITH THE COURT OR RESPONSIBLE ADMINISTRATIVE AUTHORITY AND SERVE ON ANY OTHER GOVERNMENT AUTHORITY WHICH PREVIOUSLY APPROVED THE STRUCTURED SETTLEMENT, ON ALL INTERESTED PARTIES, A NOTICE OF THE PROPOSED TRANSFER AND THE APPLICATION FOR ITS AUTHORIZATION, INCLUDING IN SUCH NOTICE: <A]

[A> (1) THE TRANSFEREE'S APPLICATION; <A]

[A> (2) A COPY OF THE TRANSFER AGREEMENT; <A]

[A> (3) A COPY OF THE DISCLOSURE STATEMENT; <A]

[A> (4) NOTIFICATION 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; AND <A]

[A> (5) NOTIFICATION OF THE TIME AND PLACE OF THE HEARING AND NOTIFICATION OF THE MANNER IN WHICH AND THE TIME BY WHICH WRITTEN RESPONSES TO THE APPLICATION MUST BE FILED (WHICH SHALL BE NOT LESS THAN FIFTEEN (15) DAYS AFTER SERVICE OF THE TRANSFEREE'S NOTICE) TO BE CONSIDERED BY THE COURT OR RESPONSIBLE ADMINISTRATIVE AUTHORITY. <A]

[A> (C) THE INTERESTED PARTIES SHALL HAVE STANDING TO RAISE, APPEAR AND BE HEARD ON ANY MATTER RELATING TO AN APPLICATION FOR AUTHORIZATION OF A TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS. <A]

[A> SEC. 4. NO WAIVER; NO PENALTIES. (A) THE PROVISIONS OF THIS ARTICLE MAY NOT BE WAIVED. <A]

[A> (B) NO PAYEE WHO PROPOSES TO MAKE A TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS SHALL INCUR ANY PENALTY, FORFEIT ANY APPLICATION FEE OR OTHER PAYMENT, OR OTHERWISE INCUR ANY LIABILITY TO THE PROPOSED TRANSFEREE BASED ON ANY FAILURE OF SUCH TRANSFER TO SATISFY THE CONDITIONS OF THIS ARTICLE. <A]

[A> SEC. 5. CONSTRUCTION. NOTHING CONTAINED IN THIS ARTICLE SHALL BE CONSTRUED TO AUTHORIZE ANY TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS IN CONTRAVENTION OF APPLICABLE LAW OR TO GIVE EFFECT TO ANY TRANSFER OF STRUCTURED SETTLEMENT PAYMENT RIGHTS THAT IS INVALID UNDER APPLICABLE LAW. <A]

SECTION 2. This Act takes effect September 1, 1999. This Act shall apply to any transfer of structured settlement payment rights under a transfer agreement entered into on or after the date of enactment; provided, however, that nothing contained in this Act shall imply that any transfer under a transfer agreement reached before such date is valid.

SECTION 3. The importance of this legislation and the crowded condition of the calendars in both houses create an emergency and an imperative public necessity that the constitutional rule requiring bills to be read on three several days in each house be suspended, and this rule is hereby suspended.

SPONSOR: