Delaware Structured Settlement Protection Act
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:
Section 1. Amend Part IV, Title 10 of the Delaware Code by adding thereto a new
Chapter, designated as Chapter 66, which new Chapter shall read as follows:
"CHAPTER 66. STRUCTURED SETTLEMENTS
Section 6601. Conditions to transfers of structured settlement payment rights.
(a) 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
responsible administrative authority, based on express findings by such court
or responsible administrative authority that:
(1) the transfer complies with the requirements of this Chapter and will not
contravene other applicable law;
(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 small than 14
points, setting forth:
(i) the amounts and due dates of the structured settlement payments to be
transferred;
(ii) the aggregate amount of such payments;
(iii) the discounted present value of such payments, together with the discount
rate used in determining such discounted present value;
(iv) the gross amount payable to the payee in exchange for such payments;
(v) an itemized listing of all brokers' commissions, service charges,
application fees, processing fees, closing costs, filing fees, administrative
fees, legal fees, notary fees and other commissions, fees, costs, expenses and
charges payable by the payee or deductible from the gross amount otherwise
payable to the payee;
(vi) the net amount payable to the payee after deduction of all commissions,
fees, costs, expenses and charges described in subparagraph (v) of this
paragraph;
(vii) the quotient (expressed as a percentage) obtained by dividing the net
payment amount by the discounted present value of the payments; and
(viii) 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;
(3) the transfer is fair and reasonable and in the best interests of the payee
and the payee's dependents;"
(4) the payee has received independent professional advice regarding the legal,
tax and financial implications of the transfer;
(5) if the transfer would contravene the terms of the structured settlement:
(i) the transfer has been expressly approved in writing by:
a. each interested party; provided, however, that 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
b. any court or government authority, other than the court or responsible
administrative authority from which authorization of the transfer is sought
under this Chapter, which previously approved the structured settlement; and
(ii) signed originals of all approvals required under subparagraph (I) of this
paragraph have been filed with the court or responsible administrative
authority from which authorization of the transfer is sought under this
Chapter, and originals or copies have been furnished to all interested parties;
and
(5) 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.
Section 6602. Definitions
The following words, terms and phrases, when used in this Chapter, shall have
the meanings ascribed to them, except where the context clearly indicates a
different meaning:
(a) "Annuity issuer" shall mean an insurer that has issued an insurance
contract used to fund periodic payments under a structured settlement;
(b) "Applicable law" shall mean:
(i) the federal laws of the United States;
(ii)the laws of this State, including principles of equity applied in the
courts of this State; and
(iii) the laws of any other jurisdiction:
a. which is the domicile of the payee or any other interested party;
b. under whose laws a structured settlement agreement was approved by a court;
or
c. in whose courts a settled claim was pending when the parties entered into a
structured settlement agreement;
(c) "Dependents" shall 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;
(d) "Discounted present value" shall mean the fair present value of future
payments, as determined by discounting 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;
(e) "Favorable tax determination" shall mean, 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:
(i) 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;
(ii) a revenue ruling or revenue procedure issued by the United States Internal
Revenue Service;
(iii) a private letter ruling by the United States Internal Revenue Service
with respect to such transfer;
(iv) 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;
(f) "Federal hardship standard" shall mean a federal standard applicable to
transfers of structured settlement payment rights based on findings of a court
or responsible administrative authority regarding the payees' needs, as
contained in the United States Internal Revenue Code, United States Code Title
26, as amended from time to time, or in a United States Treasury regulation
adopted pursuant thereto;
(g) "Independent professional advice" shall mean the advice of an attorney,
certified public accountant, actuary or other licensed professional adviser:
(i) who is engaged by a payee to render advice concerning the legal, tax and
financial implications of a transfer of structured settlement payment rights;
(ii) who is not in any manner affiliated with or compensated by the transferee
of such transfer; and
(iii) whose compensation for rendering such advice is not affected by whether a
transfer occurs or does not occur.
(h) "Interested parties" shall mean, 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;
(i) "Payee" shall mean an individual who is receiving tax-free damage payments
under a structured settlement and proposes to make a transfer of payment rights
thereunder;
(j) "Qualified assignment agreement" shall mean 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;
(k) "Responsible administrative authority" shall mean, with respect to a
structured settlement, any government authority vested by law with exclusive
jurisdiction over the settled claim resolved by such structured settlement;
(l) "Settled claim" shall mean the original tort claim or workers' compensation
claim resolved by a structured settlement;
(m) " Structured settlement " shall mean 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;
(n) " Structured settlement agreement" shall mean the agreement, judgment,
stipulation, or release embodying the terms of a structured settlement,
including the rights of the payee to receive periodic payments;
(o) " Structured settlement obligor" shall mean, with respect to any
structured settlement, the party that has the continuing periodic payment
obligation to the payee under a structured settlement agreement or a qualified
assignment agreement;
(p) " Structured settlement payment rights" shall mean rights to receive
periodic payments (including lump sum payments) under a structured settlement,
whether from the settlement obligor or the annuity issuer, where:
(i) the payee, the settlement obligor, the annuity issuer, or any other
interested party is domiciled in this State;
(ii) the structured settlement agreement was approved by a court or responsible
administrative authority in this State; or
(iii) the settled claim was pending before the courts of this State when the
parties entered into the structured settlement agreement;
(q) " Transfer " shall mean any sale, assignment, pledge, hypothecation, or
other form of alienation or encumbrance made by a payee for consideration; and
(r) "Terms of the structured settlement " shall 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;
(s) " Transfer agreement" shall mean the agreement providing for transfer of
structured settlement payment rights from a payee to a transferee.
Section 6603. Jurisdiction; procedure for approval of transfers.
(a) The Superior Court shall have non-exclusive jurisdiction over any
application for authorization, under Section 6601 of this Chapter, of a
transfer of structured settlement payment rights.
(b) Not less than twenty (20) days prior to the scheduled hearing on any
application for authorization of a transfer of structured settlement payment
rights under Section 6601 of this Chapter, the transferee shall file with the
court and serve on any other government authority which previously approved
the structured settlement, on all interested parties, and on the Office of the
Attorney General, the Director of the Consumer Affairs Unit, the Insurance
Commissioner and any known State official who is vested with discretionary
authority to be heard in proceedings under this Chapter, a notice of the
proposed transfer and the application for its authorization, including in such
notice:
(i) a copy of the transferee's application;
(ii) a copy of the transfer agreement;
(iii) a copy of the disclosure statement required under Section 6601(b) of this
Chapter;
(iv) 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
(v) 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) in order to be considered by the court or responsible
administrative authority.
(c) Those parties, persons and officials named in Section 6603(b) 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 under
this Chapter.
Section 6604. No waiver; no penalties.
(a) The provisions of this Chapter shall not be waived.
(b) No payee who proposes to make a transfer of structured settlement payment
rights shall inure 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 Section 6601 of this
Chapter.
Section 2. CONSTRUCTION.
Nothing contained in this Chapter 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.
Section 3. EFFECTIVE DATE.
This Chapter shall apply to any transfer of structured settlement payment
rights under a transfer agreement entered into on or after the thirty-first
(31st) day after the date of enactment of this Chapter; provided, however, that
nothing contained herein shall imply that any transfer under a transfer
agreement reached prior to such date is effective.
Sponsor:
Van Sant
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