In her article calling for a ban on transfers of structured settlement payment rights by lead poisoning victims (described here, here, and here), law school Professor Karen Syma Czapanskiy’s article analyzes some of the issues from the point of view of investors in such transactions, as well as from the viewpoint of taxpayers.
Among the University of Maryland professor’s additional comments are the following.
- Banning Sales Protects the Taxpayer: “[B]anning sales would . . . protect the community and the taxpayer from having to support a seller who would, in the absence of a sale, enjoy the benefits of a regular income stream.” A ban may be most beneficial to taxpayers because, among other reasons, “taxpayer-funded public benefits will not need to be paid to sellers who do not sell their income stream.”
- Parents’ Interests Should Be Heard: A court that considers whether to approve a transfer of structured settlement payment rights, pursuant to a structured settlement protection act (SSPA), should hear from parents of lead poisoning victims, for several reasons. One reason is based on “the decisional autonomy of a parent who accepted a structured settlement on behalf of a minor child to ensure some economic security once the child became an adult.” Another reason the parent should be heard is “because of the potential legal and moral responsibility the parent bears for supporting the adult disabled child, a duty the parent attempted to satisfy by accepting a structured settlement to settle the tort suit rather than a lump sum.” When the income stream is gone and the lump sum is spent, the seller’s dependent child also loses access to parental support, so impoverishment is shared with the next generation. In fact, where the payee is a lead poisoning victim, the situation creates a “poster child” for protection of an extant structured settlement agreement. “A tort claimant whose childhood lead poisoning results in the loss of some or all of their capacity for self-support is the poster child for the arguments in favor of a structured settlement. When the tort claim is settled with a structured settlement, the parent, acting for the minor, can predict with a high degree of confidence that the child will lack the usual degree of judgment about financial matters when he or she reaches adulthood because of a reduced IQ, and potential full or partial illiteracy. Further, the predictable impulsivity and poor executive functioning that result from lead-poisoning suggest, in all likelihood, that the adult will be unable to turn a lump sum into an investment that supports financial security. Instead, the payee is likely to spend the lump sum on plans that cannot be realized and on other goods and services that will not yield a source of ongoing support. If the parent wants the child to have a source of financial security during adulthood, therefore, the best solution is a structured settlement or some other arrangement that prevents access to the principal, such as a trust. The alternative is to leave open the possibility that the child, once grown, will exhaust the principal and become dependent on public benefits and parental support.”
- Investors Should Not Have Cause to Complain: “Factoring companies and investors will have cause to complain if investments in structured settlements are closed off for invalid reasons. However, given that one feature of the investment is the favorable tax treatment, investors cannot complain about being denied the opportunity for the investment in cases when the congressional goals for the favorable tax treatment cannot be met. Alternatively, since knowing whether a petitioner’s decision to sell will result in financial security requires such extensive investigation, investors could be given a choice: subsidize the costs of providing a court with sufficient information for it to make the requisite decision, including paying the guardian ad litem and any other consultants, or give up the investment. If the investment is still worthwhile given the costs of the litigation and the likelihood that fully-informed courts will deny many more petitions, then sales could continue. The chance is miniscule, however, that investments would be lucrative in that environment, given that factoring companies complain about the costs of litigating petitions under the current permissive procedure in which nearly all petitions are approved.”
In her article, “Structured Settlement Sales and Lead-Poisoned Sellers: Just Say No”, in the Virginia Environmental Law Journal (36 Va. Envtl. L. J. 1), Professor Karen Syma Czapanskiy’s says that the “simplest, most direct and least expensive route to a solution” to the problems presented by sales of structured settlement payment rights by lead poisoning victims “is to follow the example of worker’s compensation: ban the sale of structured settlements [payment rights].” (It should be noted that Professor Czapanskiy’s article repeatedly refers to the “sale of structured settlements” when that phrasing is imprecise at best, inaccurate and misleading at worst; the rights being sold are those to the payments due to be paid pursuant to a structured settlement.) Professor Czapanskiy wrote that “[i]f injured workers can be required to sacrifice autonomy in exchange for a reliable source of economic security, people deeply injured by lead as children probably have no room for complaint.”