On March 13, 2019, the DC Structured Settlements Protection Act of 2018 (SSPA) went into effect, updating the District of Columbia’s statutes to provide better protections to personal injury victims who receive financial compensation for their damages in the form of structured settlements.
Before we explain why that’s important, it’s worth knowing what a structured settlement is:
- A structured settlement is a negotiated arrangement where a personal injury victim agrees to resolve their claim by receiving part of an agreed-upon settlement in the form of periodic payments, rather than a lump sum.
In personal injury cases, structured settlements may be offered by defendants or requested by plaintiffs. Because they’re reached through out-of-court negotiations, the parties have discretion over what terms they choose to agree upon – from total settlement value to scheduling how payments will be made.
Structured settlements are a way to avoid the costs and burdens of litigation – both for defendants and plaintiffs, and they can help plaintiffs manage their money for future prosperity. Structured settlements became a more common arrangement beginning in the 1970s, providing an alternative to lump sum payouts at a time when interest rates were higher, and the IRS had made a number of rulings about taxation. In many cases, structured settlements use annuities to fund future payments.
The Law in DC: Structured Settlements Protection Act
Structured settlements have become part of written law in the U.S. at both the federal and state level. With passing and implementation of the Structured Settlements Protection Act, the District joins 49 other jurisdictions to enact similar protections of those structure payments – sometimes called periodical payments or structured judgments. Though they’re a viable option for victims who settle their injury cases, especially for larger amounts, there have been concerns about ensuring those victims are protected from unscrupulous businesses that aim to victimize them. The new law addresses just that.
The Act’s main purpose focuses on protecting claimants, often personal injury victims, from being taken advantage of by corporations that aim to purchase some or all of their future payments in exchange for immediate cash.
Though that may not sound like a bad deal, that immediate cash is typically much less than the value of the payments which were purchased. Unfortunately, many injury victims receiving structured settlements don’t understand the full implications of these transactions, and ultimately end up with the short end of the stick.
Quick Facts About the Law:
- When it Applies – The new law applies to any payment rights-transfer involving a resident of Washington, DC who receives structured settlement payments.
- Best Interest Factors – Though there are requirements for courts to review proposed transactions before approval to ensure the transfer is in their best interests, the Act expands those requirements and adds new protections. Under the Act, judges will use a list of factors for consideration when making “best interest” determinations. Some of these factors include a payee’s reason for seeking a transfer and whether other alternatives are available, any changes in a payee’s personal or financial life since they entered into the structured settlement agreement, and the remaining payments in the agreement.
- Disclosures – The Act requires companies looking to purchase future annuity payments to make certain disclosures before any transfer takes place. That includes disclosing prior transfers and attempted / denied transfers as well as disclosures about payees’ rights.
You can find the full law here.
CSCS: Helping Victims Through Every Aspect of Their Case
Chaikin, Sherman, Cammarata & Siegel, P.C. has been serving injured victims and families throughout the DC region for over 45 years. Having seen the constant evolution of our laws, and the battles which propel that evolution, we support the new law, as it is, at its core, a consumer protection law.
When helping clients fight for the justice and compensation they deserve, we also discuss their rights and options for settlements, which are how most personal injury cases are resolved. If you have a potential claim of your own, we can help you better understand how settlements work – and how we may be able to help you navigate the claim process while fighting the maximum recovery possible.