Structured settlements are payments made over time to an individual by an insurance company to settle civil lawsuits, such as personal injury, workers compensation, and other cases where damages to the injured party may be substantial.
These payments over a lifetime can be sold or transferred to a company, often for a lump-sum, that may seem beneficial to the injured person, but are often not in their best financial interest.
A new law, mostly effective Aug. 1, 2022, will increase protections to people transferring their settlement for a lump-sum payment by, in part, requiring an attorney to review the transfer and a judge to consider if a transfer is in the payee’s best interest.
Sponsored by Rep. Erin Koegel (DFL-Spring Lake Park) and Sen. Paul Utke (R-Park Rapids), the law stipulates that an attorney assigned by a judge as an “evaluator” must “make an independent assessment and advise the court whether the proposed transfer is in the best interest of the payee, taking into consideration the payee's dependents, if any.”
The cost of engaging an independent third-party evaluator will be paid for by the company proposing the settlement transfer.
A structured settlement purchase company must also provide a payee with a statement spelling out the financial ramifications of the proposed deal, specifically the equivalent annual interest rate the payee would be effectively paying by accepting the deal.
The law establishes a special registration for structured settlement purchase companies managed by the Office of the Secretary of State. To register, companies must secure a surety bond and provide an initial $700 filing fee and a $200 renewal fee for registration applications. This provision takes effect Jan. 1, 2023.