People suffering a traumatic injury can be tempted to trade an insurance company settlement giving them a series of benefits over a lifetime for an immediate lump-sum cash payment.
Companies tempting these people with instant cash are often predatory businesses that lure vulnerable, financially desperate people to accept offers that are not in their best financial interests, says Rep. Erin Koegel (DFL-Spring Lake Park).
She sponsors HF3768, which she calls consumer protection legislation that would help put a stop to these abusive practices.
The bill would strengthen protections outlined in a 1999 law regulating “structured settlements” — offers made by companies to individuals who are negotiating personal injury settlements with insurance companies.
An independent party would be added to the courtroom mix, namely an “evaluator” — an attorney who could be appointed by a judge “to 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.”
“With this bill, we can correct the past abuses and make sure any sale is given better scrutiny before the courts, and that the consumer will have much better information about what they are about to give up,” Koegel said.
The trouble with lump-sum offers, Koegel said, is they tempt vulnerable people, often in desperate financial situations, to accept a fraction of what they would be entitled to if they accepted payments over a lifetime.
Under existing law, the two sides appearing before a judge asking to approve a structured settlement are the injured person (the payee) and the company offering the settlement, she said.
The cost of engaging an independent a third-party evaluator would be paid for by the company proposing the settlement, Koegel said.
A structured settlement company would also be required to 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.