Sec 142 of the Property Code involving minors and incapacitated persons has an interesting recent history. Effective 9/01/1999 this law required that a structured settlement could not be provided by an affiliate of the liability insurance carrier involved in the lawsuit or connected in any way to a person obligated to fund the structured settlement. Paul J. Lesti, author of Structured Settlements, writes that this law applies to a broker with any financial arrangement (commission sharing or "points" that apply toward financial incentives) with the defense.
The obvious purpose of this law was to stop defendant's insurance carriers from profiting at the expense of injured parties. Just how lucrative this type of arrangement had been for insurance companies faced with paying substantial money to injured parties is clearly evident from how rapidly the insurance lobby reacted, managing to have this safeguard for injured parties struck from the statute during the very next session of the legislature (2001). Thus, once again, insurance companies are allowed to profit from their dealings with injured parties.
The net effect of this return to insurance business as usual is at once subtle and damaging to injured parties. The defendant's insurance carrier that uses its affiliate company to fund a structure is not maximizing dollars for the injured party (which is a function of shopping the market) but rather taking back dollars given the injured party by purchasing less benefit with more dollars, as well as allowing under the table "deals" not visible to Plaintiff's attorney between the defense broker and the insurance carrier involving commission sharing or "points" that apply toward financial incentives. Unless you, as your client's representative, have the assistance of a qualified structured settlement person to assist you, your client is not only failing to maximize his or her settlement but helping fund their own settlement.
Section 142.009 also imposes minimum rating standards (i.e. A+/A++ A.M.Best) that the court may consider in approving an insurance company to fund a structured settlement. Note the lack of a mandatory direction to the court. As an attorney or ad litem, you should insist the court applies these minimum standards for your client's benefit because there are companies that do not meet the minimum standards. Be aware that ratings change frequently, which calls for a ratings verification at the time of settlement .
It is interesting to note that a number of attorneys have put forth the argument that Sec. 142.009 minimum standards should apply in all structured settlements.
In the settlement of a case involving a minor or incapacitated individual, the plaintiff's attorney has no more valuable partner than the independent structured settlement broker.