Structured Settlements: The Law and Practice

Transcription

1 Case Management Structured Settlements: The Law and Practice RICHARD LEWIS Senior Lecturer, Cardiff Law School, University of Wales London Sweet & Maxwell 1993

2 Foreword Preface 7a We o/" Cases Table of Statutes TaWe of Statutory Instruments Tables of Rules of the Supreme Court and County Court Rules Table of Abbreviations Page vii ix xvii xxi xxiii xxv xxvii Chapter 1 Introduction Paw. 1. The New Way of Paying Damages A Pension System Based upon Annuities The Anatomy of a Structure and its Tax Advantage An Outline of the Benefits of a Structured Settlement Judicial Support for Structures The Duty to Consider a Structure and the Threat of Professional Negligence An Illustrative Case: Kelly v. Dawes: The First Judicially Approved Structure 1-32 PART A: HISTORY AND DEVELOPMENT Chapter 2-A Critique of the Traditional Lump Sum System 1. Historical Factors Criticisms of the Lump Sum System The Extent to Which Structured Settlements Avoid These Criticisms of the Lump Sum System 2 22 Chapter 3 - Attempts to Avoid the Lump Sum System Other Than by Structuring 1. Change of Circumstance Before an Appeal is Heard Split Trials and Interim Damages Provisional Damages Proposals for Law Reform Other Countries 3-11 xiii

3 Chapter 4 The History of Structures in Britain and North America 1. The United States of America Canada The United Kingdom 4-15 PART B: IDENTIFYING CASES TO STRUCTURE Chapter 5 Legal Limits Upon the Type of Case Which May be Structured 1. Dispelling Doubts About Cases Which Can be Structured Cases Where the Tax Position Discourages a Structure Cases Which Cannot be Structured Cases Where Doubt Exists as to the Possibility of Structuring 5-25 Chapter 6 The Advantages of Structuring 1. Advantages to the Plaintiff Advantages to the Defendant Advantages to the State 6-34 Chapter 7 The Disadvantages of Structuring 1. Disadvantages to the Plaintiff Disadvantages to the Defendant 7-35 Chapter 8 Where Structuring is Most Appropriate 1. Where the Injury is Serious and the Damages High Where Higher Rate Tax Would Otherwise be Paid Where Access Already Exists to Substantial Capital Where Life Expectancy is Reduced, Uncertain or Disputed Where Long-Term Care is the Major Consideration Where the Plaintiff Wishes to Avoid the Uncertainty, Stress and Cost Involved in Lump Sum Investment Where the Plaintiff is a Minor, a Patient or Otherwise in Need of Protection Where the Defendant is a Large Non-Mutual Insurer or Health Authority 8-18 PART C: ENGINEERING A STRUCTURE Chapter 9 Tactical Matters in Negotiating Damages and Allocating Them Among the Components of a Structure 1. What Matters Should be Considered in the Early Stages of a Case Which May be Structured? What is the Basis on Which the Parties Negotiate the Damages in a Structured Case? What are the Components of a Settlement Involving a Structure? What Features of Annuities May be Sought? 9-48 xiv

4 4. How Should the Damages in a Structure be Divided Among its Component Parts to Ensure that the Money is Best Used? What are the Major Pitfalls in the Structuring Process? 9-90 Chapter 10- The Role of Intermediaries and the Costs of Arranging a Structure 1. Who are the Intermediaries Involved? What Services do Intermediaries Offer? What is the Extent of an Intermediary's Liability to a Plaintiff? Must an Intermediary be Used? Can an Intermediary Act for Both Sides or Must Independent Advice be Obtained? The Costs of a Structure: How are Intermediaries Paid and by Whom? Chapter 11 Life Insurers and the Types of Annuity Involved 1. The Active Life Insurers and the Volatile Market The Types of Annuity Available Factors Affecting the Premium and Yield Impaired Life Annuities Chapter 12 - Obtaining Revenue and Court Approval 1. Approval from the Revenue Approval from the Court of Protection Approval from the High Court Chapter 13 The Final Settlement Agreement and the Approved Standard Form 1. The Standard Form Settlement Agreement Customised Clauses and Modifications Adding to the Standard Agreement Customised Clauses and Modifications Which Depart from the Standard Agreement PART D: AREAS OF PARTICULAR CONCERN Chapter 14 The Taxation of Structures 1. The Taxation of the Traditional Damages Award The Taxation of a Plaintiff Under a Structured Settlement The Taxation of the Insurance Companies Involved in a Structure The Taxation of Lloyd's Syndicates Involved in a Structure Chapter IS - The Long-Term Security of Structures 1. Concern about the Solvency of Insurers What Happens if the Life Office Fails? What Happens if the Liability Insurer Fails? What Precautions Against the Risk of an Insurer Becoming Insolvent Should be Taken? 15 ~ Reform 15 ~ 86 xv

5 Chapter 16- Health Authority Cases CONTENTS 1. The Importance and Development of Health Authority Structures The Options Appraisal Other Differences from Insurer-Backed Structures Chapter 17 The Reform of Structures PART E: THE FUTURE 1. Rationalisation of the Existing Voluntary Regime The Introduction of Involuntary Elements Allowing the Plaintiff to Purchase Tax-Free Annuities Page Appendix 1 The A.B.I. Circular and Model Settlement Agreement of July Appendix 2 Practice Note: Obtaining Court Approval for a Structured Settlement 297 Appendix 3 Guidance Note on Structures issued by the Law Society, October 28, Appendix 4 Case Reports and Settlement Documents 307 Appendix 5 Provisional Conclusions and Summary of Consultation Issues in the Law Commission Paper No Index 335 XVI