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How Applicant Attorneys Work with their Structure Broker to Effectuate Large Settlements
By Steve Chapman and Gregg Chapman, Esq.
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Steve Chapman and Gregg
Chapman, Esq. specialize in structured settlements of workers’ compensation
cases. In this article they discuss how they work with applicant
attorneys to settle big cases. See the companion article, “Structuring
a Settlement: A How-to Guide” by Marjory Harris, Esq.
For more information on structured settlements and the structure
broker’s role, see:
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The structured settlement broker is
a valuable resource who can assist the applicant attorney settle
their large cases. The structure broker is the professional who is
licensed to provide the tax free settlement annuities which fund
the periodic payments, obtain rated ages, and prepare the documentation
necessary to comply with the insurance company and IRS regulations
preserving the tax free nature of the payments. The defendant has
a structured settlement broker who has a fiduciary responsibility
to the comp carrier. The applicant has the right to retain his or
her own broker, a skilled advocate who is accountable to the applicant
and his/her counsel; looking out for their best interests. This collaboration
of the applicant attorney with their structure broker provides a
great potential for settling large cases.
The applicant attorney’s
structured settlement broker can provide extremely valuable services.
These include: analyzing structure offers and creating settlement
demands; calculating the present value of the permanent disability
portion of the claim; analyzing the medical payment history; providing
inflation factors to the future medical components of the case; ensuring
the Medicare Set-Aside issues are addressed; preparing “Hartman
Formula” calculations to preserve Social Security benefits;
reviewing and/or creating settlement documents ensuring that all
necessary language is included and correct, especially the language
pertaining to the tax free status of the periodic payments.
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| This collaboration of the applicant
attorney with their structure broker provides a great potential for
settling large cases. |
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It is never too early for
the applicant attorney to contact their structure broker. For large
serious injury cases, it is not uncommon to contact your structure
broker 6 months post accident to begin to address and quantify the
future medical needs of the applicant, with a primary focus on attendant
care, transportation and any home modification needs. For other cases,
the structure broker can be contacted upon release of a Permanent
and Stationary report; once a Stipulation and Award or Findings and
Award are finalized; or when the applicant attorney is ready to begin
settlement negotiations.
The applicant’s structure expert is
available to explain to the applicant and other decision makers how
a structured settlement works and the benefits of this type of settlement.
In working with their own broker, the applicant’s attorney
does not have to worry about information shared by their client since
all communication is confidential. It is also useful to have a meeting
with the applicant since this can bring to light medical concerns
that have previously gone unnoticed.
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It
is never too early for the applicant attorney to contact
their structure broker… All communication is confidential.
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The first step in the process is for
the applicant attorney to provide the relevant information to their
broker. This includes 2 or 3 current medical reports (Agreed Medical
Evaluator if available). These reports will be used to obtain rated
ages which are substandard ratings provided by life insurers. The
use of rated
ages provides the applicant with a lower annuity cost.
Additionally, the attorney must provide their estimation of the permanent
disability percentage of the case. The structure broker also requires
the date of injury, the applicant’s date of birth, the applicant’s
earnings information, the permanent and stationary date (if applicable),
the payment history and the MSA (if applicable).
Throughout this
process, the applicant attorney and structure broker are in communication
with each other via telephone and e-mail to clarify important issues.
For example, if the case has a post 2003 date of injury and involves
a life pension, they will discuss whether their broker will prepare
the COLA calculation using a start date in 2004 per Duncan, one year
after the DOI or one year after the P&S date. Another critical
issue is the amount of non-Medicare medical expenses. The applicant
attorney can provide important information about home care, transportation,
off label prescription medications among many others to the structure
broker so that he or she can factor these costs into the value of
the case.
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The first step in the process
is for the applicant attorney to provide the relevant information
to their broker.
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The applicant attorney’s broker will take all this information
into account and create a confidential settlement analysis. This
analysis will include all the components of the case. First, the
broker will calculate the annuity cost present value of the permanent
disability portion of the case. Additionally, if the case involves
a life pension, the broker will also provide the annuity cost that
matches this benefit. As mentioned above, the broker can provide
a number of COLA options if applicable. Furthermore, it is typically
the case where the applicant attorney wants to see this calculation
with different percentages (for example: 70%, 80% and 90%). The
broker can easily provide these figures as requested. The cost
of the MSA seed amount and the annuity cost of the MSA annual payments
are next included in the analysis. The non-Medicare medical expenses
mentioned above as well as the Medicare Part A, B and D deductibles,
co-pays, premiums and “doughnut
hole” are totaled up
and priced using the appropriate annuity. If applicable, permanent
disability advances will also be included in the settlement analysis.
The applicant attorney will review the analysis and discuss with
the broker at which time adjustments can be made. Once all issues
have been addressed, the structure broker will create a demand
based on the analysis. The applicant’s structured settlement
broker can take the demand and present it to the structured settlement
broker for the defense. The structured settlement consultant for
the defendant usually has a direct line of communication with the
claims examiner and is able to get the demand directly to the individual
who has the money to settle the case. Additionally, through this “backdoor
communication”, the applicant attorney can learn what the
claims examiner is thinking without the filter of the defense attorney.
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Once all issues have been addressed,
the structure broker will create a demand based on the analysis and
can present it to the structured settlement broker for the defense
without the filter of the defense attorney.
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The response to the demand will dictate
the next steps. In some cases a counter offer is made by the carrier
and negotiations commence. The applicant’s structure expert
can assist in the negotiation of the settlement. One of the best
forums for such negotiations are informal meetings held at either
counsels’ office. The most successful meetings occur when the
defendants bring their structure expert and the applicant attorney
has their own. The structure experts are able to put together structured
settlement proposals that work to bring the two sides closer and
closer together.
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The most successful meetings
occur when the defendants bring their structure expert and the applicant
attorney has their own.
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In especially large cases mediation could
be the next appropriate step. The structured settlement specialist
can perform a variety of duties at the actual mediation. As offers
are made, and the need for counter demands arises, the structure
specialist can provide figures for the applicant’s attorney
and be able to explain to the defendant and to the mediator how the
figures were calculated. It is the ability to keep the process moving
forward that allows the mediator to do their job. The whole process
can come to a grinding halt unless there are experts present who
can recalculate present values as new information is presented during
the process. Additionally, there are times in mediation where the
mediator senses an impasse and needs to have the structure expert
run figures for their own edification, in an effort to keep the negotiation
from falling apart. When each side has their own structured settlement
expert, the mediator can have the two specialists work together in
an effort to find a compromise. The presence of structure people
at the mediation provides additional tools for the mediator to utilize
all available resources in attempting to find a mutually agreeable
settlement. Thus, the structured settlement specialist not only can
play a key role in preparing for the mediation but can assist all
parties to reach the desired conclusion at the actual mediation.
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The structured settlement specialist
not only can play a key role in preparing for the mediation but can
assist all parties to reach the desired conclusion at the actual
mediation.
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During the negotiations, the applicant
attorney’s structure broker has the expertise to keep the momentum
moving towards settlement even when the defense comes back with a
lower than anticipated offer. One of the strategies used by the applicant
attorney’s broker is to get annuity quotes from all the approved
annuity providers, whereas it is not unusual for the defense broker
to cost out a structured offer from just one annuity company. In
fact, certain comp carriers require their defense brokers to only
use their affiliated life company. Upon receipt of the defense’s
offer, the applicant’s structure broker will price the proposal
with more than 8 different annuity providers finding the one offering
the best rates. This has the effect, for example, of reducing the
cost of the MSA structured annual payments and thus bringing the
sides closer to a settlement.
Once the parties have agreed upon a
settlement amount, the structure broker still plays an important
role to make sure the agreement is approved. If the deal is contingent
upon CMS approval of an MSA, the broker will follow through to verify
that the MSA has been submitted and will assist should CMS require
additional information. Upon CMS approval the broker will run the
new annuity calculations. If the MSA amount is substantially different
than submitted, the broker and attorney may have to restart negotiations
to arrive at a new settlement amount.
Upon reaching a final settlement
agreement, the broker will provide the attorney with the structured
settlement addendum to the Compromise and Release. Additionally,
the broker’s office will follow-up on the administrative requirements
for the annuity. They will obtain the required documents and assist
the applicant to set up the necessary direct deposit accounts for
their annuity checks.
The final chapter occurs when the Compromise and Release is presented
to the judge at the WCAB. In more large complex cases it is wise
to have your structure professional available to explain to the judge
how the figures were arrived at. The broker can also explain the
annuity payments and how they match the needs of the applicant. Additionally,
they can discuss the life insurance company’s financial strength
ratings and show that annuities were purchased only from A or A+
rated companies as measured by A.M. Best Company. Finally the broker
can substantiate the correct present value figure in order that the
appropriate attorney’s fee is awarded.
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Upon reaching a final settlement
agreement, the broker will provide the applicant and his or her attorney
additional services to complete documentation, set up the necessary
bank accounts, etc.
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Steve Chapman strives to remain current on all issues affecting
the settlement of the case, including Medicare set-aside allocations,
life care plans, medical cost trends, Long Term Disability, and Social
Security issues.
To contact
Steve Chapman:
Steven F. Chapman
National Settlement Consultants
12039
Jefferson Blvd.
Culver City, CA 90230
Phone: 800-845-2969
Fax:
310-450-3132
Cell: 310-480-5742
Email: SettleMan@aol.com
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Gregg Chapman has been a member
of the State Bar of California for twenty years. Over the last
eight years, he has worked for two of the largest national MSA
vendors in various positions including General Counsel, National
Sales Manager and Director of MSA Education. He has provided hundreds
of presentations on all topics regarding Medicare Set-Asides to
the insurance industry and attorney associations across the country.
To contact Gregg Chapman:
Gregg Chapman
National Settlement Consultants
12039 Jefferson Blvd.
Culver City, CA 90230
Phone: 800-845-2969
Fax: 310-450-3132
Email: greggchap@aol.com |
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