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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:

 
 
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.
 
This collaboration of the applicant attorney with their structure broker provides a great potential for settling large cases.
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.
 
It is never too early for the applicant attorney to contact their structure broker… All communication is confidential.
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.
 
The first step in the process is for the applicant attorney to provide the relevant information to their broker.
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.

 
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.
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.
 
The most successful meetings occur when the defendants bring their structure expert and the applicant attorney has their own.
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.
 
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.
 
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.
 
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.
 
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
 
 
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