093_HB3582

 
                                     LRB093 10522 JLS 10776 b

 1        AN ACT concerning structured settlements.

 2        Be  it  enacted  by  the People of the State of Illinois,
 3    represented in the General Assembly:

 4        Section 1.  Short title. This Act may  be  cited  as  the
 5    Structured Settlement Protection Act.

 6        Section 5.  Definitions. For purposes of this Act:
 7        "Annuity  issuer"  means  an  insurer  that  has issued a
 8    contract  to  fund  periodic  payments  under  a   structured
 9    settlement.
10        "Dependents"  include a payee's spouse and minor children
11    and all other persons for whom the payee is legally obligated
12    to provide support, including alimony.
13        "Discounted present value" means  the  present  value  of
14    future  payments  determined  by discounting such payments to
15    the present using  the  most  recently  published  Applicable
16    Federal Rate for determining the present value of an annuity,
17    as issued by the United States Internal Revenue Service.
18        "Gross advance amount" means the sum payable to the payee
19    or for the payee's account as consideration for a transfer of
20    structured  settlement  payment  rights before any reductions
21    for transfer expenses or other deductions  to  be  made  from
22    such consideration.
23        "Independent  professional  advice"  means  advice  of an
24    attorney, certified  public  accountant,  actuary,  or  other
25    licensed professional adviser.
26        "Interested   parties"   means,   with   respect  to  any
27    structured settlement, the payee, any beneficiary irrevocably
28    designated under the annuity  contract  to  receive  payments
29    following   the   payee's  death,  the  annuity  issuer,  the
30    structured settlement obligor, and any other party  that  has
31    continuing   rights  or  obligations  under  such  structured
 
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 1    settlement.
 2        "Net advance amount" means the gross advance amount  less
 3    the  aggregate  amount  of  the actual and estimated transfer
 4    expenses required to be disclosed under item (5)  of  Section
 5    10 of this Act.
 6        "Payee"  means  an  individual  who is receiving tax free
 7    payments under a structured settlement and proposes to make a
 8    transfer of payment rights thereunder.
 9        "Periodic payments" includes both recurring payments  and
10    scheduled future lump sum payments.
11        "Qualified   assignment  agreement"  means  an  agreement
12    providing for a qualified assignment within  the  meaning  of
13    Section  130  of  the  United  States  Internal Revenue Code,
14    United States Code Title 26, as amended from time to time.
15        "Responsible  administrative   authority"   means,   with
16    respect  to a structured settlement, any government authority
17    vested by law with exclusive jurisdiction  over  the  settled
18    claim resolved by such structured settlement.
19        "Settled claim" means the original tort claim or workers'
20    compensation claim resolved by a structured settlement.
21        "Structured settlement" means an arrangement for periodic
22    payment   of   damages  for  personal  injuries  or  sickness
23    established by settlement or judgment in resolution of a tort
24    claim or for periodic payments in settlement  of  a  workers'
25    compensation claim.
26        "Structured  settlement  agreement"  means the agreement,
27    judgment, stipulation, or release embodying the  terms  of  a
28    structured settlement.
29        "Structured  settlement  obligor"  means, with respect to
30    any structured settlement, the party that has the  continuing
31    obligation  to  make  periodic  payments to the payee under a
32    structured settlement agreement  or  a  qualified  assignment
33    agreement.
34        "Structured  settlement  payment  rights" means rights to
 
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 1    receive periodic  payments  under  a  structured  settlement,
 2    whether from the structured settlement obligor or the annuity
 3    issuer, when:
 4             (1)  the  payee  is domiciled in, or the domicile or
 5        principal place of business of the structured  settlement
 6        obligor or the annuity issuer is located in, this State;
 7             (2)  the   structured   settlement   agreement   was
 8        approved   by   a  court  or  responsible  administrative
 9        authority in this State; or
10             (3)  the   structured   settlement   agreement    is
11        expressly governed by the laws of this State.
12        "Terms   of  the  structured  settlement"  include,  with
13    respect to  any  structured  settlement,  the  terms  of  the
14    structured  settlement  agreement,  the annuity contract, any
15    qualified  assignment  agreement,  and  any  order  or  other
16    approval of any court or responsible administrative authority
17    or other government authority  that  authorized  or  approved
18    such structured settlement.
19        "Transfer"    means   any   sale,   assignment,   pledge,
20    hypothecation,  or  other  alienation   or   encumbrance   of
21    structured  settlement  payment  rights  made  by a payee for
22    consideration; provided that the  term  "transfer"  does  not
23    include  the creation or perfection of a security interest in
24    structured settlement payment rights under a blanket security
25    agreement entered into with an insured depository institution
26    in the absence of  any  action  to  redirect  the  structured
27    settlement payments to such insured depository institution or
28    an  agent  or  successor  in interest thereof or otherwise to
29    enforce such blanket security interest against the structured
30    settlement payment rights.
31        "Transfer agreement" means the agreement providing for  a
32    transfer of structured settlement payment rights.
33        "Transfer expenses" means all expenses of a transfer that
34    are  required  under the transfer agreement to be paid by the
 
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 1    payee or deducted from the gross advance  amount,  including,
 2    without limitation, court filing fees, attorneys fees, escrow
 3    fees,  lien  recordation fees, judgment and lien search fees,
 4    finders' fees, commissions, and other payments to a broker or
 5    other  intermediary;  "transfer  expenses"  do  not   include
 6    preexisting  obligations of the payee payable for the payee's
 7    account from the proceeds of a transfer.
 8        "Transferee" means a  party  acquiring  or  proposing  to
 9    acquire   structured  settlement  payment  rights  through  a
10    transfer.

11        Section 10.  Required disclosures to payee. Not less than
12    3 days prior to the date on which a payee  signs  a  transfer
13    agreement,  the  transferee  shall  provide  to  the  payee a
14    separate disclosure statement, in bold type no  smaller  than
15    14 points, setting forth all of the following:
16             (1)  the  amounts  and  due  dates of the structured
17        settlement payments to be transferred;
18             (2)  the aggregate amount of the payments;
19             (3)  the discounted present value of the payments to
20        be  transferred,  which  shall  be  identified   as   the
21        "calculation   of   current   value  of  the  transferred
22        structured settlement payments  under  federal  standards
23        for  valuing annuities", and the amount of the Applicable
24        Federal Rate used in calculating the  discounted  present
25        value;
26             (4)  the gross advance amount;
27             (5)  an  itemized listing of all applicable transfer
28        expenses,  other  than  attorneys'   fees   and   related
29        disbursements payable in connection with the transferee's
30        application   for  approval  of  the  transfer,  and  the
31        transferee's best estimate of the amount of any such fees
32        and disbursements;
33             (6)  the net advance amount;
 
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 1             (7)  the  amount  of  any  penalties  or  liquidated
 2        damages payable by the payee in the event of  any  breach
 3        of the transfer agreement by the payee; and
 4             (8)  a  statement  that  the  payee has the right to
 5        cancel the transfer agreement, without penalty or further
 6        obligation, not later than the third business  day  after
 7        the date the agreement is signed by the payee.

 8        Section   15.  Approval   of   transfers   of  structured
 9    settlement payment rights. No direct or indirect transfer  of
10    structured  settlement  payment rights shall be effective and
11    no structured settlement obligor or annuity issuer  shall  be
12    required  to  make  any payment directly or indirectly to any
13    transferee of structured settlement payment rights unless the
14    transfer has been approved in advance in a final court  order
15    or  order  of a responsible administrative authority based on
16    express findings by such court or responsible  administrative
17    authority that:
18             (1)  the  transfer  is  in  the best interest of the
19        payee, taking into account the welfare and support of the
20        payee's dependents;
21             (2)  the payee has been advised in  writing  by  the
22        transferee   to   seek  independent  professional  advice
23        regarding the  transfer  and  has  either  received  such
24        advice or knowingly waived such advice in writing; and
25             (3)  the transfer does not contravene any applicable
26        statute  or  the  order  of any court or other government
27        authority.

28        Section 20.  Effects of transfer of structured settlement
29    payment rights. Following a transfer of structured settlement
30    payment rights under this Act:
31             (1)  the  structured  settlement  obligor  and   the
32        annuity  issuer  shall,  as  to  all  parties  except the
 
                            -6-      LRB093 10522 JLS 10776 b
 1        transferee, be discharged and released from any  and  all
 2        liability for the transferred payments;
 3             (2)  the   transferee   shall   be   liable  to  the
 4        structured settlement obligor and the annuity issuer:
 5                  (A)  if the transfer contravenes the  terms  of
 6             the structured settlement, for any taxes incurred by
 7             the parties as a consequence of the transfer; and
 8                  (B)  for   any   other  liabilities  or  costs,
 9             including  reasonable  costs  and  attorneys'  fees,
10             arising from compliance  by  the  parties  with  the
11             order  of  the  court  or responsible administrative
12             authority  or  arising  as  a  consequence  of   the
13             transferee's failure to comply with this Act;
14             (3)  neither  the  annuity issuer nor the structured
15        settlement obligor may be required to divide any periodic
16        payment between the payee and any transferee or  assignee
17        or between 2 or more transferees or assignees; and
18             (4)  any  further  transfer of structured settlement
19        payment rights by  the  payee  may  be  made  only  after
20        compliance with all of the requirements of this Act.

21        Section 25.  Procedure for approval of transfers.
22        (a)  An  application  under  this  Act  for approval of a
23    transfer of structured settlement  payment  rights  shall  be
24    made  by  the  transferee and may be brought in the county in
25    which  the  payee  resides,  in  the  county  in  which   the
26    structured settlement obligor or the annuity issuer maintains
27    its  principal  place  of business, or in any court or before
28    any responsible administrative authority  that  approved  the
29    structured settlement agreement.
30        (b)  Not less than 20 days prior to the scheduled hearing
31    on  any  application for approval of a transfer of structured
32    settlement payment rights under Section 15 of this  Act,  the
33    transferee   shall   file   with  the  court  or  responsible
 
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 1    administrative authority and serve on all interested  parties
 2    a notice of the proposed transfer and the application for its
 3    authorization, including with the notice:
 4             (1)  a copy of the transferee's application;
 5             (2)  a copy of the transfer agreement;
 6             (3)  a  copy  of  the  disclosure statement required
 7        under Section 10 of this Act;
 8             (4)  a listing of each of  the  payee's  dependents,
 9        together with each dependent's age;
10             (5)  notification   that  any  interested  party  is
11        entitled to support, oppose, or otherwise respond to  the
12        transferee's application, either in person or by counsel,
13        by   submitting   written   comments   to  the  court  or
14        responsible administrative authority or by  participating
15        in the hearing; and
16             (6)  notification  of  the  time  and  place  of the
17        hearing and notification of the manner in which  and  the
18        time  by  which written responses to the application must
19        be filed (which shall be not  less  than  15  days  after
20        service  of  the  transferee's  notice)  in  order  to be
21        considered by the  court  or  responsible  administrative
22        authority.

23        Section 30.  General provisions; construction.
24        (a)  The  provisions of this Act may not be waived by any
25    payee.
26        (b)  Any transfer agreement entered into on or after  the
27    effective  date  of  this  Act by a payee who resides in this
28    State  shall  provide  that  disputes  under   the   transfer
29    agreement,  including  any  claim that the payee has breached
30    the agreement, shall be determined in and under the  laws  of
31    this  State.  No  such transfer agreement shall authorize the
32    transferee or any other party to confess judgment or  consent
33    to entry of judgment against the payee.
 
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 1        (c)  No  transfer of structured settlement payment rights
 2    shall extend to any payments that are life-contingent unless,
 3    prior to the date on  which  the  payee  signs  the  transfer
 4    agreement,  the  transferee has established and has agreed to
 5    maintain procedures reasonably satisfactory  to  the  annuity
 6    issuer   and   the  structured  settlement  obligor  for  (1)
 7    periodically confirming the payee's survival, and (2)  giving
 8    the  annuity  issuer  and  the  structured settlement obligor
 9    prompt written notice in the event of the payee's death.
10        (d)  No  payee  who  proposes  to  make  a  transfer   of
11    structured settlement payment rights shall incur any penalty,
12    forfeit  any  application  fee or other payment, or otherwise
13    incur  any  liability  to  the  proposed  transferee  or  any
14    assignee based on any failure of the transfer to satisfy  the
15    conditions of this Act.
16        (e)  Nothing  contained in this Act shall be construed to
17    authorize  any  transfer  of  structured  settlement  payment
18    rights in contravention of any  law  or  to  imply  that  any
19    transfer under a transfer agreement entered into prior to the
20    effective date of this Act is valid or invalid.
21        (f)  Compliance   with  the  requirements  set  forth  in
22    Section 10 of this Act and fulfillment of the conditions  set
23    forth  in  Section  15  of  this  Act  shall  be  solely  the
24    responsibility   of   the   transferee  in  any  transfer  of
25    structured  settlement  payment  rights,  and   neither   the
26    structured  settlement  obligor  nor the annuity issuer shall
27    bear any responsibility for, or any liability  arising  from,
28    non- compliance with those requirements or failure to fulfill
29    those conditions.

30        Section  35.  Applicability.  This Act shall apply to any
31    transfer of structured  settlement  payment  rights  under  a
32    transfer  agreement  entered  into  on  or after the 30th day
33    after the effective date of this Act; provided, however, that
 
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 1    nothing contained herein shall imply that any transfer  under
 2    a  transfer  agreement  reached  prior to that date is either
 3    effective or ineffective.

 4        (215 ILCS 5/155.34 rep.)
 5        Section 97.  The Illinois Insurance Code  is  amended  by
 6    repealing Section 155.34.