Maryland AG, Lawmakers Look to Improve Structured Settlement Law

By | January 22, 2016

Maryland’s attorney general and lawmakers are looking at ways to protect the public from bad deals offered by businesses that have bought legal settlements from lead poisoning victims, such as Baltimore’s Freddie Gray, at a steep discount.

David Nitkin, a spokesman for Maryland Attorney General Brian Frosh, said Frosh is working with lawmakers to ensure a court can only approve the transfer of structured settlements if it’s in the best interest of the settlement’s recipient.

The attorney general also is working on a plan to better protect victims with more comprehensive regulation of the industry.

In a structured settlement, damages are awarded in personal injury or workers’ compensation cases over a period of time rather than one lump sum.

“The attorney general has been deeply concerned that victims of lead paint poisoning who may have significant impairments are entering into financial transactions that they may not understand and that may compromise their future,” Nitkin said.

Del. Keith Haynes, a Baltimore Democrat, also is sponsoring a bill to reform the law. The measure would require an application for a transfer of a specified settlement to be filed in a circuit court in the county where the payee resides. That would help prevent companies from filing in states other than where the payee lives in order to find a judge friendly to the companies.

The measure also would require the person who received the settlement to appear at the hearing on an application to transfer the settlement payment rights. A payee also would not be able to transfer more than 25 percent of the discounted present value of future payments.

The Washington Post reported in August that Gray, whose death after he broke his neck in police custody last year prompted Baltimore riots, had agreed in 2013 to sell $146,000 worth of future payments in his structured settlement for about $18,300. The newspaper detailed how people are not getting counseling when selling settlements.

Alan Wilner, a retired judge from Maryland’s highest court who now chairs the Court of Appeals of Maryland Standing Committee on Rules of Practice and Procedure, briefed lawmakers last week about rule changes the court approved after the newspaper’s article.

Wilner said the review was prompted by the article and “the predatory conduct of one factoring company that was preying mostly on lead paint victims and the disturbingly lax manner in which petitions for approval of the assignment of those structured benefits to that company were being reviewed by one judge.”

While the assignment of structured settlement payments can be useful when the payee needs quick money for buying a house or car or paying for school, some of the practices employed by companies as early as the 1990s caused concern, leading state legislatures and Congress to pass laws controlling the market. Maryland’s law was enacted in 2000. Wilner said the Maryland judiciary did not develop rules to guide the proceedings created by the law.

“We’ve become much more vigilant since then in reviewing legislation that affects judicial proceedings and in drafting rules to implement the laws that you do enact, but frankly 15 years ago we just dropped the ball on this one,” Wilner said.

Wilner warned lawmakers on two judicial panels that as they consider changes to the law, the industry will urge them to override some of the new rules that the judiciary put in place, effective Jan. 1. He said they will contend the rules are making the process prohibitively expensive. But Wilner said the problem is that in many cases the cost already is prohibitive — to the payee.

“These people are getting literally in some instances pennies on the dollar, and the problem is until these rules went into effect the payee was often unaware of that or couldn’t contemplate it, couldn’t understand it — even if there was a disclosure statement that laid out a lot of this financial stuff, and the problem also was that the judge was unaware of it,” Wilner said.


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