Alternative Settlement Arrangements a Big Risk

Monday, June 7, 2004 | 0

Injured Worker question: I'm totally broke and considering borrowing funds from a financial institution that specializes in loans based on pending lawsuits. Has anyone ever borrowed money against their pending worker's compensation lawsuit? If so, could you make a recommendation?

The WorkCompCentral Forums offer a wealth (no pun intended) of advice and the above question posed in the Injured Workers Forum brought a very interesting response from respected attorneys knowledgeable about alternative financial settlement arrangements in the workers compensation setting. The Forum discussion has been edited for readability, spelling and grammar.

Reply from one Injured Worker: Ive heard of financial institutions that will lend money for a structured settlement already in place but why would anyone lend money to anyone with a pending lawsuit, how would they be paid back if you lost your case? You might be thinking of the ads on TV that will loan against structured settlements such as lottery winnings, or insurance settlements that are paid in installments. If you do find a lending institution like you described let me know, I could use a new Cadillac!!! Good luck.

Attorney One response: Cashing out a structured settlement early is illegal. That is the reason why the entities that you are making inquiries of are charging such outrageous rates. If they give you money against your structured settlement there is a good chance that they will not get paid off as the structure annuity holder may not recognize whatever agreement you are making to cash out your structure.

Original Injured Worker reply: I was wondering if you might explain in a little more detail , when you said "That there is a good chance they will not get paid off as the structure annuity holder may not recognize whatever agreement you are making to cash out your structure." Right now I am in a very stressed out situation with my finances, because of various reasons, I have been having to make partial payments when and where ever possible to be able to keep my car that I am financing, pay the insurance rates and now because of a really stupid idea some one gave me , I am having to pay back one of those places that make advances on your paycheck. Well at least my wife is. And now she has gotten laid off and were not being able to stretch our finances as far as we used to. I would be very interested in a place that would loan against my WC settlement if I had the right sort of information on all this lending money on a structured settlement.

What is a structured settlement? My attorney has told me that the insurance carrier does not have to give any advances on claims and that is what they have told me also. So what choice does a person have? Lose everything that they have worked so hard to get or go to a loan shark sort of to say?

Attorney Two response: Structured Settlements are controlled by Federal Law which prohibits their assignment. When you settle by structure you are no longer dealing with the Workers Comp Insurer. You are now dealing with the Life Insurance Company that the Work Comp Insurer bought the annuity from.

The outfits that give you money as advance on your Structure payments can't take an assignment as the Life Insurer would not recognize it. So they set up a scam to put in a change of address directing payment of your check to them and then requiring you to come to their office and endorse the check to them. If you refuse to endorse, they may have an unenforceable agreement with you.

Also the Life Insurance Company may get wind of the scam when they recognize the address. That is why these outfits charge outrageous rates of up to 25% or more.

Lastly, as these guys are outside the law, if you refuse to endorse I would not be surprised if they send over Guido the leg breaker to convince you to sign.

-------------------

The views and opinions expressed by the author are not necessarily those of workcompcentral.com, its editors or management.