New Law in Michigan Expands Structured Settlement Transfer Opportunities

The following post was sent to us from Andrew Richner at the Michigan Law firm Clark Hill:

Michigan Governor Jennifer Granholm signed into law Public Act 296 of 2006, sponsored by Sen. Alan Sanborn (R - Richmond), which replaces the Michigan Structured Settlement Protection Act with new legislation based on the Model State Structured Settlement Protection Act adopted by the National Conference of Insurance Legislators ("NCOIL").

SB 541 addresses three principal concerns with the current law in Michigan:

1. It reduces the transactional costs to the sellers of structured settlements by removing the requirement that sellers obtain professional advice before selling payments. SB 541 retains the NCOIL Model Act language requiring that the seller be advised in writing to seek independent professional advice regarding the transfer.

2. It greatly expands the seller's right to access capital by, in cases where a structured settlement obligor (e.g., insurance company) does not object, removing the requirement that the seller demonstrate "imminent financial hardship" as a condition to a transfer and replaces it with the NCOIL Model Act requirement that the seller show that the transfer is in his or her "best interest" (this is consistent with the standard set forth in federal tax law (IRC §5891)).

3. It eliminates the ability of insurance companies and other third parties to, without justification, veto a transaction even when the court otherwise approves. Under SB 541, an insurance company objecting to a transfer must do so affirmatively before the court hearing on the application for approval of the transfer. Even if the insurer objects, the transfer may still be approved if:

(a) the seller will suffer "imminent financial hardship" if the transfer is not approved;

(b) the transfer will not render the seller unable to pay current or normal living expenses; and

(c) gross advance payments from the transferee are made directly to the provider of the goods or services that are the subject of the imminent financial hardship, unless the court finds that total costs cannot be readily determined.

"Imminent financial hardship" is defined in this context to mean necessary expenses relating to medical care, housing, transportation, education, job training, child support, alimony, tax liens, funerals or judgments.

NASP Executive Director Earl Nesbitt and Settlement Capital Corporation General Counsel Matt Bracy, along with attorney Andrew Richner and the governmental relations group at Clark Hill PLC, worked over the past three years to shepherd this legislation through the Michigan legislature. Despite vigorous opposition from the domestic insurance industry in Michigan, and a Republican-dominated legislature sympathetic to insurance company views, the NASP team was successful in crafting legislation that deviates in essentially only immaterial ways from the NCOIL Model Act. Not a single "no" vote was cast throughout the entire legislative process.

The legislation takes effect September 1, 2006.

The Michigan Law firm Clark Hill, including Andrew Richner and Tom Dixon, who handles structured settlement court proceedings for the firm, is an excellent resource for additional information about the changes in Michigan law should you have any questions.