Structured Settlements

Structured Settlements

The most desirable situation is to provide a way of paying the plaintiff's expenses as they arise, with offsets for both increased and reduced needs. This is incompatible with having lawsuits result in fixed obligations.

The remaining alternative is to retain the lump sum determination but to pay out the lump sum only as it is needed by the plaintiff. This is termed a structured settlement and is available only in a structured manner. Structured settlements may be agreed to as part of the overall judgment in a case or required by the court if the plaintiff is a minor or the state has a specific statute requiring that certain awards be structured.

Plaintiff's attorneys have an ethical obligation to inform the client fully of the value of entering into a structured settlement. Many attorneys will even reduce their fees to provide an incentive for the client to waive a right to the lump sum.

There have been many proposals to require that all large settlements and verdicts be paid on a structured or periodic payment basis. The intent is to ensure that money is available to meet the plaintiff's needs and to allow the defendant to recoup any unused money. This can happen when a plaintiff does not live long enough to use up the projected nursing and medical care allowances. In one extreme instance, a quadriplegic plaintiff was awarded more than $1 million for future medical needs. The plaintiff died shortly after the settlement papers were signed, and the money went into the plaintiff's estate. In this case, a periodic payment law would have led to a more just result.

There are problems with structured settlements. Most periodic payment proposals are not symmetric; the defendant's contribution is reduced if the plaintiff's needs diminish, but it is not increased if the plaintiff's needs were underestimated. A second problem is that they make the calculation and awarding of attorney's fees difficult. The value of the award must be reduced to net present value and fees calculated and paid as a lump sum in addition to the periodic payments. The most serious problem is ensuring that the defendant will be solvent during the period over which the award must be paid out. The usual way to handle this is to require the defendant to buy an annuity from a third-party financial institution. The defendant will want to buy the least expensive annuity that will provide the necessary payments to the plaintiff. Since the stability of the financial institution is a factor in the pricing of annuities, the least expensive annuity may be backed by the least stable institution. If the institution fails, the plaintiff will receive no compensation.

Law and the Physician Homepage
Copyright 1993 - NOT UPDATED
The Climate Change and Public Health Law Site
The Best on the WWW Since 1995!
Copyright as to non-public domain materials
See DR-KATE.COM for home hurricane and disaster preparation
See WWW.EPR-ART.COM for photography of southern Louisiana and Hurricane Katrina
Professor Edward P. Richards, III, JD, MPH - Webmaster

Provide Website Feedback - https://www.lsu.edu/feedback
Privacy Statement - https://www.lsu.edu/privacy
Accessibility Statement - https://www.lsu.edu/accessibility

Home

Climate Change Project

Table of Contents

Courses

Search

Structured Settlements