Public Act 93-0502

HB3582 Enrolled                      LRB093 10522 JLS 10776 b

    AN ACT concerning structured settlements.

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

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

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

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

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

    Section 20.  Effects of transfer of structured settlement
payment rights. Following a transfer of structured settlement
payment rights under this Act:
         (1)  the   structured  settlement  obligor  and  the
    annuity issuer  shall,  as  to  all  parties  except  the
    transferee,  be  discharged and released from any and all
    liability for the transferred payments;
         (2)  the  transferee  shall   be   liable   to   the
    structured settlement obligor and the annuity issuer:
              (A)  if  the  transfer contravenes the terms of
         the structured settlement, for any taxes incurred by
         the parties as a consequence of the transfer; and
              (B)  for  any  other  liabilities   or   costs,
         including  reasonable  costs  and  attorneys'  fees,
         arising  from  compliance  by  the  parties with the
         order of the  court  or  responsible  administrative
         authority   or  arising  as  a  consequence  of  the
         transferee's failure to comply with this Act;
         (3)  neither the annuity issuer nor  the  structured
    settlement obligor may be required to divide any periodic
    payment  between the payee and any transferee or assignee
    or between 2 or more transferees or assignees; and
         (4)  any further transfer of  structured  settlement
    payment  rights  by  the  payee  may  be  made only after
    compliance with all of the requirements of this Act.

    Section 25.  Procedure for approval of transfers.
    (a)  No annuity issuer or structured  settlement  obligor
may  make payments on a structured settlement to anyone other
than the payee or beneficiary  of  the  payee  without  prior
approval  of  the circuit court or responsible administrative
authority.   No  payee  or  beneficiary  of  a  payee  of   a
structured settlement may assign in any manner the structured
settlement  payment  rights without the prior approval of the
circuit court or responsible administrative authority.
    (b)  An application under this  Act  for  approval  of  a
transfer  of  structured  settlement  payment rights shall be
made by the transferee and shall be brought  in  the  circuit
court of the county in which an action was or could have been
maintained or before any responsible administrative authority
that approved the structured settlement agreement.

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

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

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