2007 California Insurance Code Article 2.3. Transfers Of Structured Settlement Payment Rights

CA Codes (ins:10134-10139.5)

10134.  For the purposes of this article, the following terms have
the following meanings:
   (a) "Buyer's first right of refusal" means any provision in the
transfer agreement or related documents that obligate the payee to
give to the buyer the first choice or option to purchase any
remaining structured settlement rights belonging to the payee.
   (b) "Dependents" include the payee's spouse and minor children and
all other family members and other persons for whom the payee is
legally obligated to provide support, including alimony.
   (c) "Discounted present value" means the fair present value of
future payments, as determined by discounting those 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.
   (d) "Effective equivalent interest rate," with respect to a
transfer of structured settlement payment rights, means the
annualized rate of interest on the net advance amount, calculated by
treating the transferred structured settlement payments as if they
were installment payments on a loan, with each payment applied first
to accrued unpaid interest and then to principal.
   (e) "Expenses" means all broker's commissions, service charges,
application or processing fees, closing costs, filing or
administrative charges, legal fees, notary fees and other
commissions, fees, costs, and charges that a payee would have to pay
to transfer the structured settlement payment rights of a structured
settlement agreement or that would be deducted from the gross
consideration that would be paid to the payee in connection with the
transfer of the structured settlement payment rights of a structured
settlement agreement.
   (f) "Independent professional advice" means advice of an attorney,
certified public accountant, actuary, or other licensed professional
adviser meeting all of the following requirements:
   (1) The adviser is engaged by a claimant or payee to render advice
concerning the legal, tax, or financial implications of a structured
settlement or a transfer of structured settlement payment rights.
   (2) The adviser's compensation for rendering independent
professional advice is not affected by occurrence or lack of
occurrence of a settlement or transfer.
   (3) A particular adviser is not referred to the payee by the
transferee or its agent, except that the transferee may refer the
payee to a lawyer referral service or agency operated by a state or
local bar association.
   (g) "Interested parties" means, with respect to a structured
settlement agreement, the payee, the payee's attorney, any
beneficiary designated under the annuity contract to receive payments
following the payee's death, the annuity issuer, the structured
settlement obligor, and any other party who has continuing rights or
obligations under the structured settlement agreement.  If the
designated beneficiary is a minor, the beneficiary's parent or
guardian shall be an interested party.
   (h) "Payee" means an individual who received tax-free payments
pursuant to a structured settlement agreement.
   (i) "Qualified assignment agreement" means an agreement providing
for a qualified assignment within the meaning of Section 130 of Title
26 of the United States Code, as amended from time to time.
   (j) "Structured settlement agreement" means an arrangement for
periodic payment of damages established by settlement or judgment in
resolution of a tort claim in which the payment of the judgment or
award is paid in whole, or in part, in periodic tax-free payments
rather than a lump-sum payment.  A structured settlement agreement
entered into pursuant to Section 667.7 of the Code of Civil Procedure
or Section 970.6 or 984 of the Government Code is not subject to the
provisions of this article other than the requirements of Section
10138.
   (k) "Structured settlement obligor" means the party that has the
continuing periodic payment obligation to the payee under a
structured settlement agreement or a qualified assignment agreement.

   (l) "Structured settlement payment rights" means rights to receive
periodic payments, including lump-sum payments, pursuant to a
structured settlement agreement, whether from the settlement obligor
or an annuity issuer.
   (m)  "Terms of the structured settlement" include, with respect to
a structured settlement agreement, the terms of the structured
settlement agreement, annuity contract, qualified assignment
agreement, and any order or approval of a court or responsible
administrative authority or other governmental authority authorizing
or approving the structured settlement.
   (n) "Transfer" means any sale, assignment, pledge, hypothecation,
or other form of alienation or encumbrance made for consideration.
   (o) "Transfer agreement" means the agreement providing for the
transfer, and any other document used to effectuate the transfer,
from the payee to the transferee of structured settlement payment
rights of a structured settlement agreement.
   (p) "Transferee" means any person receiving structured settlement
payment rights resulting from a transfer.



10135.  (a) This article is only applicable to transfers entered
into on or after January 1, 2000.
   (b) Notwithstanding subdivision (a), the changes to this article
made by the act amending this section in the 2001-02 Regular Session
shall only be applicable to transfers entered into on or after
January 1, 2002.


10136.  (a) No transfer of structured settlement payment rights,
either directly or indirectly, shall be effective by a payee
domiciled in this state, or by a payee entitled to receive payments
under a structured settlement funded by an insurance contract issued
by an insurer domiciled in this state or owned by an insurer or
corporation domiciled in this state, and no structured settlement
obligor or annuity issuer shall be required to make any payment
directly or indirectly to a transferee, unless all of the provisions
of this section are satisfied.
   (b) Ten or more days before the payee executes a transfer
agreement, the transferee shall provide the payee with a separate
written disclosure statement, accurately completed with the
information that applies to the transfer agreement, in substantially
the following form, in at least 12-point type unless otherwise
indicated (bracketed instructions shall not appear in the form):

   "Disclosure Notice Required By Law (14-point boldface type)
   You are selling (technically called 'transferring') your right to
receive your payments under a structured settlement. You should get
this disclosure notice at least 10 days before you sign any contract.

      IMPORTANT TERMS: (14-point boldface type )



Total dollar amount of          $_________________
payments you are selling:
Present value of amount you     $_________________
are selling:
Net amount paid to you:         $_________________

   For comparison purposes:
   If you did not sell your right to receive structured settlement
payments, but instead borrowed the net amount of $____ and paid that
loan back in installments with each of the payments you are now
selling, the equivalent interest rate you would be paying for that
loan would be ____% per year.
   (The text and information set forth above under 'IMPORTANT TERMS'
shall be in 14-point type and circumscribed by a box with a bold
border)
   To figure the net amount we are paying, we have charged you for
the following expenses:
      (itemize in a list by type and amount)
    for a total of $____ in expenses.
   You should get independent professional advice about whether
selling your structured settlement payments is a good idea for you
and for your dependents.
   You also should get independent professional advice from an
accountant or lawyer experienced in tax matters about any income tax
consequences from selling your structured settlement payments. We
cannot give you the name of anyone to advise you.
   Court approval is needed (14-point boldface type). A court must
approve any agreement you sign to sell your rights under a structured
settlement. You will not receive any money until the court approves
the sale. Court approval could take more than 30 days following the
day you sign an agreement selling your rights under a structured
settlement.
   You may cancel the contract before court approval (14-point
boldface type). You may cancel the agreement selling (or
transferring) your rights under a structured settlement without any
cost or obligation. You may cancel at any time before the court
approves the contract. You will get notice of the date of the court
hearing.
   If you want to cancel, you do not need any special form. But, you
must cancel in writing. Send your cancellation to:  (insert
transferee's name and address).
   If you believe that you have been treated unfairly or have been
misled, you should contact your local district attorney or the state
Attorney General."

   (c) The transfer agreement shall be written in at least 12-point
type and shall be complete and without blank spaces to be completed
after the payee's signature. The transfer agreement shall set forth
clear and conspicuously, and in no less than 12-point type, all of
the following:
   (1) A statement that the agreement is not effective until the date
on which a court enters a final order approving the transfer
agreement and that payment to the payee pursuant to the transfer
agreement will be delayed up to 30 days or more after the date the
payee signed the transfer agreement in order for the court to review
and approve the transfer agreement.
   (2) The amounts and due dates of the structured settlement
payments to be transferred.
   (3) The aggregate amount of the structured settlement payments to
be transferred. This amount shall be disclosed in the form prescribed
in subdivision (b) in the space for "Total dollar amount of payments
you are selling."
   (4) The aggregate amount of all expenses, if any, to be deducted
from the purchase price to be paid to the payee in exchange for the
payments to be transferred, and an itemization of all expenses by
type and amount.
   (5) The amount payable to the payee, net of all expenses, in
exchange for the payments to be transferred. This amount shall be
disclosed in the form prescribed in subdivision (b) in the spaces for
"Net amount paid to you" and "net amount."
   (6) The discounted present value of all structured settlement
payments to be transferred and a statement that "This is the value of
your structured settlement in current dollars." This amount shall be
disclosed in the form prescribed in subdivision (b) in the space for
"Present value of amount you are selling."
   (7) The federal rate, as described in subdivision (c) of Section
10134, used in determining the discounted present value.
   (8) The effective equivalent interest rate, which shall be
disclosed in the following statement:

   "YOU WILL BE PAYING THE EQUIVALENT OF AN INTEREST RATE OF ____%
PER YEAR.
   Based on the net amount that you will receive from us and the
amounts and timing of the structured settlement payments that you are
transferring to us, if the transferred structured settlement
payments were installment payments on a loan, with each payment
applied first to accrued unpaid interest and then to principal, it
would be as if you were paying interest to us of ____% per year,
assuming funding on the effective date of transfer."

   This percentage amount shall be disclosed in the form prescribed
in subdivision (b) in the space for "the equivalent interest rate you
would be paying for this loan would be ____% per year."
   (9) The quotient (expressed as a percentage) obtained by dividing
the net payment amount by the discounted present value of the
payments.
   (10) A statement that the payee should obtain independent
professional advice regarding any federal and state income tax
consequences arising from the proposed transfer, and that the
transferee may not refer the payee to any specific adviser for that
purpose.
   (11) A statement that the court approving the transfer agreement
retains continuing jurisdiction to interpret and monitor
implementation of the agreement as justice may require.
   (12) The following statement: "If you believe you were treated
unfairly or were misled as to the nature of the obligations you
assumed upon entering into this agreement, you should report those
circumstances to your local district attorney or the office of the
Attorney General."
   (13) The following statement printed in 14-point type,
circumscribed by a box with a bold border, and set forth immediately
above or adjacent to the space reserved for the payee's signature:
"You have the right to cancel this agreement without any cost or
obligation until the date the court approves this agreement. You will
receive notice of the court hearing date when approval may occur.
You must cancel in writing and send your cancellation to (insert
transferee's name and address)."
   (d) The contract for transferring the structured settlement
payment rights may not violate Section 10138.
   (e) At any time before the date on which a court enters a final
order approving the transfer agreement pursuant to Section 10139.5,
the payee may cancel the transfer agreement, without cost or further
obligation, by providing written notice of cancellation to the
transferee.



10137.  A transfer of structured settlement payment rights is void
unless all of the following conditions are met:
   (a) The transfer of the structured settlement payment rights is
fair and reasonable and in the best interest of the payee, taking
into account the welfare and support of his or her dependents.
   (b) The transfer complies with the requirements of this  article,
will not contravene other applicable law, and is approved by a court
as provided in Section 10139.5.



10138.  (a) A transfer agreement, as defined in subdivision (o) of
Section 10134, shall not include any provision described in the
paragraphs below.  Any inclusion of a prohibited provision, with
respect to a seller who is a California resident, shall make the
contract void and unenforceable.
   (1) Any provision that waives the seller's right to sue under any
law, or in which the seller agrees not to sue, or that waives
jurisdiction or standing to sue under the contract.
   (2) Any provision that requires the seller to indemnify and hold
harmless the buyer, or to pay the buyer's costs of defense, in any
claim or action brought by the seller or on the seller's behalf
contesting the sale for any reason.
   (3) Any provision that waives benefits or rights conferred by law
with respect to garnishment of wages.
   (4) Any provision providing that the contract is confidential or
proprietary, belonging to the buyer.
   (5) Any provision in which the seller stipulates to a confession
of judgment.
   (6) Any provision requiring the seller to pay the buyer's attorney'
s fees and costs if the purchase agreement is not completed.
   (7) Any provision requiring the seller to pay any tax liability
arising under the federal tax laws, other than the seller's own tax
liability, if any, that results from the transfer.
   (8) Any provision providing for brokerage fees incurred in the
contract to be deducted from the purchase price disclosed pursuant to
paragraph (5) of subdivision  (b) of Section 10136.
   (9) Any forum selection provision providing for jurisdiction to be
in a court outside of California for any action arising under the
contract.
   (10) Any choice-of-law provision that provides for controlling law
to be other than California law in any action arising under the
contract.
   (11) A provision that provides the transferee with a security
interest or collateral interest in any structured settlement payment
rights that exceed the actual dollar amount of the structured
settlement payment rights being transferred.
   (12) Any provision that creates a "buyer's first right of refusal"
to purchase any remaining structured payment rights that the payee
may desire to sell in the future.
   (b) The provisions in this section may not be waived by agreement
of the parties.



10139.  (a) At the time of filing a petition pursuant to Section
10139.5 for court approval, the transferee shall file with the
Attorney General a copy of the transferee's petition for approval, a
copy of the written disclosure statement required by subdivision (a)
of Section 10136, a copy of the transfer agreement as defined in
subdivision (o) of Section 10134, a copy of the annuity contract, a
copy of any qualified assignment agreement, a copy of the underlying
structured settlement agreement, a copy of any order or approval of
any court or responsible administrative authority authorizing or
approving the structured settlement, a copy and proof of notice to
the interested parties, and a verified statement from the transferee
stating that all of the conditions set forth in Sections 10136,
10137, and 10138 have been met.
   (b) The Attorney General may, but is not required to, review any
transfer agreement in order to ensure that the transfer meets the
requirements of this article.
   (c) The Attorney General may charge a reasonable fee for the
filing of the transfer agreement as provided in this section.  The
fee shall be paid by the transferee.
   (d) This section does not apply to a transfer by a payee who is
not a resident of California at the time the payee executes the
transfer agreement.



10139.1.  Any subsequent transfer of any additional structured
settlement payments between the payee and transferee may be made only
after compliance with all of the requirements of this article.



10139.2.  Any notice required by this article shall be deemed to
have been given if addressed to the recipient's last known address
and deposited, first class postage paid, in the United States mail
not less than five calendar days prior to the date on which notice is
required.



10139.3.  (a) None of the provisions of this article may be waived.

   (b) Compliance with the requirements set forth in Sections 10136,
10137, and 10138 shall be solely the responsibility of the transferee
in any transfer of structured settlement payment rights.
   (c) A payee who proposes to make a transfer of structured
settlement payment rights shall not incur any penalty, shall not
forfeit any application fee or other payment, and shall not otherwise
incur any liability to the proposed transferee based on any failure
of that transfer to satisfy the requirements of Sections 10136,
10137, and 10138.
   (d) The transferee and any assignee shall be liable to the
structured settlement obligor and the annuity issuer for any and all
taxes incurred as a consequence of the transfer or as a consequence
of any failure of the transferee or assignee to comply with this
article or the terms of the structured settlement agreement.
   (e) Neither the annuity issuer nor the structured settlement
obligor may be required to divide any structured settlement payment
between the payee and any transferee or assignee or between two or
more transferees or assignees.



10139.4.  A violation of this article by a transferee shall
constitute an unfair business practice pursuant to Chapter 5
(commencing with Section 17200) of Part 2 of Division 7 of the
Business and Professions Code and shall be subject to the penalties
and other remedies of that chapter.



10139.5.  (a) A direct or indirect transfer of structured settlement
payment rights is not effective and a structured settlement obligor
or annuity issuer is not 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 based on express written findings by the court 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 that advice or knowingly waived that advice in
writing.
   (3) The transferee has provided the payee with a disclosure form
that complies with Section 10136 and the transfer agreement complies
with  Sections 10136 and 10138.
   (4) The transfer does not contravene any applicable statute or the
order of any court or other government authority.
   (5) The payee reasonably understands the terms of the transfer
agreement, including the terms set forth in the disclosure statement
required by Section 10136.
   (6) The payee reasonably understands and does not wish to exercise
the payee's right to cancel the transfer agreement.
   (b) Following a transfer of structured settlement payment rights
under this article:
   (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 if the transfer contravenes the terms
of the structured settlement for the following:
   (A) Any taxes incurred by those parties as a consequence of the
transfer.
   (B) Any other liabilities or costs, including reasonable costs and
attorney's fees, arising from compliance by those parties with the
order of the court or arising as a consequence of the transferee's
failure to comply with this article.
   (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 two, or more,
transferees or assignees.
   (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 article.
   (c) (1) An application under this article for approval of a
transfer of structured settlement payment rights shall be made by the
transferee and brought in the county in which the payee resides.
   (2) Not less than 20 days prior to the scheduled hearing on any
application for approval of a transfer of structured settlement
payment rights under this article, the transferee shall file with the
court and serve on all interested parties a notice of the proposed
transfer and the application for its authorization, and shall include
the following with that notice:
   (A) A copy of the transferee's application.
   (B) A copy of the transfer agreement.
   (C) A listing of each of the payee's dependents, together with
each dependent's age.
   (D) A copy of the disclosure required in subdivision  (b) of
Section 10136.
   (E) A copy of the annuity contract.
   (F) A copy of any qualified assignment agreement.
   (G) A copy of the underlying structured settlement agreement.
   (H) Notification that any interested party is entitled to support,
oppose, or otherwise respond to the transferee's application, either
in person or by counsel, by submitting written comments to the court
or by participating in the hearing.
   (I) Notification of the time and place of the hearing and
notification of the manner in which and the time by which written
responses to the application must be filed, which may not be less
than 15 days after service of the transferee's notice, in order to be
considered by the court.
   (d) All court costs and filing fees shall be paid by the
transferee.
   (e) No later than the time of filing the petition for court
approval, the transferee shall advise the payee of the payee's right
to seek independent counsel and financial advice in connection with
the transferee's petition for court approval of the transfer
agreement, and shall further advise the payee that if the payee
retains counsel, a licensed certified public accountant, or a
licensed actuary in connection with a petition for an order approving
the transfer agreement, that the transferee shall pay the fees of
the payee's counsel, accountant, or actuary, regardless of whether
the transfer agreement is approved, and regardless of whether the
attorney, accountant, or actuary files any document or appears at the
hearing on the application for transfer, in an aggregate amount not
to exceed one thousand five hundred dollars (,500).  The transferee'
s accountant, counsel, or actuary may not advise the payee.
   (f) The court shall retain continuing jurisdiction to interpret
and monitor the implementation of the transfer agreement as justice
requires.