Facing an Advanced-Stage Cancer Should Not Be Financially Devastating

For those facing a late-stage illness, your life insurance policy can be a source of much needed cash. One program is the Funds for Living and Giving (FLAG) program offered by Fifth Season Financial. Under the FLAG program, Fifth Season Financial will take over paying the premium on the life insurance policy, and will give the patient (the insured) a “substantial portion of the face value of that policy as an advance payment.” As soon as Fifth Season Financial assumes the role of administrator of the policy, it handles all of the remaining premium payments. Fifth Season’s President, Adam Balinsky notes “As we know, finding a cure for cancer is a difficult task. Finding a way to afford treatment, or maintain a good quality of life? That shouldn’t be difficult.”

The Litigation Funding and Transparency Act – Round 2

The Litigation Funding and Transparency Act has been reintroduced by Republican Senators Grassley (Iowa); Thom Tillis (N.C), JohnCronyn (Texas), and Ben Sasse (Nebraska).  This legislation would require parties in class action lawsuits to disclose third-party funding arrangements, positing that this transparency will head off potential conflicts of interest and bring accountability to the industry. A prior version of this bill was introduced in 2017, but failed to gain any traction.  The legislation is supported by in-house counsel for 30 major U.S. companies, including General Electric, AT&T, Chevron, Google, Johnson & Johnson, and others.  Some litigation companies, including Burford and Vannin Capital support limited disclosures, but find that the proposed legislation is overreaching and would permit defendants in legitimate lawsuits to gain an improper advantage.

Proposed Consumer Litigation Funding Legislation in NY

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New York State Senators Leroy Comie (D. 14th) and Michael Ranzenhofer (R. 61st) have co-sponsored new legislation that would subject consumer litigation funding transactions to state regulation – Senate Bill 3651 – The Consumer Litigation Funding Act.”.  A “same as” bill has been introduced in the New York Assembly by Assemblyman Erik M. Dilan (D. 54th). The proposed legislation, if passed, will require certain contract requirements,  consumer disclosures, and registration with the Secretary of State for consumer litigation funding companies.

Georgia Rules on Litigation Funding Agreements

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The Georgia Supreme Court recently ruled in Ruth v. Cherokee Funding, LLC, that funding provided to plaintiffs during a pending lawsuit is not a loan under Georgia law.  The court reasoned that since the funders did not expect repayment if the plaintiffs lost their lawsuits, the agreements were not loans under Georgia’s Payday Lending Act or the Industrial Loan Act.   This decision was a win for the litigation funding industry.  In an article in Legal News Line, executive director of the American Legal Finance Association was quoted as saying: “The American Legal Finance Association (ALFA) applauds the Georgia Supreme Court’s decision today recognizing the fundamental differences between pre-settlement advances and loans.”

CFPB Files Suit Against Pension Advance Companies

The Consumer Financial Protection Bureau filed a lawsuit in federal court in California in September 2018 against Scott Kohn, Future Income Payments, LLC, and a variety of related entities including:  FIP, LLC; BuySellAnnuity Inc.; Cash Flow Investment Partners LLC; Pension Advance LLC; Cash Flow Investment Partners East LLC; Cash Flow Investment Partners MidEast LLC; Lumpsum Pension Advance Atlantic LLC; Lumpsum Pension Advance Southeast LLC; Lumpsum Settlement West LLC; PAS California, LLC; PAS Great Lakes, LLC; PAS Northeast LLC; PAS Southwest LLC; Pension Advance Carolinas LLC; Pension Advance Midwest LLC; and Pension Loans South LLC.

The lawsuit alleges that these companies violated federal law by “representing to consumers that their pension-advance products were not loans, were not subject to interest rates, and were comparable in cost to, or cheaper than, credit card debt .”  These “pension advances” sold to retirees were actually subject to “interest rates” that were substantially higher than credit card interest rates.

NFL Concussion Litigation – Assignments of Awards Found Void

On December 8, 2017 Judge Anita Brody issued an “Explanation and Order” concluding that the anti-assignment language in the NFL Concussion Litigation Settlement Agreement “unambiguously prohibits” the class members from assigning their monetary awards rendering “any such purported assignment . . . void, invalid and of no force and effect.”  This finding was recently adopted by Judge Loretta A. Preska, Senior United States District Judge for the Southern District of New York in the case styled as Consumer Financial Protection Bureau and The People of the State of New York,  by Eric T. Schneiderman, Attorney General for the State of New York v. RD Legal Funding, LLC; RD Legal Finance, LLC; RD Legal Funding Partners, LP; and Roni Dersovitz, 17-cv-890 (S.D.N.Y. June 21, 2018).  Judge Preska stated: ” In sum, Judge Brody’s interpretation of the term “relating to” complies with New York contract law and basic principles of contract interpretation by giving meaning to the plain meaning of the phrase. Accordingly, the Court agrees with the Explanation and Order’s conclusion.  Accordingly, the Court agrees with the Explanation and Order’s conclusion.”

Keeping Track of Your Annuity Benefits

Recent news regarding the failure of insurance companies to keep track of those to whom it owes money makes it all the more important that consumers keep track of their benefits.  In December, 2017 MetLife revealed that it had failed to pay some 30,000 people to whom it owed retirement benefits.  In February, 2018 Prudential stated that it was also having difficulty locating certain retirees to whom it owed benefits. A lawsuit has been filed against MetLife in the wake of its failure to keep by a former employee of Martindale-Hubbell. Styled as a class action, the lawsuit alleges more than $500 million in damages. The action, styled as Roycroft v. Metlife, 18-cv-05481 is pending in federal court in the Southern District of New York.  The Commonwealth of Massachusetts, Securities Division, has also charged MetLife with fraud for making materially misleading statements in public filings causing harm to investors.

Maryland is the Epicenter of Structured Settlement Woes

Over the past year, Maryland has been front and center with regard to lawsuits focusing on the structured settlement secondary market.  Access Funding, LLC has been the subject of a lawsuit brought by the Maryland Attorney General, Brian Frosh.  A civil suit was also filed against Access Funding, alleging, among other things, unfair business practices.  Maryland has actively sought additional protections for structured settlement annuitants, including registration requirements for transferees.  Ultimately, better business practices are better for buyers, sellers, and investors. But, this story isn’t finished – there is surely more to come.

Life Settlements Resurrected

A recent article in the New York Times by Paula Span “Wringing Cash From Life Insurance” indicates that the life settlement market is resurrecting itself – moving away from the affluent market and “courting middle-class people who own policies with face values of $100,000 to $500,000.”  This could be good news for seniors looking for cash for medical expenses, or that once-in-a-lifetime trip around the world.

What’s Next? A Company to Manage the Nest?

The New York Times published an interesting article on May 30, 2017 – “After Divorce, Giving Our Kids Custody of the Home”.  It describes an interesting arrangement where a divorced couple keep the children in the family home, and the mom and dad move in and out of the family home according to a prearranged schedule.  One can’t help but wonder if the next step is the creation of a company – limited liability company or S-corp to manage the finances of the nest.  Could be a win-win for all involved.

Crowd Funding for Your Divorce – the new Litigation Finance

Litigation funding has moved into a new realm – crowd funding.  With the cost of a divorce estimated to be as much as $30,000.00, it is no wonder that formerly happy couples are looking for ways to finance their breakup. Several crowd funding websites have a section dedicated to divorce:  Plumfund and FundedJustice are two we recently looked at. This is definitely a new style of litigation funding. This definitely takes “litigation funding” to a new place.  The jury is out.

Edward Stone – Guest Speaker at Society of Settlement Planners Meeting

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Edward Stone was a guest speaker at the Society of Settlement Planners Annual Conference in Las Vegas on March 2, 2017.  Edward Stone and John Darer participated in a panel discussion on current developments in the structured settlement secondary market.

Litigation Follows COI Increases

Over the past few years a number of life insurers have raised annual cost of insurance charges (COI) in ways that many consumers once thought impossible.  For the most part, COI increases have targeted flexible premium universal life policies – the kind of life insurance policies that the insurance industry marketed as retirement savings vehicles.  Now, it turns out that flexible premiums are not so flexible after all.  Life insurance companies such as AXA, Voya Financial, Tranamerica, and William Penn/Banner have increased COI charges on universal life policies by as much as 200% sending shock waves through retirement communities across the nation and irking the life settlement industry, the secondary market purchasers of life insurance policies.

While the insurance companies point to contractual provisions in their policies permitting these increases as a justification for the hefty premium increases, more scrutiny is required and will inevitably follow.  Some of the recent lawsuits allege discrimination; others highlight the insurance industries infatuation with “shadow insurance” – a sneaky way for insurers to hold fewer assets in reserve by transferring liabilities to wholly owned captive insurers located in “regulation light” jurisdiction.

CFPB Files Suit Against Access Funding

The Consumer Financial Protection Bureau (CFPB) has filed suit in federal court in Baltimore accusing Access Funding of violations of the federal Consumer Protection Act.  Access Funding (now Reliance Funding) is a purchaser of structured settlement payment streams whose alleged predatory business practices involving people who had been poisoned by lead paint as children were exposed by investigative reporter Terrence McCoy of The Washington Post last summer.  Rep. Louise M. Slaughter (D-NY); Rep. Elijah E. Cummings (D-Md); Sen. Ben Cardin (D-Md); Sen. Barbara A. Mikulski (D-Md) and Sen. Edward J. Markey (D-Mass) all praised the CFPB effort to protect consumers who may have been victims of financial fraud by companies in the structured settlement industry.

This federal lawsuit follows on the heels of a similar lawsuit filed by Maryland Attorney General Brian Frosh in May, 2016.  The state court action filed by Attorney General Frosh is pending in Baltimore City Circuit Court. Frosh has pledged to work to “prevent vulnerable Marylanders from having their money taken from them through illegal practices.”

Law review note advocates fee shifting, not divorce funding

In an interesting twist, a note published in the Michigan Law Review “Eliminating Financiers from the Equation: A Call for  Court-Mandated Fee Shifting in Divorces”  advocates fee shifting as a way to “obviate the need for …financing firms that improperly profit from divorce and whose services come with many unwelcome strings attached.” While the proposed solution of fee shifting is novel, the problems the Note’s author cites as being associated with divorce funding are the same dredged up by all opponents to the many varieties of litigation funding:  interference with the attorney/client relationship; conflicts of interest; unreasonably high, potentially usurious fees; and the settlement deterrent. Given that many divorces involve out of court settlements, and no divorce attorney can take on a client on a contingency basis, court approved fee shifting is not likely to eliminate the need or the desire for a non-monied spouse to seek third party financing.

Is it time to sell your life insurance policy?

The annual costs of many “universal life” policies have skyrocketed in recent years.  While this isn’t real “news” – after all, financial advisers have been warning about this for years,  it is a real problem for retirees. Universal life insurance policies are a combination investment vehicle and insurance policy.  Many people bought universal life polices based on “illustrations” that indicated there would be enough profit on the money invested to cover the cost of rising premiums as the insureds aged. Unfortunately, that hasn’t been the case.  Many seniors now cannot afford to pay the ever-increasing premiums. Could it be time to sell your policy?

Third party litigation funding here to stay

Despite warnings from organizations like the U.S. Chamber Institute for Legal Reform that third party litigation funding will increase and prolong litigation, the financing of litigation and law firms seems here to stay.  Earlier this summer, Burford Capital Limited announced its plans to expand with several new business lines, and according to a recent study by Burford, 79% of lawyers polled think litigation finance is a useful tool. With litigation costs sky-rocketing it is no wonder that plaintiffs, defendants and the law firms that represent them are looking for new ways to finance their lawsuits.

NY upholds litigation finance fund’s suit against law firm

Ruling on a motion to dismiss, New York Supreme Court Justice Shirley Werner Kornreich refused to dismiss Hamilton Capital VII’s lawsuit against Khorrami LLP, a Los Angeles based plaintiffs firm. Justice Kornreich rejected claims that the financial arrangement amounted to illegal fee sharing and found the financial arrangement supported by public policy. “Modern litigation is expensive, and deep pocketed wrongdoers can deter lawsuits from being filed if a plaintiff has no means of financing her or his case. Permitting investors to fund firms by lending money secured by the firm’s accounts receivable helps provide victims their day in court.” Hamilton Capital VII, LLC v Khorrami, LLP, 2015 N.Y. Misc. LEXIS 2954, *20, 2015 NY Slip Op 51199(U), 9 (N.Y. Sup. Ct. Aug. 17, 2015).

New Medicaid Laws and the Life Settlement Industry

In a move that could save its Medicaid program millions of dollars, Texas recently enacted new legislation called the “Medicaid Life Settlement Law” that encourages seniors to sell their life insurance policies to pay for their custodial health care costs. The new Texas law allows individuals to enter the Medicaid program provided they  use the proceeds obtained from a life settlement for long term care expenses.   Similar bills are pending in several other states including California, Florida,  New Jersey and New York.  If passed, the modifications to the Medicaid rules should breathe new life into the life settlement industry, which has suffered in the last few years, both from a lack of capital and a lack of age appropriate sellers.

Policyholders benefit from these revised Medicaid laws and the new legislation legitimizes an industry that has often been criticized as being morbid and macabre.  A life settlement can provide much needed financial resources for seniors facing the daunting expenses of long-term care and allow them to choose their own care provider, while preserving dwindling state coffers.  The legislation also offers relief for families dealing with escalating nursing home costs.

Berkshire Hathaway buys Coventry Portfolio

In July, Berkshire Hathaway confirmed that it had purchased a life settlement portfolio with a face value of $300 million in face value from Coventry First for $60 million.  Most of the activity in the life settlement market has continued to be portfolio sales, but new developments on the horizon indicate that the market is rebounding. Stone Capital Assets has long predicted that insurance companies will be the biggest investors in the life settlement industry as they should understand long duration asset and liability matching as well as anyone.