Law Times

Law TiMes • March 29, 2010 BriEF: STrUCTUrED SETTlEMENTS PAGE 13 globe a reminder of how fragile their financial holdings can be. Bob Nigol, managing part- Some lawyers reluctant despite popularity of structures R BY ROBERT TODD Law Times ecent market turbu- lence has certainly giv- en investors across the ner of Henderson Structured Settlements Inc., understands the importance of secure in- vestments for vulnerable indi- viduals set to receive large pay- outs after suffering a serious personal injury. And he says the market crash of 2008 has made structures more popular than ever. These settlements are avail- able only to individuals receiv- ing compensatory damages for a personal injury. They aim to provide an incentive to vulner- able people receiving damages to ensure they have enough money to meet their needs throughout their lives. At the same time, by introducing legislation permitting this fi- nancial tool, the government wanted to reduce the chance that such people would need to rely on social assistance in the future. So while structures don't produce the "spiked" rates of return that other financial products might, Nigol notes they come with the added ben- efit of being tax-free. "Structured settlements are imperative, or absolutely es- sential, to people who have been made vulnerable by in- jury because they really can't be lost," Nigol says. "They offer rates of return that really can't be matched in the current en- vironment, net of tax." But structures haven't blos- somed to the same degree in every jurisdiction, Nigol points out. His firm recently opened an office in British Columbia, where there has been much res- ervation about the advantages of structures, he says. But that viewpoint shifted once the fi- nancial crisis took hold in late 2008. "If intelligent lawyers rep- resenting the vulnerable have seen their portfolios decreas- ing by 30, 40 per cent, then the whole notion of advocating something that will preserve scarce resources for their clients is that much more enhanced," says Nigol. "Again, structured settlements are the right thing, and that has never been made clearer than the financial de- bacle of 2008." Douglas Mitchell, presi- dent of Structured Settlements Group Inc., notes the financial crisis continues to slow the process that leads to settle- ment, which he suggests is due to companies that still find themselves in a cash-strapped position. This dynamic is cer- tainly not as engrained as it was in 2009, says Mitchell, but settlements are still far slower to reach compared to 2007. He envisions a "gradual return" to the previous timelines. Untitled-4 1 Ralph Fenik, president of McKellar Structured Settle- ments Inc., says many lawyers continue to be misinformed about the performance of struc- tures. He often hears lawyers suggesting structures will yield no more than 2 1/2 per cent when in fact 30-year returns can be as high as 4.6 per cent. Fenik says that perception can prove problematic to struc- And that can be the largest roadblock for structures firms, says Fenik. Quite simply, he has no way of demonstrating the potential benefits of his product if he never gets the opportunity to present it to people receiving settlements. That's why he urges lawyers to, at a minimum, pre- serve structures as an option for their clients. John Rousseau, a principal vastly different than the level of risk that an injured person can afford to take with settlement money that's designed to replace their salary or pay their medical expenses," says Rousseau. "When I was a boy growing up, I learned that it's fine to go play poker on a Saturday night, but you don't bet the grocery money. For most plaintiffs, their settlements are the gro- When I was a boy growing up, I learned that it's fine to go play poker on a Saturday night, but you don't bet the grocery money. For most plaintiffs, their settlements are the grocery money or, worse still, the medical expense money. tured settlement firms and cli- ents alike. "If the lawyers don't recognize the level of yield, they may not even want to raise the issue of structuring with their client, which could be a mistake whereas they might otherwise at least preserve the option for the client to have the right to structure and negotiate that as a condition of the settlement." at McKellar, says he's often surprised at lawyers who don't recognize the difference be- tween their own financial strat- egy and that of their clients in settlement cases. "If I'm a lawyer and I'm earning a reasonable income, the level of risk that I can af- ford to take on myself in terms of my investment is going to be cery money or, worse still, the medical expense money. So their risk tolerance is basically nil in most cases." Rousseau, who is a lawyer, says there is a potential for re- percussions for plaintiffs' coun- sel who fail to present struc- tures as an option in settlement proceedings. While he's not aware of any Canadian lawyers facing consequences on that basis, a Texas case could serve as a warning. In the Grillo v. Pettiete case, the plaintiff's lawyers had brought in a $2.5-million medical malpractice settlement paid out in a lump sum. The plaintiff later claimed the law- yers didn't tell her the defence had offered a structured settle- ment on the claim and that the lawyers had failed to make their own structured-settlement pro- posal on her behalf. They ended up settling the legal malpractice claim for $1.6 million. "I've got a number of very sophisticated plaintiffs' counsel out there who take the position that they want a structure pro- posal on any significant file," says Rousseau. "Even if they think that the plaintiff is going to want the cash, the lawyers want the comfort of having obtained the structure proposal from us and put it in front of the client." LT The McKellar Structured Settlement™ www.lawtimesnews.com 3/23/10 11:05:43 AM

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