HBA-NIK, ALS H.B. 3040 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 3040 By: Smithee Civil Practices 3/22/1999 Introduced BACKGROUND AND PURPOSE Structured settlements are currently used to provide long-term financial security to victims of serious injuries. A lump sum payment for compensation of serious personal injuries may be dissipated, leaving the injury victim to depend on state and federal assistance programs. A structured settlement permits an injury victim to continuously receive assured, tax-free payments of the settlement. Recently, specialized financing firms, sometimes known as "factoring companies," have promoted unregulated secondary market purchases of structured settlements payments from injury victims, often at significant discounts. H.B. 3040 regulates transfers of the structured settlement payments while upholding their fundamental purpose, ensuring long-term payments to the injured victim. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 3, Texas Insurance Code, by adding Subchapter K, Structured Settlement Protection Act, Article 3097, as follows: Article 3.97. STRUCTURED SETTLEMENT PROTECTION ACT. Sec. 1. CONDITIONS TO TRANSFERS OF STRUCTURED SETTLEMENT PAYMENT RIGHTS. Establishes that a direct or indirect transfer of structured settlement payment rights (payment rights) are not effective and provides that a structured settlement obligor (obligor) or annuity issuer is not required to make any payment directily or indirectly to any transferee of payment rights unless it is previously authorized in a final order of a court or responsible administrative authority that is based on a finding that: (a) the transfer complies with this Act and will not contravene any applicable law; (b) the transferee provided the payee with a specified disclosure statement, no less than 10 days before the payee first incurred any obligation with respect to the transfer; (c) the transfer was rendered appropriate by the payee or the payee's dependents; (d) the payee received independent legal advice relating to the legal, tax, and financial implications of the transfer; (e) the transfer was approved in writing by specified parties and governmental entities, and the original approvals were filed with the appropriate authority and furnished to all interested parties, if the transfer would contravene the terms of the structured settlement (settlement); and (f) the transferee gave written notice of the transferee's name, address, and taxpayer identification number to the annuity issuer and the obligor, and has filed a copy of the notice with the court or responsible administrative authority. Sec. 2. DEFINITIONS. Defines: (a) "annuity issuer," (b) "applicable law," (c) "dependents," (d) "discounted present value," (e) "favorable tax determination," (f) "independent professional advice," (g) "interested parties," (h) "payee," (i) "periodic payments," (j) "qualified assignment agreement," (k) "responsible administrative authority," (l) "settled claim," (m)"structured settlement," (n) "structured settlement agreement," (o) "structured settlement obligor," (p) "structured settlement payment rights," (q) "terms of the structured settlement agreement," (r) "transfer," (s) "transferee," and (t) "transfer agreement." Sec. 3. APPROVAL OF TRANSFERS. (a) Provides that an application for authorization of a transfer of payment rights must be made by the transferee and may be brought in the appropriate state court of original jurisdiction in the county in which the payee, the obligor, the annuity issuer, a party to the settlement agreement, or any other interested party resides or in any court or before any responsible administrative authority which approved the structured settlement agreement. (b) Requires the transferee to file with the court or responsible administrative authority and to serve on any governmental authority which approved the settlement and on all interested parties a notice of a proposed transfer of payment rights and the application for authorization of the transfer, no less than 20 days prior to the scheduled hearing on the application for authorization. Requires the notice to include other specified items. (c) Establishes that the interested parties have standing to raise, appear, and be heard on any matter relating to an application for authorization of a transfer of payment rights. Sec. 4. NO WAIVER; NO PENALTIES. (a) Prohibits the provisions of this Act from being waived. (b) Prohibits a payee who proposes to make a transfer of payment rights from incurring a penalty, forfeiting an application fee or other payment, or incurring any liability to the proposed transferee based on the transfer's failure to satisfy the conditions of Section 1 of this Act. Sec. 5. CONSTRUCTION. Prohibits this Act from being construed to authorize a transfer of payment rights in contravention of applicable law or to give effect to a transfer of payment rights that is invalid under the law. Sec. 6.EFFECTIVE DATE. Makes application of this Act prospective. SECTION 2.Effective date: September 1, 1999. SECTION 3.Emergency clause.