Vegas Personal Injury Law Blog

A Structured Settlement allows a personal injury claimant to obtain cash over a period of time, rather than obtaining his settlement in a lump sum. Structured Settlements started in the late 1970′s, and they are a big business. Structured Settlements only apply to large personal injury cases, usually involving policy limits settlements of at least $100,000.00. A Structured Settlement is an annuity.

Voluntary Structured Settlements are used in personal injury cases in situations involving claimants that can’t manage their own finances.

In some instances involving minors and incompetents, a court will order that the client’s portion of a settlement must be placed in an income producing investment.

In the state of Nevada we have a Minor’s Compromise Statute which involves a form of Structured Settlement. The court must approve a minor child’s settlement and will enter an order that the child’s settlement must be placed in a FDIC insured bank account in the state of Nevada, until the minor child reaches the age of 18 years. These funds can only be removed from the block account by court order. The court will only order the release of these funds before the child turns 18 years of age, only for reasons involving the special educational or medical needs of the minor child.

As far as personal injury settlements are concerned, the client’s part of the personal injury settlement is usually divided into three types of compensation. One portion is for medical bills. Another portion is for pain suffering. These portions free from federal income tax. Compensation for lost income for IRS purposes is considered to be a gain and various IRS’s Codes apply. Also, some States have state income tax laws that also apply to these settlements. So, the income tax consequences of a settlement must be considered when establishing a Structured Settlement for a client, if a portion of his settlement is for loss of income.

Attorney fees can also be structured. If an attorney wants to defer paying income taxes on a portion of or all of his fees, he can use a Structured Settlement. One example would be if an attorney had a very large fee on a case, he could purchase a Structured Settlement that would pay him a fixed sum per month, or he could receive a lump sum after a fixed period of years. This may be a way for the attorney to defer some income tax to a point in time when he has a reduced tax exposure.

The pros of a Structured Settlement for a minor or incompetent involve avoiding exploitation of these settlement funds by individuals who are close to the claimant. Incompetents and minors may use a Structured Settlement as a vehicle to pay for ongoing medical needs resulting from their accidents.

If you have a client that can not manage his money; or, if a client’s age or socio economic status would indicate that he would blow a large lump sum settlement; or, if a client would make bad financial choices in investing his settlement, a Structured Settlement may be appropriate for these individuals. When a settlement involves an incompetent individual, there have been many prominent attorneys who have found themselves involved in a malpractice lawsuit, because they did not structure the client’s settlement and persons close to the claimant have taken off with their settlement funds.

The cons of a Structured Settlement are as follows:

1. As we all know bank accounts as well as other investments are currently paying low rates of interest at the present time. Therefore, this may not be the best time to opt for a Structured Settlement. However, most Structured Settlements will pay a much higher return than bank interest.
2. If a claimant chooses a Structured Settlement, there is no large chunk of cash for him to use for a down payment on a house, or to pay income taxes.
3. Structured Settlements can also be sold. The older Structured Settlements have a higher interest rate, and the company purchasing the Structured Settlement would receive an income stream higher than the current interest rates. Some states have restrictions on selling Structured Settlements.

Structured Settlements can be done in a hybrid form. The claimant can take some cash now and structure the remainder of the settlement.

Some factors to be considered in selecting an insurance company or investment company to write a Structured Settlement are as follows:

1. The financial strength of the insurance company should be considered. State Farm is the largest insurance company in the world, and State Farm writes reinsurance for most insurance companies. So a company like State Farm will be around long after other insurance companies have become insolvent, because of a catastrophic insurance event. Allstate, Farmers, CNA, and Geico are all solid companies that will write Structured Settlements. You should avoid any fly-by-night company because they may not be around in the future, or may not be solvent enough in the future to make the structured payments. We are all familiar with AIG. We almost lost this company due to their involvement with mortgaged backed securities.
2. A Structured Settlement is an annuity. As far as annuities are concerned, some can contain language of an assignment and release. These can be sold to a another insurance company which may be less solvent, because the original insurance company may not want long term payments on their books. Other Structured Settlements can’t be sold because they are designated as buy and hold.
3. Financial planners and bankers give us the impression that there is no fee on the Structured Settlements, however most brokers will receive a four percent commission that will be advanced by the insurance company, so that the original principal amount of the settlement stays the same.
4. One caveat concerning Structured Settlements is that it is unethical for a claimant’s attorney to take a kick-back from the person or entity that establishes the Structured Settlement.

Therefore, Structured Settlement annuities, even those that are mandated by a court order, must be carefully established to meet the specific needs and financial concerns of each client.

As a personal injury lawyer, I have seen how trends in personal injury claims handling and litigation have changed over the years.  In this electronic age, information and documents posted on social networks like Twitter, Facebook, and Myspace can potentially have a negative impact on personal injury claims.

Insurance Companies and defense attorneys are using these sites as a source to obtain damaging information about victims of personal injury accidents in their fight against compensating those victims for the personal injuries caused by their insureds.

If a person is involved in an automobile accident, he is likely to post some information concerning the accident, the injuries caused by the accident and how the injuries affected his life on a social networking site.  Insurance companies may find on these posts information that is favorable to them regarding how the accident happened, and/or they may find  information favorable to them concerning the development of injuries after an accident.  The more times that a story is told, the more likely that there will be inconsistencies.  Information posted on social networking sites may contradict subsequent accident and injury  reporting to insurance companies and to health care providers.  If contradictory information is obtained by an insurance company, this will certainly undermine the credibility of a personal injury claimant, and devalue his claim.

Credibility is an important factor to juries when they are asked to make decisions concerning an accident causing non-visible neck and back injuries. The general public has been well indoctrinated by insurance companies to get them to believe that all whiplash injuries are fraudulent.  A personal injury claimant’s credibility before a jury can be negatively impacted by photos and video of the claimant participating in physical or athletic activities after an accident. Any content that could portray a claimant in negative light should be taken off social media sites. The claimant should also have online friends refrain from posting this type of pictorial documentation from their own sites.

Posted information regarding illegal or immoral matters can be utilized by insurance companies and/or defense attorneys to put a personal injury claimant in a bad light and damage his character. A claimant must be very careful concerning what he posts. Google yourself to determine what content exists  that may compromise your claim. Think before your post, even on invitation-only sites. Don’t let anyone you don’t know become a friend after you make an accident claim.

Pictures or video of claimants riding motorcycles, motor boats, skateboards, bicycles or all terrain vehicles can undermine the value of their lawsuit or insurance claims.

The same guidelines should apply to the content of your e-mail accounts.

If you belong to 5 networks and have 100 friends on each network, potentially hundreds of thousands of people can view your posts; and, your posts may not be protected by privacy laws.

So,  personal injury claimants and litigants need to give sone thought to cleaning  up their social media pages after involvement in an injury producing accident.

Recently, I have had a number clients who have been involved in auto accidents where they have been partially at fault for an accident and have not been treated fairly by their own insurance company.

NRS 687B.385 states: “An insurer shall not cancel, refuse to renew, or increase the premium for renewal of a policy of motor vehicle insurance covering private passenger cars of commercial vehicles as a result of any claims made under the policy with respect to which the insured was not at fault.”

What is an “at-fault accident”?

This statute was interpreted by the Nevada Supreme Court in the case of State Division of Ins. vs. State Farm Mut. Auto. Ins. Co., 116 Nev. 290, 995 P.2d 482(2000).  This case interpreted NRS NRS 687B.385 to include accidents in which the insured was 50% at fault or less.  This case put NRS 687B.385 in conformance with NRS 41.141, Nevada’s comparative negligence statute.  This decision means that an insured is at fault for an accident when his liability for a two-vehicle  accident is exactly 50/50, even though he can still recover 50% of his damages from the other driver under NRS 41.141.

Therefore, an assessment of 50% liability (or more) by your insurance company for an accident as an at-fault accident and  will probably result in an increase in your auto insurance rates.  If you are involved in another at-fault accident, your policy will probably be cancelled. Let me give you a real life example.

A vehicle making a lefthand turn going southbound to eastbound at an intersection enters a very wide lane, and stays to the left hand side of that lane.  Another vehicle, at about the same time, traveling northbound makes a right hand turn and enters the same lane but stays to the right hand side of the same lane.  The driver of the vehicle on the right then comes face to face with roadway signs indicating that the roadway lane is narrowing and she must merge to the left.  She does so and collides with the other vehicle traveling on the left hand side of the lane.

Both drivers are insured by the same insurance company. The vehicle on the right was forced to merge left because the lane narrowed into a single lane width. Roadside hazard/warning signs forced the driver on the right to merge to her left. The vehicle on the left was already on the left side of the roadway and did not have to change it’s position within the lane to enter the narrowed portion of the lane.

Anyone reading this fact pattern would automatically assume that the driver on the right hand side of the travel lane is more at fault for this accident than the driver on the left.  However, the insurance carrier, who was the same company for both parties, determined liability at 50/50 and assessed both drivers with an at-fault accident and raised both drivers’ insurance rates.

The insurance company’s assessment of 50/50 liability for this accident is unrealistic because:

1. The driver on the left had no duty to anticipate the fact that the  driver on the right was going to swerve into her vehicle;
2. If the vehicle on the right did use her left hand turn signal, the vehicle on the left, could not see it because the vehicle on the right was not in front of her vehicle; and
3. The accident occurred eighty-six (86) feet east of the intersection where both vehicles entered the same roadway.

According to Nevada case law the adverse effect of a 50/50 assessment of liability will result in the increase of both drivers’ insurance rates for an at-fault accident.  In the event that there was  an assessment of 51/49 liability in favor of the driver on the left and against the driver on the right, the insurance company could not raise the rates for the driver on the left for an at fault accident.

Obviously, there is no exact science to assessment liability for any accident, however based on the facts and circumstances of this accident, a 50/50 liability assessment is completely unrealistic.

So, why did the insurance company raise the rates of both drivers? The only reason is for an economic benefit. Raising the rates of both drivers results in the insurance company recouping its losses for this accident more quickly from the increased insurance premiums from both drivers, as compared to raising the rates for only one driver. And, the insurance company only has to pay 50% of each party’s property damage, thus forcing the insured drivers to pay their own collision deductibles in order to have their vehicles repaired.

After the insurance company was asked to review the facts and circumstances surrounding this accident and to change it’s liability decision by one percent in favor of the vehicle on the left, they refused.

Now, if in the future, liability can be determined by a trier of fact in favor of the vehicle on the left, will the insurance company return the driver on the left’s increased premiums and collision deductible?  Did the insurance company act in bad faith concerning their liability apportionment decision?

Therefore, if you are in an at-fault accident where your insurance company assesses liability against you at 50/50 (or more), you will be assessed with an at fault accident. You should also  be aware of the adverse consequences of increased rates and cancellation of your policy.  You should also consult an attorney for legal advice concerning the insurance company’s decision.

If you or your children are involved with a fender bender accident where you are at fault, or partially at-fault, and  nobody is hurt, and law enforcement isn’t involved;  you should consider working out the property damage with the other driver to avoid increased insurance rates and/or cancellation of your policy.