Exchange of Structured Settlement Payments for Lump Sum Was Invalid

In re Rapid Settlements v. Symetra Assigned Benefits Serv. Co. (June 5, 2006)

In two unrelated cases, settling defendants purchased annuities from Washington insurer Symetra Life Insurance Company to fund structured settlements with North Carolina beneficiaries. The beneficiaries then agreed with factoring company Rapid Settlements, Ltd., to exchange their rights to some of the future periodic payments for lump sum payments. Over insurer Symetra’s objection, Rapid Settlements obtained court approval of the exchanges in accordance with Washington law. But the court of appeals consolidated appeals by Symetra and reversed on two alternate grounds.

First, the court held that the transfers violated the Washington Structured Settlement Protection Act, chapter 19.205 RCW, as well as North Carolina law. One violation was Rapid Settlements' failure to provide a disclosure statement setting forth all the structured payments to be “encumbered.” Rapid Settlements' disclosure set forth only the transferred payments. The court found that provisions of the transfer agreement, such as a grant of power of attorney, a right of first refusal, and a penalty provision, encumbered all the future periodic payments, not just those transferred. Second, the court held that anti-assignment clauses in the settlement and annuity agreements were enforceable by Symetra.