AMERICAN BAR ASSOCIATION
Young Lawyers Division
SPRING NATIONAL PUBLIC SERVICE
APRIL 30 – MAY 2, 2004
Structured Settlements 101
William T. Robinson, IV
Structured settlements are experiencing a Renaissance in tort litigation. In 2001,
structured settlement premium purchases by life companies to compensate tort victims
had increased 50 percent1 over the 1999 level.
The forces driving this growth are relatively easy to discern. During the late 1990s, the
stock market presented seemingly easy riches. Yahoo!, Enron, Global Crossing, and
hundreds of pointless dot-com companies planned to make a profit by selling a dollar for
Against this Ferrari backdrop, structured settlements appeared as eye-catching as a
How times change. Corporate fraud and high-profile bankruptcies have reminded people
of the value of guaranteed, tax-free investments.
Moreover, with interest rates likely to rise, during the coming years structured
settlements’ benefits to the plaintiff will become even more pronounced.
As if all this is not enough for plaintiff counsel, consider one more reason: There
is now precedent for a law firm being successfully sued by a former client for
allegedly failing to include the structured settlement option in negotiations.
That one suit – which involved a brain injury – cost the firm significant time,
embarrassment and a seven-figure settlement.
What is a Structured Settlement?
Formally recognized by the federal government since 1983, a structured settlement is a
voluntary agreement between the claimant and the defense under which the victim
receives a series of periodic payments. Unlike the investment income from traditional
lump-sum settlements, these periodic payments are not subject to federal taxation. This
is often one of the most appealing characteristics of a structured settlement.
A structured settlement may be the result of