(Guest Post by Casey Johnson, Esq. – Partner, Aitken – Aitken – Cohn)

“I thought I had done everything right to protect the plaintiff’s right to avail herself of the benefits of an annuity. However, during the informal negotiations, I had failed to specifically mention the right for the plaintiff to annuitize all or part of her settlement as a material term.”

 I thought I had done everything properly. I spent months diligently working up my case in preparation for mediation. I had consulted all of the necessary experts, obtained all of the necessary reports and had provided them to opposing counsel more than thirty days before the mediation, to ensure all of the decision-makers had adequate time to fully evaluate the case. Weeks prior to mediation I consulted with a structured settlement representative and confirmed that they would be present to discuss various settlement funding options with my client. A week before the mediation I reached out to opposing counsel to ask if they needed any additional information in order to ensure the mediation was as productive as possible. During this call, I expressed that we were committed to making a good faith attempt to resolve the matter, and would have a structured settlement consultant present at the mediation to help facilitate the process. I invited opposing counsel to have their own structured settlement consultant present as well.

The day of mediation arrived. The morning began with a private meeting in “our room.” Present were myself, my client and the structured settlement consultant. Shortly after the appointed start time for the mediation, the mediator arrived.   Introductions were exchanged, including the structured settlement consultant, who explained his role in the mediation.   Although I insisted from the get-go that we would only negotiate in present cash dollars, I confirmed that the structured settlement consultant would be working with my client to demonstrate how various settlement amounts could be structured to provide her security into the future.

The mediator had been specifically chosen due to his extensive experience and success in personal injury matters. During his introductory remarks, he was reassuring in his competence and familiarity with the process and asked if he could share that we had a structure present in our room. He was told to absolutely share this information, to help demonstrate our commitment to the process.

After four hours of painstaking negotiations, our structured settlement consultant had to leave for another matter, but advised that he would be available by phone should there be any further developments. After an additional two hours, the mediator ultimately provided a mediator’s proposal with a seven-day deadline to respond.

A Failed Proposal

The mediator’s proposal failed and several weeks later, informal negotiations resumed directly between counsel, it having been determined that the mediator’s actions at the conclusion of the mediation had frustrated, rather than facilitated the process. After back-and-forth negotiations, a settlement figure was agreed upon with “the details to be worked out.”

Defense counsel provided a proposed settlement release within a few days. I immediately reached out to opposing counsel and indicated that we would be providing the additional language relative to the annuity in the near future.   Opposing counsel responded that she was unaware of any such term of the settlement and that she had never been advised that a structured settlement was even being considered, either by myself or by the mediator during mediation. After consulting with her client (who happened to be self-insured) she confirmed that her client was not agreeable to purchasing an annuity for plaintiff. The long-negotiated settlement seemed destined to fall apart, there having been no true meeting of the minds, other than as to the amount of the settlement. “The details” had clearly not been worked out.

After more than six months of negotiations, including multiple conference calls with opposing counsel and the structured settlement consultant, the defendant finally relented and agreed to purchase an annuity for plaintiff with part of the settlement proceeds. I’ve settled hundreds of cases – usually with a structured settlement involved. I thought I had done everything right to protect the plaintiff’s right to avail herself of the benefits of an annuity. However, during the informal negotiations, I had failed to specifically mention the right for the plaintiff to annuitize all or part of her settlement as a material term.

Arm Yourself-and Your Client

Luckily, I was ultimately able to persuade defense counsel (and defendant) to purchase the annuity on behalf of my seriously injured and very likable client. However, the entire ordeal could have been avoided, had I implemented during informal negotiations the same “rule” I use in mediation.   By simply inserting the following language in the emails regarding the settlement discussions, and ultimate agreement on a figure, I could have saved me and my client a lot of heartache and delay:

 “Plaintiff or plaintiff attorney reserve the option to structure all or a portion of the settlement proceeds. Defendant shall coordinate with plaintiff’s settlement planner to ensure proper IRS language is included in the release and assignment agreement.”

Ideally, one should have a structured settlement consultant with them at the mediation.   Be sure to tell opposing counsel (preferably in writing) in advance of the mediation, and confirm with the mediator that the ability for the plaintiff to structure all or a portion of any ultimate settlement is a material term of negotiations. Get that right out on the table from the beginning, to help avoid an uncooperative defendant once the number is agreed upon. However, even if you do not have a structured settlement consultant with you at the mediation, if you do reach an agreement, ask the mediator to draft a provisional agreement (until the more formal agreement can be drafted) and insist that the language above be included. This is particularly true for attorneys who like to distance themselves from structured settlement consultants during the mediation process, to avoid any impression that they are eager to settle. If you follow the advice above, when it comes time to formalize the full terms of the agreement, opposing counsel cannot attempt to deny plaintiff the benefits of an annuity.

Thankfully, everything worked out well in the end for my client, but I regularly hear stories from attorneys who are unable to persuade defendants or defense counsel to incorporate a structure into the settlement. Don’t repeat my mistake or that of others.   Simply insist on the language above in any writing confirming settlement discussions or settlement, and you’ll be on your way to avoid unnecessary delays and hassles – and even a potential malpractice claim from a client.   Unfortunately, Traci Kaas was not working with me on this particular client. Had she been, I know she never would have allowed me to make such a mistake.