The Superior Court of Los Angeles County, California issued an order denying a petition seeking court approval for the transfer to factoring company Fortress Funding LLC of an applicant’s rights to payments under a workers’ compensation settlement according to the report on the Corporate Counsel website. In the matter styled In Re Rudy Andrade, No. BS139876, Superior Court Judge Amy D. Hogue held that the issuer of the annuity that funded the settlement payments was an interested party with standing to appear and oppose the petition, and that, based on the arguments in the annuity issuer’s opposition, the petition was denied.

It is not uncommon in large workers’ compensation or personal injury cases to resolve the claim by way of a structured settlement. The settlement is typically funded by an annuity purchased from another insurance company for a lump sum of money. The annuity pays a regular benefit to the claimant over his or her lifetime, and may even offer a residual payment to the heirs of the claimant. There are advantages to a structured settlement for both parties. The lump sum paid by the carrier is less than the total aggregate of future payments, thus there is cost savings. The carrier no longer has to keep an open file as the future payments are paid directly by the annuity company. The applicant receives an aggregate dollar settlement higher than what the workers’ compensation benefit would have been. And, the annuity payments are tax free.

However, after a structured settlement, some applicants have second thoughts, and want to get a lump sum of cash for their structured settlement. Indeed, there are financial companies advertising on television offering cash for assignment of a structured settlement (for a deep discount of course). It would appear that the petition of Rudy Andrade is an example of such cases. Fortress Funding LLC was seeking to buy out his annuity funded structured settlement for a discount of 13.48%. An agreement such as this requires court approval pursuant to the California Structured Settlement Act. In this case the annuity company opposed the petition, and the Superior Court denied the petition to transfer the annuity to Fortress Funding LLC..

n its opposition, the annuity issuer argued, among other things, that:

• The California structured settlement transfer act, Cal. Ins. Code § 10134 et seq., under which the petition was brought, did not apply to transfers of workers’ compensation payments.
• The proposed transfer contravened the California Labor Code § 4900 prohibiting assignment of workers’ compensation payments.
• The proposed transfer would be contrary to California common law, as the compromise and release agreement signed by the payee expressly prohibited assignment of the payments.
• The proposed transfer would be contrary to a prior order of the Workers’ Compensation Appeals Board of the State of California, which approved the underlying workers’ compensation compromise and release agreement that expressly prohibited assignment of the payments.
• The factoring transaction involved a transfer with an effective annual discount rate of 13.48%, and did not appear to be in the payee’s best interest.
• The payee had no rights to the annuity that funded the workers’ compensation payments, and could not lawfully assign the annuity payments.