RSL Funding, LLC v. Alford

(Trial Court's Order to Divide Structured Settlement Payments Over Insurer's Objection Violates the Structured Settlement Protection Act)

In RSL Funding, LLC v. Alford, 239 Cal. App. 4th 741 (August 18, 2015), the California Court of Appeal reversed the “trial court's approval of an order directing the transfer of structured settlement payments to plaintiff and respondent RSL Funding, LLC (RSL).

Defendant Felicia Alford, then a minor, entered into a settlement in 1994 (by her guardians) for her personal injury claim against State Farm's insureds. A court order approved the settlement, which directed State Farm to provide an annuity with specified structured payments to Ms. Alford ($10,000 annually from August 11, 2003 through August 11, 2006; $50,000 on August 11, 2009; $100,000 on August 11, 2016; and $151,558.80 on August 11, 2021).

Ms. Alford then entered into two contracts with RSL, assigning a portion of her future payments in exchange for present payments. In July 2012, she received $30,000 in exchange for $50,000 of the August 11, 2016 payment. RSL then assigned its payment to Extended Holdings, Ltd. (“EHL”). In a 2012 order, the trial court approved the transfer, which State Farm did not contest. In July 2013, she received $22,500 in exchange for assigning to RSL $25,000 each from the August 11, 2016 payment and from the August 11, 2021 payment. RSL filed a petition for the court to approve this transfer. State Farm opposed the petition on the grounds that “(1) the proposed transfer would violate a California statute (Ins. Code, § 10139.5, subd. (e)(3)), which provides that an annuity issuer and settlement obligor may not be required to divide payments, and (2) the proposed transfer would materially increase State Farm's burdens and risks.” The trial court approved the transfer petition.

The Court of Appeal applied a de novo standard of review on appeal.

The Court summarized the relevant provisions of the Structured Settlement Protection Act:

The California Legislature has adopted the Structured Settlement Protection Act (SSPA) (§ 10134 et seq.) to protect structured settlement payees from exploitation by factoring companies. Annuity issuers and structured settlement obligors are defined as “'interested parties'” under the SSPA (§ 10134, subd. (g)), and as such, are entitled to notice of petitions to authorize transfer of payments under a structured settlement agreement. (§§ 10139, subd. (a), 10139.5, subd. (f)(2).)

A transfer to a...