Pat Hindert and John Darer have both written about legislation proposed in West Virginia that would radically alter the current law there, as well as depart from the national model act and standards used in most states. As identified by Hindert, the proposed law, HB 4380, has three essential elements:

• Mandating that a guardian ad litem be appointed for every prospective seller
• Changing the standard for approval from “best interests” to requiring clear and convincing evidence that the transfer is to avoid a financial hardship (and is in the seller’s best interest), and
• Imposing a rate cap for discount rates equal to the average mortgage rate for 20 year mortgages (the average rate is thought to be around 6%, but the state Banking Commissioner has indicated that they do not track that and don’t want to).

Contrary to John Darer’s position, in my opinion none of these would be good for tort victims. In fact, each prong of this proposed new law effectively shuts the courthouse doors on tort victims who will never have their chance to sell structured settlement payments when they need to. They are also just bad public policy. ALL sellers would have to have a guardian ad litem appointed, irrespective of their sophistication or understanding. For the non-lawyers who read this, a guardian ad litem is a court appointed person, usually a lawyer, who is supposed to essentially act as that person’s parent in the matter before the court. (“A guardian ad litem is a special guardian appointed by the court in which a particular litigation is pending to represent an infant, ward or unborn person in that particular litigation…” Black’s Law Dictionary, 6^th Ed.). How insulting to tort victims. Does being a tort victim mean you are not capable of making your own decisions? Or is it because you are a structured settlement recipient? What does that imply about structured settlement recipients? Sure, some tort victims are truly not capable of making financial decisions, and the courts of West Virginia, like courts everywhere, already have the inherent power to appoint guardians ad litem in those cases. But should it be mandatory for all sellers, irrespective of their individual status?

Only sellers needing money to avoid “financial hardship” would be able to sell future payments under the proposal. This is vastly different from the common “best interest” standard, and again would restrict which West Virginians would be able to even make it into the courtroom to tell their story. Is getting a new prosthetic leg “avoiding a financial hardship”? Probably not. How about being able to attend college or a trade school. Again, most likely not. Should structured settlement recipients be able to sell their asset, future payments, to do these things. Maybe. But under the proposed law, they would never get to make that case, under any circumstances.

The “rate cap” is probably the most clear evidence of what this bill is really about. If the rate is capped at 6%, then the structured settlement factoring market in West Virginia is closed. Period. All funding companies in this business must borrow money to use in funding. 6% is far below the rate at which we can borrow, so each transaction would start at a loss, and just get worse. Don’t forget, we would also need to pay the guardian ad litem, and the attorney bringing the action, not to mention covering our overhead, and making a reasonable profit. Under this proposal, we would never get to this level of analysis, because a large “Closed for Business” sign would be hung at the West Virginia border. Customers like “Mr. Smith” (real person, real West Virginian, fake name for this article), a retired Veteran, would not have been able to sell some of his future payments to buy an oxygen machine to help him breathe.

What is this bill really about? Delegate Walters, the key sponsor and a structured settlement broker, has made it very clear that this is really about putting the factoring companies out of business in West Virginia. His bill would do just that. If that is the goal, then let’s debate that issue directly and not dress it up in all this costuming, pretending to be “consumer protection”. But, if the factoring companies are out of business in West Virginia, then West Virginians with structured settlements are out of luck when they experience a life change, not anticipated at the settlement table. They will no longer enjoy the same financial freedom and flexibility as their neighbors in Virginia, Ohio or Pennsylvania.

HB 4380 is bad law and bad policy, and everyone, including the NSSTA and Mr. Darer, should oppose it.