Case Number: 19BBCP00167    Hearing Date: September 06, 2019    Dept: NCB

Superior Court of California County of Los Angeles

North Central District

Department B





Case No.:  19BBCP00167


Hearing Date: September 6, 2019 (cont. from June 21, 2019 and August 2, 2019)






This petition initially came for hearing on June 21, 2019 and August 2, 2019.  At the hearings, Petitioner’s counsel requested that this matter be continued.  The Court continued the matter to this date of September 6, 2019.

On May 7, 2019, Petitioner Peachtree Settlement Funding of California, LLC (“Petitioner”) filed the Petition for Approval for Transfer of Structured Settlement Payment Rights by and between Elliot Coy (“Transferor”) and Petitioner, pursuant to Insurance Code, §10134 et seq.  Transferor entered into an agreement for the settlement of a personal injury claim on December 7, 2011.  (Pet., ¶1.)

The petition and its initial accompanying documents provide that Petitioner seeks to purchase and Transferor seeks to sell certain periodic structured payments, including but not limited to: 120 monthly payments of $350.00 each, increasing at 3% annually, beginning on February 15, 2020 and ending on January 15, 2030.  (Pet., ¶2 at p.2.)  Transferor agreed to sell to Petitioner this lump sum and/or periodic structure payments as described in the purchase agreement for $18,543.37.  (Pet., Ex. B.)

In the amended documents (filed July 15, 2019), Petitioner seeks to buy and Transferor intends to sell: 120 monthly payments of $202.03 each, increasing at 3% annually, beginning on February 15, 2020 and ending on January 15, 2030.  (Am. Exs. A-B.)  Transferor agreed to sell to Petitioner this lump sum and/or periodic structure payments as described in the purchase agreement for $15,005.44.


“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).)”  (RSL Funding, LLC v. Alford (2015) 239 Cal.App.4th 741, 745.)

Procedurally, Insurance Code §10136(b) provides that 10 or more days before the payee executes a transfer agreement, the transferee shall provide the payee with a separate written disclosure statement, accurately completed with the information that applies to the transfer agreement in at least 12-point type.  Any notice required shall be deemed to have been given if addressed to the recipient’s last known address and deposited, first class postage paid, in the United States mail not less than 5 calendar days prior to the date on which notice is required.  (Ins. Code, §10139.2.)  Exhibit B to the Petition includes the separate disclosure documents and provides that Transferor received the disclosure at least 10 days prior to signing the agreement.

In accordance with Insurance Code §10139.5(f), Petitioner must file and serve numerous notices and other documents not less than 20 days prior to the scheduled hearing on any application for approval of a transfer of structured payment rights (Ins. Code §10139.5(f)(2)).  Petitioner has complied or not complied with these requirements as follows:

  1. A copy of the current petition (see Pet.)
  2. A copy of the transfer agreement (Pet., Ex. A; Am. Ex. A)
  3. Transferor states in his declaration that he has no minor dependents.  (Coy Decl., ¶8.)
  4. A copy of the disclosure statement (Pet., Ex. B; Am. Ex. B)
  5. A copy of the annuity contract and qualified assignment agreement, if available.  (Pet., Ex. C.)
  6. A copy of the underlying structured settlement agreement, if available.  In lieu of the settlement agreement, Transferor provides his affidavit stating that his attempts to locate the settlement agreement have been unsuccessful.  (Pet., Ex. D.)
  7. Proof of service showing compliance with the notification requirement, notification that any interested party is entitled to support or oppose the motion and notification of the time and hearing of this matter and when responses are due (Proof of Service).
  8. It has been over 5 years since Transferor entered this structured settlement.  (See Ins. Code, §10139.5(f)(2)(L); see Pet. at ¶1.)
  9. These petition was filed and served at least 20 days prior to the scheduled hearing in the county in which Transferor resides.  (Ins. Code §10139.5(f)(1)-(2).)  Further, Petitioner (the transferee) filed a copy of the petition with the California Department of Justice.  (Ins. Code § 10139; Proof of Service.)


  1. Relevant Insurance Code Provisions

This petition is governed by the California Insurance Code §§10134–10139.5.  Under Insurance Code §10137, a transfer of structured settlement payment rights is void unless a court reviews and approves the transfer and finds the following conditions are met:

  1. The transfer of the structured settlement payment rights is fair and reasonable and in the best interest of the payee, taking into account the welfare and support of his or her dependents.
  2. The transfer complies with the requirements of this article, will not contravene other applicable law, and the court has reviewed and approved the transfer as provided in Section 10139.5.
    1. The transfer is in the best interest of the payee, taking into account the welfare and support of the payee’s dependents.
    2. The payee has been advised in writing by the transferee to seek independent professional advice regarding the transfer and has either received that advice or knowingly waived that advice in writing.
    3. The transferee has provided the payee with a disclosure form that complies with Section 10136 and the transfer agreement complies with Sections 10136 and 10138.
    4. The transfer does not contravene any applicable statute or the order of any court or other government authority.
    5. The payee reasonably understands the terms of the transfer agreement, including the terms set forth in the disclosure statement required by Section 10136.
    6. The payee understands and does not wish to exercise the payee’s right to cancel the transfer agreement.            The transfer agreement is effective only upon approval in a final court order.  (Ins. Code § 10139.5(a).)   The court shall retain continuing jurisdiction to interpret and monitor the implementation of the transfer agreement as justice requires.  (Ins. Code, §10139.5(i).)
    7. Insurance Code §10139.5(b) also sets forth 15 factors to consider in determining whether the transfer is fair and reasonable and in the best interest of the payee.
  3. Pursuant to Insurance Code §10139.5(a), the Court must make the following express findings as to a transfer of structured settlement payment rights:
  1. Legal Standard

            A review of California case law reveals that what is in the “best interest” of the Transferor and what constitutes a “fair and reasonable” transfer are not well defined, and have not been examined in the context of this quite specific provision of the Insurance Code.  .  California’s law is one of numerous similar state laws that provide a process for court approval of these transactions in order to avoid a prohibitive federal tax that is imposed on such transactions where court-approval is not obtained.[1]  These state laws, and their interpretation by the Court provide guidance that is instructive to this Court’s inquiry regarding the fairness and reasonableness of the settlement.

            Based on the guidelines set forth in the Insurance Code, the Court is tasked with determining whether it is in the “best interest” of a person to give up his or her right to receive future payments under a structured settlement in exchange for a reduced sum of money.  (See In re Keena (N.J. Super. Ct. Law Div. 2015) 442 N.J.Super. 393, 395.)  “The court’s obligation is much more than merely inquiring into whether the payee is competent and has voluntarily entered into the agreement with knowledge of its consequences. It is not enough for the court to merely learn that the payee understands the consequences and the significant sacrifice being made through the sale. The court must make ‘express findings’ that the proposed sale is in the payee’s ‘best interest’ by somehow improving his or her life (or addressing an urgent need), making the loss of future income and the receipt of a lesser sum now akin to an investment in the future which will enhance his or her life in a meaningful way. This is the primary means by which to ‘optimize’ the lesser sum, namely, using it to augment the payee’s life’s circumstances in a manner that waiting for the money could never do.”  (Id. at 401-402.)[2]

            In essence, the Court’s duties reflect that of one in the role of parens patriae, i.e., it is in the “position of a guardian of a person who stands in the presumptive position of the defenseless recipient of a benefit.”  (In re Transfer Structured Settlement Payment Rights of Curto (2004) 2004 Pa. Dist. & Cnty. LEXIS 151, *3-4.)

  1. Analysis
  2. Payments and Discount Rate

The transfer agreement states that Transferor has agreed to sell: 120 monthly payments of $202.03 each, increasing at 3% annually, beginning on February 15, 2020 and ending on January 15, 2030.  This totals $27,792.48.  The future payments have a discounted present value equal to $24,001.03, which was calculated by applying a discount rate of 2.60%.  Transferor has agreed to accept $15,005.44 as the purchase price in exchange for the future payments.  The purchase price to be paid to Transferor was calculated using a discount rate of 12.23%.  (Pet., Ex. B.)[3]

    1. Berkshire Hathaway Life Insurance’s Response

On May 17, 2019, specially interested party Berkshire Hathaway Life Insurance Company of Nebraska (“Berkshire”) filed a response to the initial petition.  Berkshire explains that on January 1, 2017, BIFCO, LLC (a company affiliated with Berkshire and BHG Structured Settlement, Inc., which owns the contract) began a Hardship Exchange Program in which BIFCO will purchase structured settlement payment rights from Berkshire payees in limited cases.  With respect to Transferor, Berkshire states that BIFCO would apply a 6.5% annual discount rate and collect a $1,000 administrative charge for this transaction.  (Berkshire Response at p.3.)  Berkshire states that should Transferor be interested in the option of selling the payments to BIFCO, he can contact BIFCO’s counsel and BIFCO would at its sole expense prepare and file with the Court a separate petition.

Based on Berkshire’s response, the Court inquires whether Transferor has tested the market to determine whether other companies can provide Transferor with a better price for the sale of the right to periodic payments, such as Berkshire’s offer.


  • Transferor’s Declaration


A review of the declaration from Transferor reveals the following:

  1. Transferor believes it is in his best interest to make the transfer because the settlement was initially entered to compensate him for a personal injury claim.  (Coy Decl., ¶4.)  Transferor is currently 26 years old, single, and has no minor dependents.  (Id., ¶8.)  Transferor does not have any court ordered child support payments.  (Id.)  He is currently unemployed, but earns $3,598.12 per month from his annuity.  (Id.)  He states he is currently experiencing a financial hardship and intends to use the money from the proposed transaction to pay off a hospital bill in collections ($1,728.00), an auto loan ($5,251.00), and a credit card balance ($609.00).  He intends to use the remainder of the money to g o towards a new apartment and moving expenses, and to purchase a new prosthetic leg.  (Id., ¶11.)  Transferor has not completed any prior transactions. (Id., ¶9.)
  2. Transferor has been advised in writing to seek independent professional advice and has waived that advice. (Pet., Ex. E.)
  3. Petitioner provided a disclosure form that complies with Insurance Code §10136 and a transfer agreement that complies with Insurance Code §§10136 and 10138.  (Pet., Exs. A-B.)
  4. The transfer will not contravene any applicable statute, other government authority, or known order of the Court.  (See Ins. Code, §10139.5(a)(4).)
  5. Transferor understands the terms of the transfer agreement.  (See generally Coy Decl.)

Despite these finding, at this time, the Court cannot find that the transfer of the settlement payment rights is fair and reasonable and in the best interest of Transferor.  (Ins. Code §§ 10137; 10139.5(a)-(b).)  The Court is tasked with making express findings that the proposed sale is within the Transferor’s best interest and to ascertain whether the Transferor’s life will be changed for the better by receiving a substantially reduced sum now, rather than receiving the full amount later.  (Keena, supra, 442 N.J. Super. at 397.)

In addition, as noted above, the Court needs additional information about the calculation of the purchase price, the terms of the original obligation, the potential uses of the money, and the reasons why the money cannot otherwise be obtained by the Transferor at a lesser price.


Transferor is ordered to appear and explain why this transaction is in his best interest.  At the hearing, the Court may inquire of Transferor:

  1. Has Transferor compared offers from other companies to transfer/sell these portions of the structured settlement? In particular, has Transferor considered Berkshire’s offer and contacted BIFCO’s counsel?
  2. Does Transferor understand the transfer agreement and is in fact aware Transferor is receiving less money by selling now than waiting for the installment payments?
  3. Transferor indicates that Transferor has been advised by Petitioner to seek independent professional representation for legal, tax, and/or financial advice, and has waived that advice.  However, the Court inquires whether Transferor is aware and would like to exercise the right to seek such advice (from counsel, a licensed CPA, or a licensed actuary), for which Petitioner will pay up to an aggregate amount not to exceed $1,500.  (Ins. Code, §10139.5(h).)

The Court will make its determination on the Petition at the hearing.

DATED:  September 6, 2019                                                 ___________________________

                                                                                          John Kralik

                                                                                          Judge of the Superior Court

[1] Under federal law, the transferee of the structured settlement payment rights must pay a federal tax on the transaction of 40 percent of the factoring discount, unless the transferee obtain a judge’s approval of the transfer in advance in a qualified order. 26 USC § 5891(a), (b). See 26 USC § 5891(c)(4) (“factoring discount” is the excess of the aggregate undiscounted amount of structured settlement payments being acquired in the transaction over the total amount actually paid for those payments).

[2] As further stated by Judge Nelson C. Johnson in the Keena case:

The court must never lose sight of the fact that at the time the structured settlement was entered into the purpose was to create a degree of financial security for the injured person. Ordinarily, at the time a structured settlement payment schedule is established by a plaintiff, or a plaintiff’s parents and legal counsel, the purpose is to provide a degree of financial security, assuring that funds will be available at various benchmarks in a person’s life. In short, it is a good faith effort to save people from themselves, by insulating injured persons from the temptation to possibly squander their settlements, leaving them unable to provide for themselves or their dependents. This purpose, and the right of any competent adult to choose how best to handle his or her own finances, creates a tension that can only be resolved by engaging in, what is of necessity, a case-by-case assessment of that person’s situation and how the proposed transaction will benefit them long term.

Illustrative of categories of needs paid via the proceeds of such transactions which yield long-term benefits or address an urgent need, and which this court has approved over the years, are the following: (1) education expenses, (2) purchase of a home, (3) payment of debts that threaten continued occupancy of the payee’s dwelling, (4) payment of debts/fines that prevent a payee from being employable, (5) payment of non-routine medical expenses for the payee or a family member, (6) purchase of a vehicle critical to the payee’s ability to earn income, (7) retention of professional services needed to prevent a known harm, (8) wedding costs and expenses incurred in setting up a new household, (9) adoption costs and the expenses incurred in making arrangements for a new member of the payee’s family, and (10) funeral expenses of a loved one of the payee.

(In re Keena (N.J. Super. Ct. Law Div. 2015) 442 N.J.Super. at 398.)

[3] The initial transfer agreement states that Transferor has agreed to sell: 120 monthly payments of $350.00 each, increasing at 3% annually, beginning on February 15, 2020 and ending on January 15, 2030 (i.e., total $48,148.44).  The future payments have a discounted present value equal to $40,937.15, which was calculated by applying a discount rate of 2.80%.  Transferor agreed to accept $18,543.37 as the purchase price, which was calculated using a discount rate of 19.96%.  (Pet., Ex. B.)