Structured settlements: a winning business.

How many transactions in business today afford all parties a nearly equal opportunity to come out on top -- and all at once? The very nature of competition, whether it be in the marketplace, the boardroom, or all too often these days, in a court of law, would seem to demand that there be a winner and at least one big loser.

But the structured settlements business is all about resolving conflict and creating win-win conclusions to sticky, potentially very costly, disputes. All parties profit from structuring a long-term settlement, and even society-at-large wins because of the huge sums saved in circumvented court costs and other expenses bound to tax public coffers.

A range of structured settlement products are marketed by life insurance companies through networks of independent brokers. The goal of a structured settlement is to provide mutual benefit to all parties involved in a personal injury dispute. Acting on behalf of a property and casualty insurer or a self-insured company against whom a claim has been made, brokers seek to negotiate a structured settlement before the case goes to litigation or is resolved by lump-sum cash settlement.

Funded by a life insurance product such as a single premium immediate annuity, a structured settlement can put a lot more of the monies involved in a dispute into the pockets of the ones who most need it -- namely the plaintiffs or the injured parties. And it does it in a way that the recipients are assured of having needed funds available to them for many years to come.

At the same time, defendants in the action avoid the risk of a devastatingly large verdict. In fact, the insurer or the self-insured company generally purchases the structured settlement at a cost considerably less than would be required even for an outright cash settlement. In addition, brokers are able to demonstrate to a plaintiff in a personal injury case how by accepting, say, $1.5 million in a structured settlement can be of greater benefit over the long run than a $2 million one-time cash settlement. This benefit can even more dramatically be shown to apply when the dispute is headed into litigation where 40 percent or more of any verdict could be eaten up by legal fees normally paid, in large measure, by the plaintiff to his or her attorney.

Under a structure, an individual who has suffered injury receives set payments, at established intervals, for a period of time appropriate to his or her specific needs. In cases where individuals have become disabled and require costly, highly specialized medical care -- perhaps for the rest of their lives -- they can benefit from the long-term financial security provided by the structure. In fact, the average liability is paid out over 40 years. Moreover, in most personal injury cases, payments are income tax-free. And by resolving their suit with a structured settlement, injured persons don't risk altogether losing their cases at trial.

Another class of persons frequently protected by a structured settlement is dependent minors. In cases where a family's primary breadwinner is killed in an accident, and perhaps the surviving parent is seriously injured as well, structures provide funds necessary to insure financial security for the surviving child's (or childrens') future. Not only will the structure make available funds for mortgage payments and other living expenses, but in many cases, monies are specifically earmarked for the child's education. In such cases the structure may pay out for as long as 50 or 60 years.

In personal injury cases, a structure generally provides the injured party a steady stream of guaranteed, income tax-free funds carefully calculated to provide for his or her needs, typically through monthly payments. Studies of plaintiffs who have received either verdicts or lump sum settlements of tort actions totaling over $1 million have found that as many as 80 percent of such individuals completely deplete these funds within five years.

In addition, a structured settlement provides the plaintiff protection against the mismanagement of funds required for his or her very sustenance and ongoing medical care. In recent years, there have been reported a disturbing number of cases in which individuals who have received and dissipated large verdicts or settlements wind up as wards of the state, dependent on society to pay for the care that under a structure they would have almost certainly been able to afford themselves.

The use of structured settlements has become increasingly popular over the past decade as both personal injury verdicts and medical costs have skyrocketed. Litigation, we've all become painfully aware, is absolutely the most expensive, cumbersome way to resolve a dispute. And the tax advantage generally given to structured settlements makes a structure an attractive instrument -- particularly as investments are taxed at increasingly higher rates.

Another area in which structured settlements are now being very successfully employed involves disputes over liability for environmental cleanup. In its purest form, an environmental structured settlement is a property damage case. Examples include land or ground water pollution. The pollution has got to be cleaned up, and it is usually very costly and can take a long time to correct the damage. Some life insurance companies also provide environmental structured settlements in third-party toxic tort cases, which, for example, might involve a person who lives near a polluted site and has been stricken with cancer.

It has been estimated that close to 90 percent of the money that insurers pay for environmental clean-up o hundreds of millions of dollars each year o is spent not in dealing with the problem but rather on legal fees to contest liability. An environmental structured settlement puts an end to the legal dispute between insurers and insured parties and maximizes the funds available for cleaning up a polluted site or offsetting a victim's damages. By putting a structure in place, there is a guarantee that the money designated for clean up will be put to its intended use. This type of structure also protects the community-at-large.

Overall, the structured settlements industry is poised for continued vigorous growth and prosperity as the millennium approaches. Pending changes in tax rules are likely to create new markets for structured settlements companies. An anticipated change in Section 130 of the Internal Revenue tax code may enhance companies' ability to structure workers' compensation claims. Once property and casualty companies are able to assign their liabilities in workers' compensation cases, as they now do in personal injury cases, the market for structured settlements could double. An estimated $3 billion in workers' compensation claims that could be candidates for structured settlements are currently paid out each year.

The structured settlements industry is a comparatively young one. In many ways it is still evolving, seeking to be ever more responsive to the needs of its customers.

Tony Wilkey, an eight-year veteran of the structured settlements industry, is vice president and director of marketing for Transamerica Life Companies Structured Settlements line.