Ray Thomas, Jr. had been injured at work and received a settlement, his employer and their insurer agreed that he would receive payments from a purchased annuity. His insurer assigned American General Annuity Service Company (AGASC) to make the payments, and they purchased the annuity from American General Life Insurance Company (AGLIC).
Thomas wanted to transfer his rights to the periodic payments to a third party so that he could get a lump-sum payment. He contracted with DRB Capital, LLC. AGASC and AGLIC did not approve that, and in court argued that Thomas could not transfer his payment rights due to the language of the agreement. They also pointed to the Kentucky Structured Settlement Protection Act (SSPA), and claimed provision KRS 454.430 does not apply to structured settlements of workers’ compensation claims.
The Boyd Circuit Court approved the transfer of payment rights in his workers’ compensation structured settlement, saying that the SSPA does apply to workers’ compensation settlements and that it was in Mr. Thomas’ best interest to transfer the assignment.
The Court of Appeals heard the case and upheld the lower court’s decision. There was anti-assignment language in the agreement; however the Kentucky Supreme Court had previously ruled that language was enforceable before an occurrence of a covered loss, and not for assignments made after an occurrence. The Court said that he had a right to his periodic payments just like a creditor would.
There were dissenting judges who filed separate opinions that said they agreed with the decision that the SSPA is applicable to workers’ compensation settlements, but they did not agree that the anti-assignment language was unenforceable. Since the anti-assignment clause in this settlement was created after he had won his case and after damages had been assessed, it could be enforced. The Act prohibits enforcing anti-assignment clauses that are created before the chose in action arose, before the claim is asserted and settled, and before damages had been assessed. The dissenting judges thought the majority’s opinion was too broad. In the case cited in their decision the anti-assignment clause had pre-existed a covered loss. In the case at hand, the anti-assignment clause was created after the covered loss occurred, after he had won his claim and after damages had been assessed. The opinion of the dissenting judges is that when Mr. Thomas entered into the qualified assignment he became the beneficiary of the claim and not the owner, and no longer had the right to change the terms of the policy or create a new policy by making a new payment arrangement with DRB.
Read both decisions and facts of the case here.