STRUCTURED SETTLEMENT

A structured settlement is a financial or insurance arrangement, including periodic payments, that a claimant accepts to resolve a personal injury tort claim or to compromise a statutory periodic payment obligation. Structured settlements were first utilized in Canada and the United States during the 1970s as an alternative to lump sum settlements. Structured settlements are now part of the statutory tort law of several common law countries including Australia, Canada, England and the United States. Although some uniformity exists, each of these countries has its own definitions, rules and standards for structured settlements. Structured settlements may include income tax and spendthrift requirements as well as benefits. Structured settlement payments are sometimes called “periodic payments.” A structured settlement incorporated into a trial judgment is called a “periodic payment judgment."

Structured Settlements in the United States

The United States has enacted structured settlement laws and regulations at both the federal and state levels. Federal structured settlement laws include sections of the (federal) Internal Revenue Code^[1]. State structured settlement laws include structured settlement protection statutes and periodic payment of judgment statutes. Medicaid and Medicare laws and regulations affect structured settlements. To preserve a claimant’s Medicare and Medicaid benefits, structured settlement payments may be incorporated into “Medicare Set Aside Arrangements” “Special Needs Trusts."

Structured settlements have been endorsed by many of the nation's largest disability rights organizations, including the American Association of People with Disabilities ^[2] and the National Organization on Disability ^[3].

Definitions

The United States definition of “structured settlement” for federal income taxation purposes, found in Internal Revenue Code Section 5891(c)(1) (26 U.S.C. § 5891(c)(1)), is an "arrangement" that meets the following requirements:

• A structured settlement must be established by:
  • A suit or agreement for periodic payment of damages excludable from gross income under Internal Revenue Code Section 104(a)(2) (26 U.S.C. § 104(a)(2)); or
  • An agreement for the periodic payment of compensation under any workers’ compensation law excludable under Internal Revenue Code Section 104(a)(1) (26 U.S.C. § 104(a)(1)); and
• The periodic payments must be of the character described in subparagraphs (A) and (B) of Internal Revenue Code Section 130(c)(2) (26 U.S.C. § 130(c)(2))) and must be payable by a person who:
  • Is a party to the suit or agreement or to a workers' compensation claim; or
  • By a person who has assumed the liability for such periodic payments under a qualified assignment in accordance with Internal Revenue Code Section 130 (26 U.S.C. § 130).

Legal Structure

The typical structured settlement arises and is structured as follows: An injured party (the claimant) settles a tort suit with the defendant (or its insurance carrier) pursuant to a settlement agreement that provides that, in exchange for the claimant's securing the dismissal of the lawsuit, the defendant (or, more commonly, its insurer) agrees to make a series of periodic payments over time. The insurer, a property/casualty insurance company, thus finds itself with a long-term payment obligation to the claimant. To fund this obligation, the property/casualty insurer generally takes one of two typical approaches: It either purchases an annuity from a life insurance company (an arrangement called a "buy and hold" case) or it assigns (or, more properly, delegates) its periodic payment obligation to a third party which in turn purchases an annuity (which arrangement is called an "assigned case").

In an unassigned case, the property/casualty insurer retains the periodic payment obligation and funds it by purchasing an annuity from a life insurance company, thereby offsetting its obligation with a matching asset. The payment stream purchased under the annuity matches exactly, in timing and amounts, the periodic payments agreed to in the settlement agreement. The property/casualty company owns the annuity and names the claimant as the payee under the annuity, thereby directing the annuity issuer to send payments directly to the claimant. If any of the periodic payments are life-contingent (i.e., the obligation to make a payment is contingent on someone continuing to be alive), then the claimant (or whoever is determined to be the measuring life) is named as the annuitant or measuring life under the annuity.

In an assigned case, the property/casualty company does not wish to retain the long-term periodic payment obligation on its books. Accordingly, the property/casualty insurer transfers the obligation, through a legal device called a qualified assignment, to a third party. The third party, called an assignment company, will require the property/casualty company to pay it an amount sufficient to enable it to buy an annuity that will fund its newly accepted periodic payment obligation. If the claimant consents to the transfer of the periodic payment obligation (either in the settlement agreement or, failing that, in a special form of qualified assignment known as a qualified assignment and release), the defendant and/or its property/casualty company has no further liability to make the periodic payments. This method of substituting the obligor is desirable for property/casualty companies that do not want to retain the periodic payment obligation on their books. Typically, an assignment company is an affiliate of the life insurance company from which the annuity is purchased.

An assignment is said to be "qualified" if it satisfies the criteria set forth in Internal Revenue Code Section 130 [1]. Qualification of the assignment is important to assignment companies because without it the amount they receive to induce them to accept periodic payment obligations would be considered income for federal income tax purposes. If an assignment qualifies under Section 130, however, the amount received is excluded from the income of the assignment company. This provision of the tax code was enacted to encourage assigned cases; without it, assignment companies would owe federal income taxes but would typically have no source from which to make the payments.

MESOTHELIOMA

Mesothelioma is a form of cancer that is almost always caused by previous exposure to asbestos. In this disease, malignant cells develop in the mesothelium, a protective lining that covers most of the body's internal organs. Its most common site is the pleura (outer lining of the lungs and internal chest wall), but it may also occur in the peritoneum (the lining of the abdominal cavity), the heart,^[1] the pericardium (a sac that surrounds the heart) or tunica vaginalis.

Most people who develop mesothelioma have worked on jobs where they inhaled asbestos particles, or they have been exposed to asbestos dust and fiber in other ways. Washing the clothes of a family member who worked with asbestos can also put a person at risk for developing mesothelioma.^[2] Unlike lung cancer, there is no association between mesothelioma and smoking.^[3] Compensation via asbestos funds or lawsuits is an important issue in mesothelioma (see asbestos and the law).

The symptoms of mesothelioma include shortness of breath due to pleural effusion (fluid between the lung and the chest wall) or chest wall pain, and general symptoms such as weight loss. The diagnosis may be suspected with chest X-ray and CT scan, and is confirmed with a biopsy (tissue sample) and microscopic examination. A thoracoscopy (inserting a tube with a camera into the chest) can be used to take biopsies. It allows the introduction of substances such as talc to obliterate the pleural space (called pleurodesis), which prevents more fluid from accumulating and pressing on the lung. Despite treatment with chemotherapy, radiation therapy or sometimes surgery, the disease carries a poor prognosis. Research about screening tests for the early detection of mesothelioma is ongoing.

Signs and symptoms

Symptoms of mesothelioma may not appear until 20 to 50 years after exposure to asbestos. Shortness of breath, cough, and pain in the chest due to an accumulation of fluid in the pleural space are often symptoms of pleural mesothelioma.

Symptoms of peritoneal mesothelioma include weight loss and cachexia, abdominal swelling and pain due to ascites (a buildup of fluid in the abdominal cavity). Other symptoms of peritoneal mesothelioma may include bowel obstruction, blood clotting abnormalities, anemia, and fever. If the cancer has spread beyond the mesothelium to other parts of the body, symptoms may include pain, trouble swallowing, or swelling of the neck or face.

These symptoms may be caused by mesothelioma or by other, less serious conditions.

Mesothelioma that affects the pleura can cause these signs and symptoms:

• chest wall pain
• pleural effusion, or fluid surrounding the lung
• shortness of breath
• fatigue or anemia
• wheezing, hoarseness, or cough
• blood in the sputum (fluid) coughed up (hemoptysis)

In severe cases, the person may have many tumor masses. The individual may develop a pneumothorax, or collapse of the lung. The disease may metastasize, or spread, to other parts of the body.

Tumors that affect the abdominal cavity often do not cause symptoms until they are at a late stage. Symptoms include:

• abdominal pain
• ascites, or an abnormal buildup of fluid in the abdomen
• a mass in the abdomen
• problems with bowel function
• weight loss

In severe cases of the disease, the following signs and symptoms may be present:

• blood clots in the veins, which may cause thrombophlebitis
• disseminated intravascular coagulation, a disorder causing severe bleeding in many body organs
• jaundice, or yellowing of the eyes and skin
• low blood sugar level
• pleural effusion
• pulmonary emboli, or blood clots in the arteries of the lungs
• severe ascites

A mesothelioma does not usually spread to the bone, brain, or adrenal glands. Pleural tumors are usually found only on one side of the lungs.

Diagnosis

CT scan of a patient with mesothelioma, coronal section (the section follows the plane that divides the body in a front and a back half). The mesothelioma is indicated by yellow arrows, the central pleural effusion (fluid collection) is marked with a yellow star. Red numbers: (1) right lung, (2) spine, (3) left lung, (4) ribs, (5) descending part of the aorta, (6) spleen, (7) left kidney, (8) right kidney, (9) liver.

Diagnosing mesothelioma is often difficult, because the symptoms are similar to those of a number of other conditions. Diagnosis begins with a review of the patient's medical history. A history of exposure to asbestos may increase clinical suspicion for mesothelioma. A physical examination is performed, followed by chest X-ray and often lung function tests. The X-ray may reveal pleural thickening commonly seen after asbestos exposure and increases suspicion of mesothelioma. A CT (or CAT) scan or an MRI is usually performed. If a large amount of fluid is present, abnormal cells may be detected by cytology if this fluid is aspirated with a syringe. For pleural fluid this is done by a pleural tap or chest drain, in ascites with an paracentesis or ascitic drain and in a pericardial effusion with pericardiocentesis. While absence of malignant cells on cytology does not completely exclude mesothelioma, it makes it much more unlikely, especially if an alternative diagnosis can be made (e.g. tuberculosis, heart failure).

If cytology is positive or a plaque is regarded as suspicious, a biopsy is needed to confirm a diagnosis of mesothelioma. A doctor removes a sample of tissue for examination under a microscope by a pathologist. A biopsy may be done in different ways, depending on where the abnormal area is located. If the cancer is in the chest, the doctor may perform a thoracoscopy. In this procedure, the doctor makes a small cut through the chest wall and puts a thin, lighted tube called a thoracoscope into the chest between two ribs. Thoracoscopy allows the doctor to look inside the chest and obtain tissue samples.

If the cancer is in the abdomen, the doctor may perform a laparoscopy. To obtain tissue for examination, the doctor makes a small incision in the abdomen and inserts a special instrument into the abdominal cavity. If these procedures do not yield enough tissue, more extensive diagnostic surgery may be necessary.

Typical immunohistochemistry results

Positive	Negative
EMA (epithelial membrane antigen) in a membranous distribution	CEA (carcinoembryonic antigen)
WT1 (Wilms' tumour 1)	B72.3
Calretinin	MOC-3 1
Mesothelin-1	CD15
Cytokeratin 5/6	Ber-EP4
HBME-1 (human mesothelial cell 1)	TTF-1 (thyroid transcription factor-1)

Screening

There is no universally agreed protocol for screening people who have been exposed to asbestos. Screening tests might diagnose mesothelioma earlier than conventional methods thus improving the survival prospects for patients. The serum osteopontin level might be useful in screening asbestos-exposed people for mesothelioma. The level of soluble mesothelin-related protein is elevated in the serum of about 75% of patients at diagnosis and it has been suggested that it may be useful for screening.^[4] Doctors have begun testing the Mesomark assay which measures levels of soluble mesothelin-related proteins (SMRPs) released by diseased mesothelioma cells.^[5]

Staging

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Mesothelioma is described as localized if the cancer is found only on the membrane surface where it originated. It is classified as advanced if it has spread beyond the original membrane surface to other parts of the body, such as the lymph nodes, lungs, chest wall, or abdominal organs.

Pathophysiology

The mesothelium consists of a single layer of flattened to cuboidal cells forming the epithelial lining of the serous cavities of the body including the peritoneal, pericardial and pleural cavities. Deposition of asbestos fibres in the parenchyma of the lung may result in the penetration of the visceral pleura from where the fibre can then be carried to the pleural surface, thus leading to the development of malignant mesothelial plaques. The processes leading to the development of peritoneal mesothelioma remain unresolved, although it has been proposed that asbestos fibres from the lung are transported to the abdomen and associated organs via the lymphatic system. Additionally, asbestos fibres may be deposited in the gut after ingestion of sputum contaminated with asbestos fibres.

Pleural contamination with asbestos or other mineral fibres has been shown to cause cancer. Long thin asbestos fibers (blue asbestos, amphibole fibers) are more potent carcinogens than "feathery fibers" (chrysotile or white asbestos fibers).^[6] However, there is now evidence that smaller particles may be more dangerous than the larger fibers.[1][2] They remain suspended in the air where they can be inhaled, and may penetrate more easily and deeper into the lungs. "We probably will find out a lot more about the health aspects of asbestos from [the World Trade Center attack], unfortunately," said Dr. Alan Fein, chief of pulmonary and critical-care medicine at North Shore-Long Island Jewish Health System. Dr. Fein has treated several patients for "World Trade Center syndrome" or respiratory ailments from brief exposures of only a day or two near the collapsed buildings.[3]

Mesothelioma development in rats has been demonstrated following intra-pleural inoculation of phosphorylated chrysotile fibres. It has been suggested that in humans, transport of fibres to the pleura is critical to the pathogenesis of mesothelioma. This is supported by the observed recruitment of significant numbers of macrophages and other cells of the immune system to localised lesions of accumulated asbestos fibres in the pleural and peritoneal cavities of rats. These lesions continued to attract and accumulate macrophages as the disease progressed, and cellular changes within the lesion culminated in a morphologically malignant tumour.

Experimental evidence suggests that asbestos acts as a complete carcinogen with the development of mesothelioma occurring in sequential stages of initiation and promotion. The molecular mechanisms underlying the malignant transformation of normal mesothelial cells by asbestos fibres remain unclear despite the demonstration of its oncogenic capabilities. However, complete in vitro transformation of normal human mesothelial cells to malignant phenotype following exposure to asbestos fibres has not yet been achieved. In general, asbestos fibres are thought to act through direct physical interactions with the cells of the mesothelium in conjunction with indirect effects following interaction with inflammatory cells such as macrophages.