On July 12 I wrote about predatory structured settlement purchasers who buy out periodic payments to the disabled–those who need the funds over their lifetime–for 30-40 cents on the dollar. On July 16, the New York Times published a story entitled, “After N.F.L. Concussion Settlement, Feeding Frenzy of Lawyers and Lenders.” The article describes predatory sales pitches to former NFL players “who stand to receive checks from the largest legal settlement in sports history, a pool of money that may top $1 billion for retirees who sued the league for lying to them about the dangers of concussions as they got their heads pounded on the field.”
The stench of $1 billion has attracted lenders offering tens of thousands of dollars that would be paid back from the settlement payouts–commonly called “lawsuit loans” or “pre-settlement funding.” All they ask in return is 40% interest, which can completely consume any recovery from the settlement, according to the article.
Lawsuit lending is the “before” equivalent of structured settlement purchases, and often preys on a person’s desire for immediate gratification, or worse, their need of funds for healthcare or other essentials, even though there may be far more financially sound solutions.
The New York attorney general filed suit against RD Legal Funding, LLC, a lawsuit lending company based in New Jersey who allegedly targeted NFL players with “severe neurological disorders.” Reporting by the New York Times explains:
This type of lending against a settlement payout is part of a legal but largely unregulated business focused mostly on victims in personal injury cases. The loans, though, have potentially devastating trapdoors, most notably the high interest rates that kick in immediately after money is advanced, and can cut deeply into the sum a player might ultimately receive in a settlement.
Some financial watchdogs accuse the lenders of preying on people who are sick or who, in the case of the N.F.L. retirees, have memory problems or other cognitive ailments that could mean they cannot fully grasp the terms of the loans, which often require the players’ lawyers to provide consent.
Whether before a settlement or after, there are numerous companies waiting to prey on those in the greatest need, and those who are least able to protect themselves. Sadly, it works.
We recently handled a fraud and consumer protection case against two structured settlement purchasers that settled in about four months, one for a confidential amount and one for a several hundred thousand dollar gross recovery. While I cannot yet go into case specifics, below are some words of caution about a predatory and insular industry operating within Washington courts for settlements originating all over the country.
The vast majority of plaintiffs spend their settlement funds in the blink of an eye, relatively speaking. Numbers vary depending on the study, but generally about 90% of settlement beneficiaries dissipate most or all of a lump sum settlement within five years. Sometimes clients spend the money wisely. But because almost no one is accustomed to receiving a large chunk of money all at once–larger than any amount they have ever seen–more often than not a significant portion is blown on frivolous stuff.
For this reason, many lawyers negotiating large claims discuss with clients the need to plan ahead. We are not financial advisors, but we encourage clients to explore their opportunities with appropriate experts.
One of the most common avenues lawyers mention is a structured settlement (“SS”). In a SS, the defense insurer agrees to pay a lump sum to purchase an annuity that makes periodic payments on a schedule chosen by the settlement beneficiary, usually over decades, including interest. A SS affords significant tax benefits under 26 U.S. Code § 130 and 26 U.S. Code § 104(a). Many lawyers believe a SS protects the beneficiary’s funds over the long term.
Unfortunately, for every smart financial move there is a business willing to take advantage of it. 26 U.S. Code § 5891 allows “factoring transactions,” or sales, of structured settlement benefits. Thanks to these businesses, for a lump sum “advance” your client can sell some or all of his benefits for 30-40 cents on the dollar, or the equivalent of a 15-20% interest rate (like a college student’s first credit card) on a totally secure transaction (like a high equity home mortgage).
Washington’s Structured Settlement Protection Act (“SSPA”), RCW 19.205, offers some protections. The SSPA requires that any proposed transfer be approved by a judge with findings that the “transfer is in the best interest of the payee,” and that the “transfer does not contravene any applicable statute or the order of any court.” RCW 19.205.030. None of the Act’s provisions may be waived, and complying with the SSPA is “the sole responsibility” of the SS purchaser. RCW 19.205.060(1) and (6).
Like many laws, however, the SSPA is only as good as the information applied to it. SS purchasers that petition for these sales often do little or no investigation before certifying that the transfer does not contravene the order of any court and is in the best interest of the SS beneficiary. Worse, some willfully ignore and conceal contrary information to obtain court approval, such as the SS beneficiary’s disability or a minor settlement order in another state placing permanent restrictions on the transfer of funds. Some SS purchasers then have the gall to argue that the enforceability of a fraudulently obtained transfer order is subject to an arbitration clause, and is outside the jurisdiction of the court signing the order.
Remember that like Washington, other states provide jurisdiction for SS sales on settlements originating elsewhere. A Washington SS could be sold in another state based on inadequate investigation and/or concealment by the purchaser. Even within Washington courts, the system could improve. For example, in King County LCR 40.1 sets all minor/disability settlement approvals before Ex Parte/Probate, whereas LCR 40(b)(14) puts structured settlement transactions under RCW 19.205 before Chief Civil. The judges deciding what to do with minor/disability settlements, and why, may not be able to foresee how a proposed sale is determined, and the judges deciding on a proposed sale may not be as intimately familiar with the unique interests and options of minor and disability settlements.
For any structured settlement involving a minor or disabled person, you should consider whether or not restrictions on sale/transfer are appropriate. If so, the settlement agreement and any court order approving settlement should contain language that the beneficiary “shall not have the power to transfer or sell benefits,” either at all or except under very specific conditions or circumstances. Some jurisdictions require this disempowerment language rather than language merely prohibiting sale.
Common conditions on sale include that the “advance” be used only to fund education, or for compelling financial need. I would also recommend that a settlement order prohibit any sale exceeding a specific “discount rate,” any sale accompanied by an arbitration agreement, and any sale in a jurisdiction other than the court approving the original settlement.
An appellate decision just came down from Division 3 further protecting tenant security deposits. In Goodeill v. Madison Real Estate, the court addresses the burden on landlords to prove an exception to the 14-day deposit rule.
Briefly, RCW 59.18.280 requires landlords, within 14 days of termination of the rental agreement and move-out, to return the security deposit, less any deductions described in a “full and specific statement of the basis for retaining any of the deposit.” The same statute offers landlords an escape: “The landlord is also barred in any action brought by the tenant to recover the deposit from asserting any claim or raising any defense for retaining any of the deposit unless the landlord shows that circumstances beyond the landlord’s control prevented the landlord from providing the statement within the fourteen days.”
In Goodeill, the court elaborated on the burden to prove such circumstances: “We hold that a landlord may not avail itself of RCW 59.18.280′ s exception unless it accounts for any active or passive delays sufficient to show that it made a conscientious attempt to comply with the 14 day statutory notice.” The facts of the case are too detailed to summarize here, but the story is typical. The landlord interpreted the statute to mean that only an estimate is due within 14 days, and that because repair work was necessary by two or more service providers, it was categorically not feasible to comply with RCW 59.18.280’s 14-day requirement. As a result, the plaintiff/tenant did not receive her “full and specific statement” until 43 days after move-out. At small claims court, the landlord argued that other small claims court judges had generally agreed, but had no appellate law supporting that position.
In reaching its decision, the Goodeill court reasoned that the defendant/landlord failed to act with reasonable diligence in scheduling repairs and obtaining cost invoices well before the 14-day period expired. The length of the delay seems particularly offensive to the court: “[The landlord’s] evidence falls woefully short of showing that circumstances beyond its control prevented it from timely providing Ms. Goodeill the statutory notice.” The plaintiff/tenant was entitled to her full deposit back, regardless of whether or not the repairs were justified.
This is a cautionary tale for landlords that just because you need to hire professional cleaners or repair contractors doesn’t mean you can automatically justify significant delays past the 14-day deadline.
In a previous post I addressed the limitations on tenants’ legal remedies against landlords. Today the Washington Supreme Court unanimously found that “actual damages” under RCW 59.18.085 does not include emotional distress damages in connection with tenant relocation from a condemned dwelling. The Court’s decision is based on its interpretation of the legislative intent of the Residential Landlord Tenant Act (“RLTA”). In very general terms, the Court reasons that the RLTA expressly prescribes detailed remedies for relocation from a condemned dwelling, such as relocation expenses and deposit, and that where emotional distress damages are not one of the prescribed remedies, they should not be read into the statute.
The Supreme Court’s reasoning confirms again that while the RLTA is generally very favorable to tenants as consumers, it typically does not form the basis for non-economic damages. For the lawyer audience, however, just because the RLTA does not create a cause of action itself does not mean violation of a provision by a landlord will not constitute evidence of negligence or potentially negligence per se under RCW 5.40.050, as supporting a common law cause of action.
If you are confused about what auto insurance benefits are and what you might need, you are not alone. Many law students and lawyers do not understand the types of insurance available. Here are the basics on the types of insurance, how they apply, and why you should consider buying the coverage.
What: PIP stands for Personal Injury Protection. It covers medical expenses and a small amount of lost wages if you are out of work for more than two weeks. Benefit limits range from $10,000 to $35,000.
How: PIP is also called “no fault” coverage because it applies regardless of whether or not you were at fault. For example, it does not matter if you were rear-ended or run yourself into a tree–PIP applies. If you are struck by a vehicle while walking or riding your bike, the other driver’s PIP, as well as yours, will apply in most instances. If you are a passenger in a vehicle involved in an accident, the driver’s PIP should apply to you.
Why: Even if you have good health insurance, PIP offers additional benefits. First, there is no coinsurance or copay for treatment. Second, there is no annual insurance deductible, so for example, you do not need to incur $2,500 in covered medical charges for benefits to kick in. Third, PIP covers treatment many health plans exclude or limit, such as chiropractic care and massage therapy.
What: Liability insurance is mandated by Washington law. The minimum requirement is $25,000.
How: Liability insurance pays when a driver’s negligence injures another person.
Why: Because it’s the law.
What: UIM stands for Underinsured Motorist. Benefit limits typically range from $100,000 to $500,000, though some policies exceed $1,000,000.
How: UIM coverage applies if the at-fault driver has no insurance, which is unlawful in Washington, flees the scene (also unlawful), or lacks sufficient insurance to pay the full value of the claim. There are several major distinctions between UIM and PIP. First, UIM is not “no fault” coverage. Your UIM insurer “stands in the shoes” of the at-fault driver, and you are only entitled to recover damages under a UIM policy that you would have been entitled to receive from the at-fault driver if he had sufficient liability insurance. Second, UIM does not just cover medical bills and wage loss (what we call economic damages), but also pain and suffering, emotional distress, and loss of enjoyment of life (what we call noneconomic damages). Third, a UIM insurer is entitled to defend the merits of the claim. For example, if liability is disputed, or if the insurer disagrees about the value of general damages, they can force you to sue or arbitrate to determine the amount of damages.
Why: Remember that not all drivers have or can afford more than the $25,000 minimum liability insurance, which barely covers the average whiplash injury claim. If you are seriously injured by such a driver and have no UIM coverage, not only will you not recover the general damages you are entitled to, you may not recuperate the cost of coinsurance and copays.
Other Types of Insurance:
Comprehensive: This typically refers to coverage for property damage to your vehicle or another vehicle involved in an accident.
GAP Insurance: Cars depreciate in value rapidly in the first few years. If you purchase a car new and do not put much money down, and the car is subsequently totaled early in its car-life, you may owe the lender more than the “actual cash value” or “replacement cost” payable under your auto insurance policy. GAP insurance covers that remainder.
Tenants in disputes with landlords are one of the most underserved populations in need of legal services. Landlords can afford to hire attorneys and attorneys are attracted to repeat clients. Tenants, on the other hand, are far less likely to need legal services again, and their claims are typically not large enough to entice lawyer involvement.
I have written about tenant rights, spoken to the media about claims against landlords, investigated suspicious fires that displaced tenants and destroyed their belongings, and discussed disputes with more than one hundred tenants throughout Western Washington. One point of confusion many tenants have is what relief they are entitled to (and is practically obtainable), and what they are not. It is impossible to address here every scenario, and the following is not intended to be legal advice, but rather, general principles often applicable to common landlord-tenant disputes. Nothing here should take the place of or be considered as actual legal advice applicable to your case and situation.
Remedies Available to Tenants
- Generally, if a landlord violates his or her duties under the Residential Landlord Tenant Act (RLTA), the most common relief available is for a tenant to move out before termination of the lease agreement. There are too many caveats and prerequisites to list here, but the points below elaborate on why moving out is the primary and most practical relief available.
- Even though it seems more practical than moving somewhere else, a tenant cannot always force a landlord to bring a rental up to par with your expectations under the lease, or even up to code. Sometimes landlords cannot afford it. Sometimes landlords do not care to rent the unit out. This does not mean, however, that the landlord can go rent the same unit, not up to code, to another tenant. There are significant penalties for landlords who rent a condemned dwelling.
- If monetary damages are available, they typically fall under one of these two categories: (1) moving expenses, and (2) deposit refund. If a tenant is forced to move out early or on short notice, he or she may be entitled to compensation for moving expenses and other increased costs. As for the deposit refund, the RLTA spells out very specific requirements for landlords demanding security deposits as the outset of the tenancy. Namely, the landlord must have the tenant fill out a move-in inspection form (identifying defects in the dwelling so the tenant cannot be held responsible for them later), and the landlord must mail the tenant, within 14 days of move-out, an itemized list of deductions from the deposit, and any refund. These issues are more complex than they sound, however, so you should consult with an attorney if you have concerns over your deposit. More on what a landlord can charge you for below.
- A tenant can make a claim for damage to his or her personal property resulting from the landlord’s breach of his or her duties under the RLTA. For instance, if a tenant reports to a landlord in writing the consistent spread of mold, and the landlord fails to reasonably begin remedying the problem within the time provided under the Act, the landlord can be liable to replace property damaged by the spread of mold, provided that the tenant also used reasonable care to prevent the mold from spreading. On that note, as an important caveat, generally the tenant is responsible for preventing mold from growing and spreading, unless there is something about the dwelling itself that is conducive to mold growth, e.g. insufficiently sealed windows, rotted drywall or wall studs.
- Under most circumstances, there are no punitive damages in Washington. This means a landlord generally cannot be punished by being forced to pay damages commensurate with the egregiousness of the conduct. Rather, Washington law primarily allows for compensatory damages for actual losses.
- In most cases, emotional distress and other “non-economic” damages–those for which there is no price tag–are not recoverable in landlord-tenant disputes.
What a Landlord Can Charge For
There is considerable confusion (and sometimes worse) regarding what a landlord can and cannot charge you for, often times for landlords and their lawyers. Here are some more general principles. Again, nothing below should replace actual legal advice applicable to your case and situation.
- A tenant cannot be charged for “reasonable wear and tear.” This term is difficult to define generally, but as an example, flattening or slight fraying of a carpet due to ordinary, repeated traveling on it. In contrast, accidentally burning a hole in carpet is typically not reasonable wear and tear. Generally, reasonable wear and tear refers to the natural aging of products through everyday use. Things that are not reasonable wear and tear generally result from one specific incident.
- One of the most commonly disputed facts is what property damage existed prior to move-in, and what did not. The move-in inspection form is supposed to reduce or eliminate such dispute, but it only works if tenants take it seriously and document all damage they see upon move-in.
- A landlord typically cannot charge you the cost of brand new carpet or a brand new appliance. More often, the landlord can only charge the cost to replace a similarly used carpet or stove. For instance, if a tenant ruins a carpet that is 9 years old with a 10 year expected life, the tenant will owe the landlord for the lost year, or 10% of the cost. Often times landlords attempt to get tenants to finance “new stuff” for the unit, a tactic not supported under Washington law. If a landlord’s property is damaged, he or she is entitled to be put in the same position he would have been in but for the damage, but not a better position, with the tenant paying for brand new carpet.
No blog post can advise you as to legal rights and steps to take in your specific situation because there are too many variables involved: the terms of the lease, the facts and evidence available, and the ordinances in any given municipality, which may be more restrictive than State law. Because everyone should consult with a lawyer, and yet finding a lawyer is so difficult for tenants, I’ve compiled a list of tenant resources below.
UW Student Legal Services (for active UW students)