For Immediate Release
September 26, 2020
Contact: Tom Considine
(732) 201-4133
NCOIL ADOPTS MODEL ACT CONCERNING STATUTORY THRESHOLDS FOR SETTLEMENTS INVOLVING MINORS
Allows for More Efficient and Swifter Process in Minor Settlements
Manasquan, NJ – During the 2020 NCOIL “Summer” Meeting in Alexandria, VA, the organization adopted the NCOIL Model Act Concerning Statutory Thresholds for Settlement Involving Minors (Minors Settlement Model), sponsored by Kentucky Representative Joe Fischer, NCOIL Secretary, and Texas Representative Tom Oliverson, M.D. The measure passed on a voice vote by both the NCOIL Financial Services and Multi-Lines Issues Committee and the NCOIL Executive Committee.
The Minors Settlement Model was introduced at the NCOIL 2020 Spring Meeting in Charlotte, North Carolina. The Model would apply mostly to situations where minimal amounts are involved, and the parties engaged want to settle without incurring additional costs for going into court and obtaining approval. It is similar to many laws in states that allow for settling small estates through affidavits. There are certain security measures in place to ensure that the settlement would be preserved for the minor.
NCOIL Secretary Joe Fischer (Rep. – KY) stated, “The objective of the Model is to save costs associated with settling small claims in order to preserve the minor’s assets. Thank you to the Committee and interested parties for coming forward with an interest to make the process more efficient and help protect settlement funds.”
Dr. Tom Oliverson (Rep. -TX) said, “I agree with Rep. Fischer that this Model creates more efficiencies in minor settlements. By settling through an affidavit, the Model would allow both parties in the matter to settle more quickly and allow the people who are injured to get their money faster. The insurance companies can then resolve the claims promptly and all parties can save costs.”
During the drafting discussion, NCOIL legislators and staff heard from interested parties including National Association of Mutual Insurance Companies (NAMIC), the American Property Casualty Insurance Association (APCIA), and Shelter Insurance.
The purpose of the Model is “to set forth standards and procedures for settling claims involving minors.”
Highlights of the Model include setting forth a procedure that allows a person having legal custody of a minor to enter into a settlement agreement with a person against whom the minor has a claim if: a [conservator or guardian ad litem] has not been appointed for a minor; the total amount of the claim, not including reimbursement of medical expenses, liens, reasonable attorney fees and costs of suit, is $25,000 or less if paid in cash or if paid by the purchase of a premium for an annuity; the moneys paid under the settlement agreement will be paid pursuant to certain guidelines; and the person entering into the settlement agreement on behalf of the minor completes an affidavit or verified statement that attests that the person has made a reasonable inquiry and that: to the best of the person’s knowledge, the minor will be fully compensated by the settlement, or, there is no practical way to obtain additional amounts from the party entering into the settlement agreement with the minor.
If a settlement agreement is entered into in compliance with the provisions of the Model, the signature of the person entering into the settlement agreement on behalf of the minor is binding on the minor without the need for further court approval or review and has the same force and effect as if the minor were a competent adult entering into the settlement agreement.
The Model also sets forth guidelines as to how the moneys payable under the settlement agreement must be paid, and states that the moneys in a minor’s savings account, trust account or trust subaccount may not be withdrawn, removed, paid out or transferred to any person, including the minor, except pursuant to court order, upon the minor’s attainment of 18 years of age, or upon the minor’s death.
NCOIL CEO, Commissioner Tom Considine, stated, “Thanks to the Committee, and a special thanks to Rep. Fischer and Rep. Oliverson for sponsoring this and getting the Model to a good place in such a timely manner to be ready to send to the states. The need for this Model caught me a bit by surprise because I thought that parents & guardians always had the right to settle disputes for their children without going to court. Little did I know it’s not always that simple.”
A full copy of the model is below.
National Council of Insurance Legislators (NCOIL)
Model Act Concerning Statutory Thresholds for Settlements Involving Minors
*Sponsored by Rep. Joe Fischer (KY) and Rep. Tom Oliverson, M.D. (TX)
*Adopted by the Financial Services & Multi-Lines Issues Committee on September 26th, 2020. Adopted by the Executive Committee on September 26, 2020.
Table of Contents
Section 1. Title
Section 2. Purpose
Section 3. Procedures for Settling Claims Involving Minors
Section 4. Effective Date
Section 1. Title
This Act shall be known and cited as the “[State] Statutory Thresholds for Settlements Involving Minors Act.”
Section 2. Purpose
The purpose of this Act is to set forth standards and procedures for settling claims involving minors.
Section 3. Procedures for Settling Claims Involving Minors
(1) A person having legal custody of a minor may enter into a settlement agreement with a person against whom the minor has a claim if:
(a) A [conservator or guardian ad litem] has not been appointed for a minor;
(b) The total amount of the claim, not including reimbursement of medical expenses, liens, reasonable attorney fees and costs of suit, is $25,000 or less if paid in cash or if paid by the purchase of a premium for an annuity;
(c) The moneys paid under the settlement agreement will be paid as set forth in subsections (3) and (4) of this section; and
(d) The person entering into the settlement agreement on behalf of the minor completes an affidavit or verified statement that attests that the person has made a reasonable inquiry and that:
(i) To the best of the person’s knowledge, the minor will be fully compensated by the settlement; or
(ii) There is no practical way to obtain additional amounts from the party entering into the settlement agreement with the minor.
(2) The attorney representing the person entering into the settlement agreement on behalf of the minor, if any, shall maintain the affidavit or verified statement completed under subsection (1)(d) of this section in the attorney’s file for two years after the minor attains the age of 21 years.
(3) The moneys payable under the settlement agreement must be paid as follows:
(a) If the minor or person entering into the settlement agreement on behalf of the minor is represented by an attorney and the settlement is paid in cash, by draft, by direct deposit into the attorney’s trust account maintained pursuant to rules of professional conduct adopted under [State Attorney Trust Accounting Rules] to be held for the benefit of the minor. The attorney shall deposit the moneys received on behalf of the minor directly into a federally insured savings account that earns interest in the sole name of the minor, and provide notice of the deposit to the minor and the person entering into the settlement agreement on behalf of the minor. Notice shall be delivered by personal service or first-class mail.
(b) If the minor or person entering into the settlement agreement on behalf of the minor is not represented by an attorney and the settlement is paid in cash or by draft, directly into a federally insured savings account that earns interest in the sole name of the minor. Notice of the deposit to the minor shall be delivered by personal service or first-class mail. The minor or person entering into the settlement agreement on behalf of the minor shall open the federally insured savings account and provide the person or entity with whom the minor has settled the claim with information sufficient to complete an electronic transfer of settlement funds within 10 business days of the settlement;
(c) If paid by purchase of an annuity, by direct payment to the provider of the annuity with the minor designated as the sole beneficiary of the annuity.
(d) If the minor is a [ward of the state] and the settlement is paid in cash, directly into a trust account, or subaccount of a trust account, established by the [department responsible for wards of the state, or similar state mechanism] for the purpose of receiving moneys payable to the ward under the settlement agreement and that earns interest for the benefit of the ward.
(4) The moneys in the minor’s savings account, trust account or trust subaccount established under subsection (3) of this section may not be withdrawn, removed, paid out or transferred to any person, including the minor, except as follows:
(a) Pursuant to court order;
(b) Upon the minor’s attainment of 18 years of age; or
(c) Upon the minor’s death.
(5) If a settlement agreement is entered into in compliance with subsection (1) of this section, the signature of the person entering into the settlement agreement on behalf of the minor is binding on the minor without the need for further court approval or review and has the same force and effect as if the minor were a competent adult entering into the settlement agreement.
(6) A person acting in good faith on behalf of a minor under this section is not liable to the minor for the moneys paid in settlement or for any other claim arising out of the settlement.
(7) Any person or entity against whom a minor has a claim that settles the claim with a minor in good faith under this section shall not be liable to the minor for any claims arising from the settlement of the claim.
Section 4. Effective Date
This Act shall take effect [xxx days] following enactment.
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NCOIL is a national legislative organization with the nation’s 50 states as members, represented principally by legislators serving on their states’ insurance and financial institutions committees. NCOIL writes Model Laws in insurance and financial services, works to preserve the State jurisdiction over insurance as established by the McCarran-Ferguson Act seventy-five years ago, and to serve as an educational forum for public policymakers and interested parties. Founded in 1969, NCOIL works to assert the prerogative of legislators in making State policy when it comes to insurance and educate State legislators on current and longstanding insurance issues.