Friday, January 30, 2009

Qualified Settlement Fund

Posted by Sylvius Von Saucken

After a very large settlement was confected a few days ago involving a single plaintiff brain damage case, plaintiff’s counsel has now requested the defendants agree to fund the money into a QSF. While the plaintiff’s request comes late in the day, I am trying to decide if this is good or bad for the underwriters I represent in London. Specifically, my concerns are:

  1. Is a QSF process available in a single plaintiff case as I thought it was created for mass tort litigation?
  2. Can my defendant insurers fund the money into the QSF and get a complete release with no recourse relative to any handling or decisions made by the administrator and plaintiff counsel on how to handle the funds?

Your assistance in addressing these questions is greatly appreciated. Thanks.

-Louisiana Attorney

Answer to Question 1: QSFs are available for single plaintiff cases provided there are multiple claimants (as opposed to plaintiffs). For example, a case can settle between one plaintiff that involves more than one claimant where that plaintiff has subrogated parties to satisfy as part of his/her settlement. Although there is still some debate about whether or not QSFs are available for single plaintiffs/claimants, provided there is more than one entity legally entitled to receive settlement proceeds, your case may not be a single claimant case. The Treas. Regs. (Section 1.468B-1(c)(2), et seq.) talk of “one or more contested claims” and an event (or series of events) giving rise to “ at least one claim asserting liability.” Accordingly, the regulatory language focuses on the claim or claims, not the number of claimants. Consequently, if it can be established by plaintiffs’ counsel that there are more than one claimant (as opposed to plaintiff), a QSF may be available and appropriate.

Answer to Question 2: Absolutely. We have served as QSF Administrators in countless mass tort and single event cases. As part of our standard process, when we have served as QSF Administrator we have provided defendant insurers with releases concerning the administration and handling of the funds. Simply put, defendant insurers can remain as involved as they desire when dealing with QSFs. However, the key to ensuring those releases are effective is to take part in the release process and where necessary, even request the QSF Administrator’s signature on the release document that transfers funds from the defendant insurers’ accounts to those of the QSF Administrator’s.

Since our firm has a QSF practice group, we would be happy to vet any QSF documents, choice of administrator or even review the plaintiffs’ explanations for why a QSF is an available settlement option as part of an overall due diligence process.