In recent months, Winget, Spadafora & Schwartzberg, LLP (“WSS”) has been engaged by numerous insurance E&O carriers and insurance agents across the country to assist in the defense of claims related to Future Income Payments (“FIP”) and investments and insurance policies that were to be funded by FIP distributions.
FIP investments were sold primarily by insurance agents, in some situations with the assistance or at the recommendation of their Independent Marketing Organization (“IMO”), to their customers as an income/growth investment vehicle. The income from the FIP was then used, depending on the client, to: (1) supplement income; (2) grow assets; or (3) fund insurance products, including but not limited to, index universal life insurance policies (“IULs”).
FIP entered into purchase and sale agreements with individuals entitled to receive cash flows generated by pension plans. In a typical transaction, the seller agrees to sell FIP a specific number of future income pension payments in exchange for an immediate lump sum cash payment. The seller would then forward the agreed upon weekly/monthly pension payments to FIP for the agreed upon period of time. The payments would then be forwarded to the insurance agent’s clients less any fees owed to FIP.
Numerous states across the country, including California, New York, Massachusetts, Iowa, Washington, North Carolina, Colorado, Pennsylvania and Minnesota have since investigated FIP’s business structure and taken the position that FIP’s structured cash flow business violates state law. This position has resulted in numerous states issuing cease-and-desist orders against FIP and allowing pensioners to stop making payments once they have returned the lump sum paid to them by FIP/FIP investors. Investors across the country have ceased receiving the return of their principal invested at FIP and the expected income from those investments. Investors are now facing potential losses from their FIP investment, as well as the possible lapsing of their insurance policies.
Should you require any assistance in the defense of any claim related to FIP, please contact one of the following partners at Winget, Spadafora & Schwartzberg, LLP who are leading the firm’s effort in the defense of insurance agents and insurance carriers across the United States.