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The Wrong Way to Treat Victims of Wrongful Birth

April 6, 2015 by Randy Levine Leave a Comment

shutterstock_258156005Ever since the advent of genetic counseling almost half a century ago, the American legal system has struggled to develop a reasoned approach for handling tort claims based on the notion of a wrongful birth – that is a claim for damages based on the birth of child with serious genetic defects. In a sense, it’s a tort action similar to any other negligence or professional malpractice claim, which arises if a professional counselor and/or physician, in providing pre-natal screening, fails to meet the appropriate standard of care by not warning parents about a foreseeable or detectable genetic defect. But even though such a claim is based on traditional concepts of negligence, courts have been troubled by the ethical dimensions of awarding damages as the result of the birth of a child.

In fact, a wrongful birth claim cannot be brought in a number of states because it has been statutorily banned – not surprisingly this tends to be the approach in Red State America, where right-to-life views predominate.

But even in more liberally minded jurisdictions, courts have distinguished and imposed limits on wrongful birth claims in contrast to the legal treatment accorded to other types of medical malpractice actions. The approach of the New York courts is a good example. Five years after Roe v. Wade established a woman’s right to choose, the New York State Court of Appeals ruled in favor of the plaintiff in Becker v. Schwartz awarding a woman who gave birth to a baby with Downs Syndrome financial damages because her doctors had failed to advise her that, based on her age, which was above 35, her child was at greater risk. But the court limited its award to financial damages to the mother based on the cost of caring for the child and refused to grant any award of emotional damages, reasoning that the family “may experience a love [for their child] that even an abnormality cannot fully dampen.”

At present, courts in about half the states recognize claims based on wrongful birth at least for financial damages. And not surprisingly, as pre-natal genetic testing becomes a more common practice, claims based on wrongful birth are being brought with increasing frequency.

Our own interest in the issue of wrongful birth litigation stems from our work as structured settlement consultants. In our corner of the legal universe, we see wrongful birth plaintiffs face yet one more hurdle that prevents them from receiving full and fair recovery even with respect to an award of financial damages. That’s because even in states that recognize a cause of action for wrongful birth, there is no clarity as to whether wrongful birth plaintiffs are able to receive their financial damages in the form of a Tax Free Qualified Structured Settlement.

As we’ve discussed on the blog before, a structured settlement is ideally suited to the needs of personal injury victims who face long-term medical care needs, by providing an optimal, tax advantaged vehicle to generate a stable stream of income for life. A child born with a serious birth defect is exactly the sort of person who stands to benefit most from a structured settlement approach.

Yet for some reason, not entirely clear to us, insurance companies are presently unsure whether to establish structured settlements that cover wrongful birth lifetime care needs. We think this is wrong and needs to change. It is based on an overly narrow reading of Internal Revenue Code section 104(a)(2), which is the statutory provision that provides tax-advantage to structured settlements to those who suffered with a physical injury or illness. There is no legal, policy or ethical reason, why families facing the burden of lifetime care for children born with serious birth defects should not stand to benefit from the advantages of Internal Revenue Code section 104(a)(2) the same as other damage award recipients. In fact, there have been other IRS revenue rulings that have carved out exceptions permitting future medical expenses to be non-taxable on the reasoning that the plaintiffs cannot deduct those future costs because the monies came from an insurance company (just as individuals cannot deduct those dollars that they receive from health insurance companies pay for medical treatment).

We are involved in case right now where a mother failed to receive advance notice about a Fragile X gene and as a result of that failure must now care for severely disabled twins for the rest of their life. We don’t see why these victims — these parents and children — are not afforded the right to use a Qualified Tax Free Annuity for the future medical care.. Tax-free settlements are far more cost effective because the same amount of dollars paid via a structured settlement can go that much further in providing needed care. Moreover, annuities are an important tool for helping these families cover these ongoing costs. And there’s further financial leverage inasmuch as structured settlements are decided based on rated ages, and life expectancies, which may also work to the advantage of children with serious birth defects.

The issue requires clarity. We at ESS Settlement Services are committed to do whatever we can. To start with, we will contact each Life company on behalf of these victims and fight for their rights because we believe it’s time that wrongful birth claimants are entitled to the same benefits under the law as other damage award recipients.

Filed Under: Life Insurance, structured settlements, Tax Law Tagged With: Special Needs Trust, structured settlements, tax free, Wrongful Death

How Personal Injury Lawyers can Expedite Getting Paid for their Services

January 27, 2015 by Brian Schachter 1 Comment

Surrogate Court NYWe know that most lawyers are aware of EPTL 5-4.26, but some lawyers just aren’t taking advantage of it and we don’t understand why that is.

Normally, when we settle a case on behalf of a deceased person, the surrogate court must approve a death compromise order before the heirs or beneficiaries can receive any money. The same holds true for the lawyers who spent many hours working on the case. It is quite possible that the court could take months or even years before they approve the settlement.

That is why Section 5-4.26 was enacted a few years ago. Section 5-4.26 enables lawyers to ask the Supreme Court to expedite this process. Once the Supreme Court approves the amount, a lawyer can, upon meeting certain conditions, take their fee while holding the distributees’ settlement monies in an escrow account until the surrogate court approves the death compromise order. Although the family cannot receive their money earlier, their funds will earn interest in the escrow account.

Here is an example of sample of language of what we seen used at Supreme Court while preserving the right to structure with the Surrogate Court still having to do final allocations:

“ORDERED, that plaintiffs and defendants anticipate that some portion of the remaining settlement monies shall be used to fund structured settlement annuities for the benefit of the distributees of the Estate of Plaintiff, with the terms subject to Decree of the Surrogate’s Court, Kings County regarding the distribution of the settlement proceeds”

This order also ensures that the client is protected in case the insurance company liquidates in the interim and cannot pay the claim. .

This law is also important because some surrogates don’t approve structured settlements; we presume that this is because some Surrogate Court judges don’t understand structured settlement as well as judges in the Supreme Court. But having the Supreme Court judge approve the structured settlement in the EPTL order opens the door to getting into the death compromise order. Either way, using Section 5-4.26 provides an extra layer of protection for clients and enables lawyers to get paid soon after the case has been settled.  It’s a win-win scenario from our vantage point and something all lawyers should be taking advantage of.

Have you taken advantage of Section5-4.26? Did this enable you to receive your legal fee in an expedited manner? Please share your story with us. We would love to hear of your experience.

Filed Under: structured settlements Tagged With: Death Compromise Order, EPTL 5-4.6, personal injury, structured settlements, Wrongful Death

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