Introduction: We Know This is Hard
We have helped many families with child injury claims throughout the years. We are parents, and we know there is nothing worse than seeing your child suffer through an injury. This article touches on the legal aspects of working with clients to protect their child's future.
Court Supervision: Filing the Case in Court
Whether the child’s personal injury claim resolves short of litigation, an Oregon State Court will be involved at one point in the case.
When a Child’s Injury Claim is Filed in Court
When a child’s injury case is filed in court, a parent or other responsible adult must also file a Petition to be appointed as a “Guardian Ad Litem.” A “Guardian Ad Litem” is a person who is appointed to “watch over” the child’s case as it moves through the courts. Oregon law requires the appointment of this overseer because children are not legally permitted to pursue their own cases in court. The person filing the lawsuit is the “Plaintiff.” In a child’s injury claim, the Guardian Ad Litem is the Plaintiff. Typically, the Guardian Ad Litem is the injured child’s parent. However, that is not necessarily required.
Court Supervision: Settlement of the Claim
Even if the child’s injury cases resolved before a lawsuit is filed, Oregon law requires the Court to approve the settlement. This begins with opening a Conservatorship. The best way to think of a Conservatorship is to think of it as an estate. The person who is appointed as the “Conservator” manages the child’s settlement recovery, wich in legal terms is the Conservatorship Estate. The child is referred to as the “protected person.”
Oregon’s conservatorship statute is all about protecting the child.
The person who seeks to become the Conservator is known as the “Petitioner.” When a “Petition to Appoint Conservator” is filed in court, the Petitioner must make certain disclosures about their financial situation and criminal history. These requirements are intended to protect the child, and help the court determine whether the petitioner is qualified to act as a Conservator. If a petition is approved, the court signs an order that appoints the Conservator, and issues a document called “letters of conservatorship.” The letters of conservatorship is the legal document that authorizes the Conservator to act on behalf of the child, including opening a bank account for the child.
Now that a Conservator has been appointed, the Conservator has legal authority to pursue the case on the child’s behalf, including settlement for the child. When this happens, the Conservator files a motion with the court seeking approval of the settlement of the injury claim.
In that motion, the Conservator outlines the terms of the settlement, including how the money will be distributed or managed on the child’s behalf. When we represent children, we file this motion, also seeking approval of attorney fees and reimbursement of costs. We also include a sworn statement outlining the facts of the case, and why we feel this is in the child’s best interests.
Sometimes, we will have multiple cases arising from one injury event. This is common in auto injury cases where the at fault driver did not have enough insurance coverage or no coverage at all to cover the child’s losses. When this happens, there may be an underinsured or uninsured motorist claim to pursue. With an underinsured at fault driver, we often resolve the initial claim against the at fault driver, obtain court approval, and then move forward with the underinsured motorist claim. While we are pursuing other claims, the Conservatorship remains open.
Terms of Conservatorship
In any conservatorship, there some requirements. A Conservatorship must be “bonded” or placed in a “restricted” account.
A “bonded” conservatorship means that there is a bond or insurance policy on the conservatorship. This insurance is intended to protect the child. There have been sad cases where a Conservator has mismanaged or outright stolen from the conservatorship estate. If this happens, a bond is there to cover any losses. Insurance companies that issue bonds will require an application from the prospective Conservator. Insurance companies will deny a bond application if they feel the potential Conservator is too much of a risk. For example, an insurer may deny a bond application if the applicant has a poor credit history.
When a conservatorship is bonded, the Conservator can manage the money in the child’s best interest, but must keep detailed records for annual reports, which we talk about below.
A “restricted” conservatorship means that the court must approve any withdrawals or expenditures from the conservatorship bank account. If the restriction is in place, the Court may agree to waive the bonding requirement.
Whether a “restricted” or “bonded” conservatorship is created depends on several factors. Also, some banks are hesitant to manage a “restricted” account for fear that they may allow a withdrawal that the court did not.
Regardless of the kind of Conservatorship (bonded or restricted) the Court will generally require the Conservator to file an “Annual Report.” This report is really an accounting of how the funds were managed, and the income and expenses of the conservatorship estate over the previous year. The Conservator must provide supporting documentation, like receipts, showing any expenditures so that the court can again make sure that the Conservatorship is being managed in the child’s best interest.
Notice is also a major feature in the Conservatorship statute. When a Petition for Conservatorship is filed, the Petitioner must send a notice to all “interested parties.” The Oregon Conservatorship statute defines an interested party. At a certain age, the injured child becomes an interested party. Both parents are also interested parties. When the Petition is filed, a copy must be provided to all “interested parties.” Any interested party can object to the Petition to Appoint a Conservator. However, in many cases, we secure an agreement from all interested parties that waive their notice and objections to the Petition. This helps us move forward more quickly in getting the case resolved.
Structured settlements offer significant advantages when pursuing a child’s personal injury claim in Oregon. Let’s start out with explaining what a structured settlement is, and then list the advantages they offer in a child’s injury claim.
In this article, when we refer to a structured settlement, we are talking about an “annuity contract.” An annuity contract is an insurance product. Essentially, the settlement funds are paid directly from the liability insurer (the at fault’s party’s insurer) to the annuity company. That money then earns interest over time and is paid out on a scheduled to be determined by the Conservator.
When we resolve a claim within annuity contract, we often work closely with an annuity broker who helps us put together the annuity contract in a way that guarantees its advantages. The annuity contract requires that certain language be included in the settlement agreement, as well as the petitions we file with the court seeking approval of the settlement. This can get a bit complicated because we are working with several people, including our client, the court, the liability insurer, and the annuity broker. However, the advantages far outweigh the complexities. Here is a summary of some of the advantages in having an annuity contract.
Advantage One: Protection
First and probably most important, the annuity contract “locks” the money up so that the Conservator and the injured child are unable to access the funds until they are paid out on his schedule. Although that may also seem like a disadvantage, not all settlement funds need to be put into the annuity contract. We have resolved cases that involve a “hybrid” conservatorship account with some funds locked into the annuity contract, and other funds managed by the Conservator so that the child can access funds as needed.
Advantage Two and Three: Growth, and Tax Free Growth
The income from an annuity contract is not taxable. Again, this must be done exactly as set out in the tax code, but in many cases, we have had significant earnings through an annuity contract that are all tax-free.
Advantage Four: Flexibility with Future Payments
Annuity contracts are also flexible in that the Conservator can determine the schedule and timing of disbursements or payouts. For example, a college-bound child may benefit from annuity payments of certain amounts at certain times of the year to help with tuition or other education expenses. Similarly, a child who pursues an apprenticeship or other vocational program may opt to have payments scheduled to fund that career pursuit.
Some payments can be delayed well into the future in anticipation of a home purchase or other large investment. Finally, scheduling will out into the future may allow the child to mature, even after adulthood, so that they are in a better position to manage a large lump sum payment.
Advantage Five: Ease of Conservatorship Reporting
Structured settlements may allow for easier management of the Conservatorship. When we seek court approval of a child’s personal injury settlement, we also request waiver of annual reporting and bonding requirements. This often works well because the money is safely stored in a locked account, and there is no need to bond that account, or provide an annual report to the court.
There are some disadvantages within annuity contract. This money is “locked up” so that the Conservator cannot access these funds if an emergency arises. Although you may be able to sell your annuity payments in exchange for a lump sum, the annuity purchaser will pay only pennies on the dollar. There are also significant tax consequences and potential penalties you must consider if you decide to cancel or surrender an annuity.
We have helped many parents make informed decisions about their child’s injury claim. If you have questions, contact us to find out where you stand.