Switch to ADA Accessible Theme
Close Menu
Call For A Confidential Case Evaluation 941-366-1800

How “Factoring Companies” Can Take Advantage Of Personal Injury Victims


Personal injury cases are often resolved with the plaintiff–i.e., the person harmed by the defendant’s conduct–agreeing to what is known as a structured settlement. Basically, this means the defendant purchases an annuity contract that makes periodic payments to the plaintiff. The annuity is managed by a separate company from the defendant (or their insurer).

Now, you may have seen ads for companies promising to pay “cash now” on a structured settlement. These businesses are sometimes called factoring companies. The idea here is that a person with a structured settlement does not–or cannot–wait for their periodic payments. So instead they sell or “assign” their rights in the annuity to the factoring company, which then pays the beneficiary a lump sum.

As you probably guessed, these factoring companies are not charities. They often pay personal injury victims just pennies on the dollar for giving up their structured settlements. And the legal system often lets the factoring companies get away with such behavior.

Florida Courts Allegedly Stood By and Let Disabled Man Sell Structured Settlement for Pennies

A recent decision from the U.S. 11th Circuit Court of Appeals, Cordero v. Transamerica Annuity Service Corporation, provides a crucial warning in this regard. The plaintiff in this case was a victim of childhood lead poisoning. As a child, the plaintiff lived with his parents in a New York apartment building. As a result of lead exposure, the plaintiff suffers from permanent cognitive impairment and other health issues.

The plaintiff’s mother, acting as his guardian, sued the landlord for her son’s injuries. The case was resolved through a structured settlement with the landlord’s insurance company. The settlement provided the plaintiff would receive approximately $3,200 a month for 30 years, starting on his 18th birthday.

When the plaintiff was 22 and living in Florida, he signed a series of six agreements assigning his rights under the structured settlement to two factoring companies. The 11th Circuit noted the terms of these six agreements “were extremely unfavorable” to the plaintiff. More precisely, he received a $22,000 lump-sum payment in exchange for giving up over $167,000 in monthly payments from the annuity.

Florida law requires a court to approve any transfer of rights under a structured settlement. In this case, the Florida courts approved six agreements, but as the 11th Circuit pointed out, this was done at hearings where the plaintiff was not present or represented by counsel. The court only heard from the factoring companies who stood to benefit.

This might have been the end of the matter, except that the original settlement agreement contained language that forbade any assignments of the plaintiff’s rights. The plaintiff therefore sued the annuity company, alleging it committed breach of contract by facilitating the transfers to the factoring companies, which it never opposed in the Florida state courts. The 11th Circuit did not address the merits of this claim. Rather, it asked the New York Court of Appeals to determine whether New York law, which governs the annuity contract, supported a claim for “breach of the implied covenant of good faith and fair dealing” against the annuity company.

Speak with a Florida Consumer Protection Attorney Today

If you are ever involved in a situation where a company has taken unfair advantage of you, it is imperative that you act quickly to assert any rights that you may have under the law. An experienced Sarasota consumer protection lawyer can help. Contact Suncoast Civil Law today to schedule a confidential case evaluation.