The Kentucky Supreme Court ruled unanimously in favor of AIG subsidiary, American General Life Ins. Company, against DRB Capital LLC in a case involving attempted factoring of payment rights under a workers’ compensation settlement, upholding the enforceability of anti-assignment provisions in the settlement documents and ruling that the Kentucky structured settlement protection act DOES NOT apply to transfers of payment rights under workers’ compensation settlements.

American General Life Ins. Co. v. DRB Capital LLCand Ray Thomas, Jr., 2017-SC-000329, __ S.W. 3_, 2018 WL6574661 (Dec. 13, 2018).

In a proceeding brought under the Kentucky Structured Settlement Protection Act, the lower courts had ruled that DRB Capital LLC could acquire rights to future payments under Ray Thomas’s Kentucky worker’s compensation settlement, notwithstanding both (i) strict anti‑assignment provisions in the settlement documents; and (ii) provisions of the Kentucky SSPA that limit its application to transfers of payment rights under tort settlements.

Because the anti-assignment provisions are typical of provisions routinely used in structured settlements to negate constructive receipt and present economic benefit, the Court of Appeals decision finding those provisions unenforceable had potential adverse implications for structured settlements across the country. The conclusion that the Kentucky SSPA applies to transfers of payment rights under workers’ compensation settlements ̶ a conclusion arguably supported by a 2011 decision, Kentucky Employers’ Mutual Insurance v. Novation Capital LLC, 361 S.W.3d 320 (Ky. Ct. App.) ̶ posed a danger to such settlements in Kentucky and at least 15 other states whose structured settlement protection acts apply only to transfers of payment rights under tort settlements. Source: NSSTA, which filed an amicus brief in the case