Mass tort litigations often include claims on behalf of minors and by persons receiving certain means-tested government benefits. When litigation resolves through settlement, these plaintiffs can suffer unintended consequences such as loss of benefits and mismanagement of funds.
Counsel and administrators must consider the legal and reputational risks of failing to adequately consider the potential unintended consequences of these plaintiff groups receiving settlement funds. They must also select a bank to manage those settlement funds. Fortunately, certain banks have embraced the complex settlement vertical and developed service offerings expanding their utility, prompting thoughtful counsel and administrators to evolve their criteria to choose the right bank.
In this article, we outline the types of vulnerable plaintiff groups, examine potential consequences for failing to consider their interests, and highlight criteria counsel and administrators should use when selecting a bank.
What are examples of vulnerable plaintiff groups?
1. Minors
A minor is a person under the age of legal competence, which is usually 18 years old. Minor plaintiffs can be prevalent in mass tort litigations. For example, a litigation alleging injuries to newborns due to a company’s failure to warn of adverse effects and the defective manufacturing of its baby formula products could include a high rate of minor plaintiffs.
Settling claims for minor plaintiffs may require extra-legal steps, such as the appointment of a Guardian Ad Litem and petitioning for Pro Ami approval of the minor’s settlement, which could require proof that the settlement funds will be properly managed to benefit the minor for years to come.
2. Supplemental Security Income (SSI) beneficiaries
SSI is a federally administered program providing monthly payments to persons meeting criteria based on age and physical disability status. Beneficiaries must also not have income or resources above specified amounts. An example of a mass tort litigation that could include a high number of SSI beneficiaries would be based on allegations that a manufacturer sold an unsafe medical device and targeted patients in economically disadvantaged areas.
A key consideration when settling claims for these plaintiffs is ensuring that receipt of settlement funds doesn’t cause them to exceed SSI resource limitations and lose benefits.
2023 SSI Income and Resource Eligibility Guidelines†
| Individual | Couple | |
|---|---|---|
| gross wages or net self-employment income |
Less than $1,913 per month in wages or self-employment | Less than $2,827 per month in wages or self-employment |
| income from pensions or gifts | Less than $934 per month | Less than $1,391 per month |
| resources | Less than $2,000 total | Less than $3,000 total |
(Source: Data from Supplemental Security Income)
Thankfully, there are financial solutions an SSI beneficiary can utilize to maintain benefits and derive value from his or her settlement funds.
3. Medicaid beneficiaries
Medicaid is a state-administered health insurance program for persons with low income and limited assets. The eligibility criteria vary by state, but all states limit eligibility based on annual income, and most states prohibit beneficiaries from owning assets valued above certain amounts. As of September 2022, there were as many as 90.6 million people enrolled in Medicaid and Children's Health Insurance Program (CHIP) benefits, making this group of plaintiffs consistently represented in mass tort litigations‡.
Like SSI beneficiaries, Medicaid beneficiaries receiving settlement funds risk losing benefits if financial planning and preservation solutions are not utilized.
Potential consequences for counsel and administrators
For counsel, failing to adequately investigate and advise a client on the options for maximizing government benefits post-settlement could lead to ethics and malpractice actions. If the plaintiff isn’t adequately advised of the risks and options prior to receiving settlement funds and later loses government benefits such as SSI or Medicaid, counsel could face claims based on the applicable rules of professional conduct, including competence, diligence, and safekeeping of client property.
Settlement claims administrators should consider the reputational risk of not having a solution and process for managing the claims of these vulnerable plaintiff groups. All parties to a mass tort settlement want a thorough but quick administrative process. If an administrator cannot wind down a claims facility due to unresolved issues stemming from claims of these vulnerable plaintiff groups, the efficacy of the administrator’s performance and reputation may be negatively impacted.
Settlement bank assessment criteria considerations
Selecting a bank experienced in settlement administration solutions such as escrow/custodial services and benefit preservation services for vulnerable plaintiffs can help address these risks. Counsel and administrators should consider answering the following questions to help them select an experienced, multi-functional bank to provide tools for assessing vulnerable plaintiff groups and help improve the settlement process.
1. Does the bank have meaningful experience handling mass tort settlement matters?
A prospective settlement bank should be able to provide an extensive list of mass tort cases it has handled, including the aggregate amount of settlement funds managed and volume of payments made. Additionally, the bank should be able to explain which of its services are appropriate based on the goals of the parties and structure of the settlement. The bank should be able to recommend a tailored solution that considers all potential needs, from escrow/custodial services and treasury management services to services designed to help protect vulnerable plaintiff groups. Offering a diverse suite of services “under one roof” is ideal as it decreases costs, risk, and delays.
2. Does the bank offer services designed to address the needs of vulnerable plaintiff groups?
A prospective settlement bank should recognize the impact the settlement processes have on vulnerable plaintiff groups, since these plaintiffs will increase going forward as the number of persons receiving government benefits, including Medicaid, continues to grow‡.
The question is whether the bank has developed tailored services to meet their needs. For example, does the bank have a team dedicated to delivering trust solutions that preserve benefits such as special needs trusts (SNTs) (whether individual trusts or pooled) and preservation trusts for minors? Does the bank have trust powers and experienced advisors who can act in a fiduciary manner to assist vulnerable plaintiffs, maximizing the use of settlement funds while competently caring for administrative tasks like investment management, record keeping, and tax matters? Selecting a bank that offers benefit preservation services and escrow/custodial services makes the settlement process easier for vulnerable plaintiffs and can help save the parties time and money.
3. Does the bank have a specialty practice group with a team dedicated to serving vulnerable plaintiffs?
Benefit preservation laws and mass tort settlement processes can be difficult to understand. A prospective settlement bank should have a dedicated team of experienced professionals who can effectively communicate with vulnerable plaintiff groups about the settlement and the services the bank is providing.
Counsel and administrators should ask the bank for background on the service team that will be engaging with vulnerable plaintiffs. Ideally, the dedicated team will have years of experience working with vulnerable plaintiff groups and have wide-ranging subject matter expertise in areas such as investment management, record keeping, and tax matters. Having a dedicated team with these qualifications improves the settlement process for all parties and provides plaintiffs with the opportunity for obtaining long-term financial security.
4. Does the settlement bank provide technology specifically designed for managing benefit preservation solutions?
Effective technology is a critical component of successful settlement administration. Many banks offer basic trust accounting platforms. However, in the settlement context, it’s important for a bank to have a platform with the capability to manage pooled trusts. Pooling combines individual accounts into a larger pool providing greater investment potential and efficiencies while still providing funds for a plaintiff to cover living expenses and maintain benefits.
Counsel and administrators should consider asking a prospective settlement bank whether it maintains a specialized sub-accounting platform providing detailed multi-level reporting capabilities and sophisticated unitization processes with daily net asset values and transactions available to view online in real-time. They should also consider asking the bank if the platform is turn-key or if it must be customized and developed for each settlement. Selecting a bank with a turn-key technology platform designed for the administration of benefit preservation services, such as pooled trusts, will provide all parties with more transparency and help provide better outcomes.
Limiting risk for firms and vulnerable plaintiffs
The proliferation of vulnerable plaintiff groups in mass tort settlements is a trend that will continue. Counsel and administrators should be thoughtful when managing the interests of these plaintiffs through the settlement process, as failing to do so could result in unintended consequences for all involved. Keeping vulnerable plaintiff groups’ needs in mind also reduces risk posed to firms, so these considerations benefit both sides.
To learn how Huntington could support you as you navigate through the process of managing mass tort settlements, contact your relationship manager.
