Commonwealth of Massachusetts, Department of Industrial Accidents, denies a proposed
assignment of workers’ compensation payments.

Administrative Law Judge and Senior Judge Martine Carroll, of the Commonwealth of
Massachusetts, Department of Industrial Accidents, flatly rejected a proposed transfer of
workers’ compensation payments, finding the transfer in direct contravention of the Massachusetts Workers’ Compensation Act, as well as the Massachusetts Structured Settlement Protection Act.

According to the transfer petition, the payments at issue flowed from the settlement of
a workers’ compensation claim in 1983. Under the terms of the settlement, the payee
receives monthly payments and is scheduled to receive lump sum payments in July 2009,
July 2014 and July 2019. The factoring company sought to purchase the three remaining
lump sum payments, which have a present value (utilizing the statutory discount rate
of 4.2 percent) of approximately $33,000, in exchange for a payment of $16,000 to the
payee. The effective interest rate of the proposed transfer was in excess of 21 percent.

After extensive briefing, oral argument and testimony from the payee, Judge Carroll denied
the transfer on three separate grounds. First, Judge Carroll held the transfer would
violate the Massachusetts Workers’ Compensation Act, which provides that “[n]o payment
shall be assignable or subject to attachment or be liable in any way for debts” except
in certain enumerated situations, such as for payment of child support. The factoring
company argued the Workers’ Compensation Act should be read more expansively, such
that only those transfers that are for the payment of “debts” are prohibited. Because the
proposed transfer was not in satisfaction of a “debt,” it was not prohibited. Judge Carroll
firmly rejected this argument, recognizing that the legislative purpose of the Workers’
Compensation Act is to uphold the “best interests of the employee” and to prohibit all
assignments and transfers except as expressly authorized in the statute.

Second, Judge Carroll held that, even if the Workers’ Compensation Act were not a bar,
the transfer was not in the best interests of the payee as required by the Massachusetts
Structured Settlement Protection Act. To that end, Judge Carroll found that the payee
has resources to cover her monthly living expenses, and it is highly unlikely that her
mortgagor would move to foreclose on her home “in the face of a sum certain becoming
available [in July 2009] to take care of any amount owed.”

Finally, Judge Carroll held that the transfer was not “fair, just and reasonable,” concluding
that “[t]he transfer would only put an additional $6,000 in [the payee’s] pocket in the short term.” She added: “The greater-than-21 [percent] interest rate that the [proposed
transfer] provides far exceeds that which would be levied on any arms-length negotiated
loan in the open credit market.”

Judge Carroll fully rejected all aspects of the proposed transfer, solidifying the precedent
that structured settlement payment rights stemming from workers’ compensation settlements
are not transferable. The annuity issuer was represented by Gregory J. Star of
Drinker Biddle & Reath LLP.