Anyone involved in personal injury negotiations needs to understand reversions (also called “reversionary interest” or “reversionary guarantee”). 

A reversion is created when a guarantee period is added to a structure, with the funding casualty insurer (NOT the claimant’s estate) named as payee in the event of the premature death of the claimant.  This creates the possibility of money being recovered by the settling insurance company if the claimant dies during the guarantee period. 

Any reversion must be negotiated at the time of settlement, and is seen most commonly in Accident Benefits cases. In its most common form, the reversion protects the investment of the settling insurer only, and there is no estate protection on the structure.  However, with the agreement of the funding casualty company, the guarantee can be divided in some fashion between the casualty insurer and the claimant’s estate.

Because the details of the reversion can be complex, you should always ensure that the terms are clearly set out at the time of settlement.  Is there a reversion at all?  If so, what are the details of that reversion?  Who will pay for the cost of the guarantee?   How much must be structured?  Will the casualty insurer have the right to approve the final option?

Making sure you have dotted all the “i”s and crossed all the “t”s will ensure that your settlement continues to its conclusion quickly, and smoothly, so it is well worth a call to McKellar to make sure you have ironed out all the necessary details.

Phil Thorpe, Principal (B.Sc., FCIP, CSSC)