McKellar Structured Settlements Inc.Landmark Ruling for McKellar
Landmark Ruling for McKellar
On May 15, 1991, a landmark Revenue Canada decision allowed McKellar Structured Settlements Inc., to announce a major breakthrough for foreign-based insurance companies and self-insured entities seeking to settle claims in Canada.
Previously, accident victims taking action against foreign-based insurers could not take full advantage of what are typically called structures (these are custom designed settlements which allow for regular non-taxable payments to resolve claims). Self-insurers could not avoid their own tax difficulties and foreign-based companies could not avoid being permanently liable. Neither position was attractive.
The concept of "conditional" assignment (assigning responsibility for payments to a secondary insurer) has recently reduced the tax problems for self-insured companies. But because the conditions include complicated fall-back clauses, such settlements do not resolve the problem of a company's ongoing liability. In other words, under this scheme, the original insurer will always be liable for continuing payments if the reinsurer defaults.
This favourable Revenue Canada ruling allows all Canadian plaintiffs to benefit from the provisions of structured settlements, whatever the defendant. In providing for the absolute transfer to a secondary insurer of both the ownership of the structure and the liability for making payment, McKellar has simplified the settlement process and added security for defendants as well as plaintiffs.
McKellar is Canada's oldest and largest Canadian structured settlement firm. Its introduction of this Revenue Canada sanctioned reinsurance system for self-insurers and companies based outside Canada is yet another example of its commitment to leadership in the structured settlements field.
