Racketeer Influenced and Corrupt Organizations Act (“RICO”)

Liability insurers charge premiums in exchange for an agreement to cover certain claims against their policyholders. When settling a tort claim against a policyholder, the insurance company can pay a lump-sum of cash or, in some cases, will enter into a “structured settlement” with the claimant. Here, the insurance company purchases an annuity (or a stream of payments over a set period of time) from, for example, a life insurance company, under which the beneficiary/claimant will receive these payments to settle the claim. However, the process of buying an annuity generates certain transaction costs in the form of a broker’s commission payable by the liability insurer to the life insurance agent. If the liability insurer were to purchase a stream of payments for the amount owed to the claimant but the claimant received less than the insurer paid, what should we call the missing funds: fraud or the price of doing business?