§ 74.505.Financial Responsibility

The security provision, and it is what makes the release in the preceding section acceptable.

As a condition to authorizing periodic payments, the court shall require a defendant who is not adequately insured to provide evidence of financial responsibility in an amount adequate to assure full payment of damages awarded.

The obligation is triggered by inadequate insurance rather than imposed on everyone — a well-insured defendant's coverage is itself the security.

Subsection (b) prescribes four funding routes, and the judgment must use one: an annuity contract from a licensed insurance company, including an assignment within the meaning of Section 130 of the Internal Revenue Code; an obligation of the United States; applicable and collectible liability insurance from one or more qualified insurers; or any other satisfactory form of funding approved by the court.

The Internal Revenue Code reference is not incidental. Section 130 governs qualified assignments of structured settlement obligations, which is the mechanism that makes the payments tax-free to the recipient and lets the defendant transfer the obligation permanently to a funding company.

The first three routes share a feature: none depends on the defendant remaining solvent. An annuity, a federal obligation, and an insurer's coverage each survive the defendant's failure.

Subsection (c): on termination of the payments the court shall order the return of the security, or as much as remains, to the defendant.