Senate Bill No. 704
(By Senator Minard)
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[Introduced February 18, 2008; referred to the Committee on
Banking and Insurance; and then to the Committee on Finance.]
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A BILL to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §33-13C-1, §33-13C-2,
§33-13C-3, §33-13C-4, §33-13C-5, §33-13C-6, §33-13C-7,
§33-13C-8, §33-13C-9, §33-13C-10, §33-13C-11, §33-13C-12, §33-
13C-13, §33-13C-14, §33-13C-15, §33-13C-16 and §33-13C-17, all
relating to viatical settlements of life insurance policies
between life insurance policyholders and third parties;
providing for licensing of viatical settlement providers and
brokers; requiring payment of fees; authorizing proposal of
and promulgation of rules, including emergency rules; and
providing civil and criminal penalties for violations.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended
by adding thereto a new article, designated §33-13C-1, §33-13C-2,
§33-13C-3, §33-13C-4, §33-13C-5, §33-13C-6, §33-13C-7, §33-13C-8, §33-13C-9, §33-13C-10, §33-13C-11, §33-13C-12, §33-13C-13,
§33-13C-14, §33-13C-15, §33-13C-16 and §33-13C-17, all to read as
follows:
ARTICLE 13C. VIATICAL SETTLEMENTS ACT.
§33-13C-1. Short title.
This article may be cited as the "Viatical Settlements Act."
§33-13C-2. Definitions.
As used in this article:
(1) "Advertising" means any written, electronic or printed
communication or any communication by means of recorded telephone
messages or transmitted on radio, television, the Internet or
similar communications media, including film strips, motion
pictures and videos, published, disseminated, circulated or placed
directly or indirectly before the public in this state for the
purpose of creating an interest in or inducing a person to sell,
assign, devise, bequest or transfer the death benefit or ownership
of a life insurance policy pursuant to a viatical settlement
contract.
(2) "Business of viatical settlements" means an activity
involved in, but not limited to, the offering, soliciting,
negotiating, procuring, effectuating, purchasing, investing,
financing, monitoring, tracking, underwriting, selling,
transferring, assigning, pledging, hypothecating or in any other
manner, acquiring an interest in a life insurance policy by means of a viatical settlement contract.
(3) "Chronically ill" means having been certified within the
preceding twelve-month period by a licensed health professional as:
(A) Being unable to perform, without substantial assistance
from another individual, at least two of the following activities
of daily living, including, but not limited to, eating, toileting,
transferring, bathing, dressing or continence due to a loss of
functional capacity;
(B) Requiring substantial supervision to protect the
individual from threats to health and safety due to severe
cognitive impairment; or
(C) Having a level of disability similar to that described in
paragraph (A) of this subdivision as determined under regulations
prescribed by the United States Secretary of the Treasury in
consultation with the United States Secretary of Health and Human
Services.
(4) "Financing entity" means an underwriter, placement agent,
lender, purchaser of securities, purchaser of a policy or
certificate from a viatical settlement provider, credit enhancer,
or any entity that has a direct ownership in a policy or
certificate that is the subject of a viatical settlement contract,
but whose principal activity related to the transaction is
providing funds to effect the viatical settlement or purchase of
one or more viaticated polices and who has an agreement in writing with one or more licensed viatical settlement providers to finance
the acquisition of viatical settlement contracts. "Financing
entity" does not include a nonaccredited investor or a viatical
settlement purchaser.
(5) "Fraudulent viatical settlement act" includes:
(A) Acts or omissions committed by any person who knowingly or
with intent to defraud, for the purpose of depriving another of
property or for pecuniary gain, commits, or permits its employees
or its agents to engage in acts including:
(i) Presenting, causing to be presented or preparing with
knowledge or belief that it will be presented to or by a viatical
settlement provider, viatical settlement broker, viatical
settlement purchaser, financing entity, insurer, insurance producer
or any other person, false material information, or concealing
material information, as part of, in support of or concerning a
fact material to one or more of the following:
(I) An application for the issuance of a viatical settlement
contract or insurance policy;
(II) The underwriting of a viatical settlement contract or
insurance policy;
(III) A claim for payment or benefit pursuant to a viatical
settlement contract or insurance policy;
(IV) Premiums paid on an insurance policy;
(V) Payments and changes in ownership or beneficiary made in accordance with the terms of a viatical settlement contract or
insurance policy;
(VI) The reinstatement or conversion of an insurance policy;
(VII) In the solicitation, offer, effectuation or sale of a
viatical settlement contract or insurance policy;
(VIII) The issuance of written evidence of viatical settlement
contract or insurance; or
(IX) A financing transaction; and
(ii) Employing any plan, financial structure, device, scheme,
or artifice to defraud related to viaticated policies.
(B) In the furtherance of a fraud or to prevent the detection
of a fraud any person commits or permits its employees or its
agents to:
(i) Remove, conceal, alter, destroy or sequester from the
commissioner the assets or records of a licensee or other person
engaged in the business of viatical settlements;
(ii) Misrepresent or conceal the financial condition of a
licensee, financing entity, insurer or other person;
(iii) Transact the business of viatical settlements in
violation of laws requiring a license, certificate of authority or
other legal authority for the transaction of the business of
viatical settlements; or
(iv) File with the commissioner or the equivalent chief
insurance regulatory official of another jurisdiction a document containing false information or otherwise conceals information
about a material fact from the commissioner;
(C) Embezzlement, theft, misappropriation or conversion of
moneys, funds, premiums, credits or other property of a viatical
settlement provider, insurer, insured, viator, insurance
policyowner or any other person engaged in the business of viatical
settlements or insurance;
(D) Recklessly entering into, negotiating, brokering,
otherwise dealing in a viatical settlement contract, the subject of
which is a life insurance policy that was obtained by presenting
false information concerning any fact material to the policy or by
concealing, for the purpose of misleading another, information
concerning any fact material to the policy, where the person or the
persons intended to defraud the policy's issuer, the viatical
settlement provider or the viator.
(E) Facilitating the change of state of ownership of a policy
or certificate or the state of residency of a viator to a state or
jurisdiction that does not have a law similar to this article for
the express purposes of evading or avoiding the provisions of this
article; or
(F) Attempting to commit, assisting, aiding or abetting in the
commission of, or conspiracy to commit the acts or omissions
specified in this subsection.
(6) "Life insurance producer" means any person licensed in accordance with the provisions of article twelve of this chapter as
a resident or nonresident insurance producer who has received
qualification or authority for a license in the life insurance
coverage line of authority.
(7) "Person" means a natural person or a legal entity,
including, without limitation, an individual, partnership, limited
liability company, association, trust or corporation.
(8) "Policy" means an individual or group policy, group
certificate, contract or arrangement of life insurance owned by a
resident of this state, regardless of whether delivered or issued
for delivery in this state.
(9) "Related provider trust" means a titling trust or other
trust established by a licensed viatical settlement provider or a
financing entity for the sole purpose of holding the ownership or
beneficial interest in purchased policies in connection with a
financing transaction. The trust shall have a written agreement
with the licensed viatical settlement provider under which the
licensed viatical settlement provider is responsible for ensuring
compliance with all statutory and regulatory requirements and under
which the trust agrees to make all records and files related to
viatical settlement transactions available to the commissioner as
if those records and files were maintained directly by the licensed
viatical settlement provider.
(10) "Special purpose entity" means a corporation, partnership, trust, limited liability company or other similar
entity formed solely to provide either directly or indirectly
access, either directly or indirectly, to institutional capital
markets for a financing entity or licensed viatical settlement
provider or in connection with a transaction in which the
securities in the special purpose entity are acquired by qualified
institutional buyers.
(11) "Terminally ill" means certified by a physician as
having an illness or physical condition that can reasonably be
anticipated to result in death in twenty-four months or less.
(12) "Viatical settlement broker" means a person who, working
exclusively on behalf of a viator and for a fee, commission or
other valuable consideration, offers or attempts to negotiate
viatical settlement contracts between a viator and one or more
viatical settlement providers or one or more viatical settlement
brokers. Notwithstanding the manner in which the viatical
settlement broker is compensated, a viatical settlement broker is
deemed to represent only the viator, and not the insurer or the
viatical settlement provider, and owes a fiduciary duty to the
viator to act according to the viator's instructions and in the
best interest of the viator. The term does not include an
attorney, certified public accountant or a financial planner
accredited by a nationally recognized accreditation agency, who is
retained to represent the viator and whose compensation is not paid directly or indirectly by the viatical settlement provider or
purchaser, provided that the viatical settlement activities are
incidental to the professional practice of the attorney, certified
public accountant or financial planner.
(13) "Viatical settlement contract" means any of the
following:
(A) A written agreement between a viator and a viatical
settlement provider or any affiliate of the viatical settlement
provider establishing the terms under which compensation or
anything of value is or will be paid, which compensation or value
is less than the expected death benefits of the policy, in return
for the viator's present or future assignment, transfer, sale,
devise or bequest of the death benefit or ownership of any portion
of the insurance policy or certificate of insurance;
(B) A premium finance loan made for a life insurance policy by
a lender to a viator on, before or after the date of issuance of
the policy in either of the following situations:
(i) The viator or the insured receives a guarantee of a future
viatical settlement value of the policy; or
(ii) The viator or the insured agrees to sell the policy or
any portion of its death benefit on any date following the issuance
of the policy.
(C) The transfer or acquisition for compensation or anything
of value for ownership or beneficial interest in a trust or other person that owns such a policy if the trust or other person was
formed or availed of for the principal purpose of acquiring one or
more life insurance policies.
(D) "Viatical settlement contract" does not include any of the
following unless part of a plan, scheme, device or artifice to
avoid the application of this article:
(i) A policy loan or accelerated death benefit made by the
insurer pursuant to the policy's terms;
(ii) Loan proceeds that are used solely to pay premiums for
the policy and the costs of the loan, including interest,
arrangement fees, utilization fees and similar fees, closing costs,
legal fees and expenses, trustee fees and expenses, and third party
collateral provider fees and expenses, including fees payable to
letter of credit issuers;
(iii) A loan made by a bank or other licensed financial
institution in which the lender takes an interest in a life
insurance policy solely to secure repayment of a loan or, if there
is a default on the loan and the policy is transferred, the
transfer of such a policy by the lender, provided that the default
itself is not pursuant to an agreement or understanding with any
other person for the purpose of evading regulation under this
article;
(iv) An agreement where all the parties are closely related to
the insured by blood or law or have a lawful substantial economic interest in the continued life, health and bodily safety of the
person insured, or are trusts established primarily for the benefit
of such parties;
(v) Any designation, consent or agreement by an insured who is
an employee of an employer in connection with the purchase by the
employer, or trust established by the employer, of life insurance
on the life of the employee;
(vi) Any of the following business succession planning
arrangements if those arrangements are bona fide arrangements:
(I) An arrangement between one or more shareholders in a
corporation or between a corporation and one or more of its
shareholders or one or more trusts established by its shareholders;
(II) An arrangement between one or more partners in a
partnership or between a partnership and one or more of its
partners or one or more trusts established by its partners; or
(III) An arrangement between one or more members in a limited
liability company or between a limited liability company and one or
more of its members or one or more trusts established by its
members;
(vii) An agreement entered into by a service recipient, or a
trust established by the service recipient and a service provider,
or a trust established by the service provider who performs
significant services for the service recipient's trade or business;
or
(viii) Any other contract, transaction or arrangement exempted
from the definition of a viatical settlement contract by the
commissioner based on a determination that the contract,
transaction or arrangement is not of the type intended to be
regulated by this article.
(14)(A) "Viatical settlement provider" means a person, other
than a viator, that enters into or effectuates a viatical
settlement contract with a viator resident in this state.
(B) "Viatical settlement provider" does not include:
(i) A bank, savings bank, savings and loan association, credit
union or other licensed lending institution that takes an
assignment of a life insurance policy solely as collateral for a
loan;
(ii) The issuer of the life insurance policy;
(iii) An authorized or eligible insurer that provides stop
loss coverage or financial guaranty insurance to a viatical
settlement provider, purchaser, financing entity, special purpose
entity or related provider trust;
(iv) An individual who enters into or effectuates no more than
one viatical settlement contract in a calendar year for the
transfer of life insurance policies for any value less than the
expected death benefit;
(v) A financing entity;
(vi) A special purpose entity;
(vii) A related provider trust;
(viii) A viatical settlement purchaser; or
(ix) Any other person that the commissioner determines is not
the type of person intended to be covered by the definition of
viatical settlement provider.
(15)(A) "Viatical settlement purchaser" means a person who
provides a sum of money as consideration for a life insurance
policy or an interest in the death benefits of a life insurance
policy, or a person who owns or acquires or is entitled to a
beneficial interest in a trust that owns a viatical settlement
contract or is the beneficiary of a life insurance policy that has
been or will be the subject of a viatical settlement contract, for
the purpose of deriving an economic benefit.
(B) "Viatical settlement purchaser" does not include:
(i) A licensee under this article;
(ii) An accredited investor or qualified institution buyer as
defined in, respectively, Rule 501(a) or Rule 144A promulgated
under the Federal Securities Act of 1933, as amended;
(iii) A financing entity;
(iv) A special purpose entity; or
(v) A related provider trust.
(16) "Viaticated policy" means a life insurance policy or
certificate that has been acquired by a viatical settlement
provider pursuant to a viatical settlement contract.
(17)(A) "Viator" means the owner of a life insurance policy or
a certificate holder under a group policy who resides in this state
and enters or seeks to enter into a viatical settlement contract.
For the purposes of this article, a viator shall not be limited to
an owner of a life insurance policy or a certificate holder under
a group policy insuring the life of an individual with a terminal
or chronic illness or condition except where specifically
addressed. If there is more than one viator on a single policy and
the viators are residents of different states, the transaction
shall be governed by the law of the state in which the viator
having the largest percentage ownership resides or, if the viators
hold equal ownership, the state of residence of one viator agreed
upon in writing by all the viators.
(B) "Viator" does not include:
(i) A licensee under this article, including a life insurance
producer acting as a viatical settlement broker pursuant to this
article;
(ii) Qualified institution buyer as defined, respectively, in
Rule 144A promulgated under the Federal Securities Act of 1933, as
amended;
(iii) A financing entity;
(iv) A special purpose entity; or
(v) A related provider trust.
§33-13C-3. License and bond requirements.
(a) (1) A person shall not operate as a viatical settlement
provider or viatical settlement broker without first obtaining a
license from the commissioner.
(2) (A) An insurance producer who is authorized to sell life
insurance in this state pursuant to a resident or nonresident
license issued in accordance with the provisions of article twelve
of this chapter may operate as a viatical settlement broker without
obtaining a license pursuant to this section if the viatical
settlement activities of the producer are incidental to the
producer's insurance business activities.
(B) The insurer that issued the policy being viaticated shall
not be responsible for any act or omission of a viatical settlement
broker or viatical settlement provider arising out of or in
connection with the viatical settlement transaction, unless the
insurer receives compensation for the placement of a viatical
settlement contract from the viatical settlement provider or
viatical settlement broker in connection with the viatical
settlement contract.
(3) A person licensed as an attorney, certified public
accountant or financial planner accredited by a nationally
recognized accreditation agency, who is retained to represent the
viator, whose compensation is not paid directly or indirectly by
the viatical settlement provider, may negotiate viatical settlement
contracts on behalf of the viator without having to obtain a license as a viatical settlement broker.
(b) Application for a viatical settlement provider or viatical
settlement broker license and for renewals of such licenses shall
be made in the manner prescribed by the commissioner and shall be
accompanied by fees established in legislative rules, including
emergency rules, promulgated by the commissioner.
(c) The commissioner shall have authority, at any time, to
require the applicant to fully disclose the identity of all
stockholders, partners, officers, members and employees, and the
commissioner may, in the exercise of the commissioner's discretion,
refuse to issue a license in the name of a legal entity if not
satisfied that any officer, employee, stockholder, partner or
member thereof who may materially influence the applicant's conduct
meets the standards of this article.
(d) The commissioner shall make an investigation of each
applicant and issue a license if the commissioner finds that the
applicant:
(1) If a viatical settlement provider, has provided a detailed
plan of operation;
(2) Is competent and trustworthy and intends to act in good
faith in the capacity involved by the license applied for;
(3) Has a good business reputation and has had experience,
training or education so as to be qualified in the business for
which the license is applied for;
(4) Has demonstrated evidence of financial responsibility in
a format prescribed by the commissioner by possessing a minimum
equity of not less than two hundred fifty thousand dollars in cash
or cash equivalents reflected in the applicant's audited financial
statements or through a surety bond executed and issued by an
insurer authorized to issue surety bonds in this state in the
amount of two hundred fifty thousand dollars:
Provided, That the
commissioner shall accept, as evidence of financial responsibility,
proof that financial instruments in accordance with the
requirements in this paragraph have been filed with a state in
which the applicant is licensed as a viatical settlement provider
or viatical settlement broker. Any surety bond issued pursuant to
this subdivision shall be in the favor of this state and shall
specifically authorize recovery by the commissioner on behalf of
any person in this state who sustained damages as the result of
erroneous acts, failure to act, conviction of fraud or conviction
of unfair practices by the viatical settlement provider or viatical
settlement broker. The commissioner may ask for evidence of
financial responsibility at any time he or she deems necessary.
(5) If a legal entity, has provided a certificate of good
standing from the state of its domicile; and
(6) Has provided an anti-fraud plan that meets the
requirements of subsection (g), section fourteen of this article.
(e) The commissioner shall not issue a license to a nonresident applicant unless the applicant files with the
commissioner either a written designation of an agent for service
of process or the applicant's written irrevocable consent that any
action against the applicant may be commenced against the applicant
by service of process on the commissioner.
(f) A viatical settlement provider or viatical settlement
broker shall provide to the commissioner new or revised information
about officers, ten percent or more stockholders, partners,
directors, members or designated employees within thirty days of
the change.
(g) An individual licensed as a viatical settlement broker
shall complete on a biennial basis fifteen hours of training
related to viatical settlements and viatical settlement
transactions, as required by the commissioner. A life insurance
producer operating as a viatical settlement broker pursuant to
subdivision (2), subsection (a) of this section shall not be
subject to the requirements of this subsection. Any person failing
to meet the requirements of this subsection shall be subject to the
penalties imposed by the commissioner.
§33-13C-4. License revocation and denial.
(a) The commissioner may refuse to issue, suspend, revoke,
place on probation or refuse to renew the license of a viatical
settlement provider or viatical settlement broker if the
commissioner finds that:
(1) There was any material misrepresentation in the
application for the license;
(2) The licensee or any officer, partner, member or key
management personnel has been convicted of fraudulent or dishonest
practices, is subject to a final administrative action or is
otherwise shown to be untrustworthy or incompetent;
(3) The viatical settlement provider demonstrates a pattern of
unreasonable payments to viators;
(4) The licensee or any officer, partner, member or key
management personnel has been found guilty of, or has pleaded
guilty or
nolo contendere to, any felony, or to a misdemeanor
involving fraud or moral turpitude, regardless of whether a
judgment of conviction has been entered by the court;
(5) The viatical settlement provider has entered into any
viatical settlement contract that has not been approved pursuant to
this article;
(6) The viatical settlement provider has failed to honor
contractual obligations set out in a viatical settlement contract;
(7) The licensee no longer meets the requirements for initial
licensure;
(8) The viatical settlement provider has assigned, transferred
or pledged a viaticated policy to a person other than a viatical
settlement provider licensed in this state, viatical settlement
purchaser, an accredited investor or qualified institutional buyer as defined respectively in Rule 501(a) or Rule 144A promulgated
under the Federal Securities Act of 1933, as amended, financing
entity, special purpose entity, or related provider trust; or
(9) The licensee or any officer, partner, member or key
management personnel has violated any provision of this article.
(b) The commissioner may suspend, revoke or refuse to renew
the license of a viatical settlement broker or a life insurance
producer operating as a viatical settlement broker pursuant to this
article if the commissioner finds that the viatical settlement
broker or life insurance producer has violated the provisions of
this article or has otherwise engaged in bad faith conduct with one
or more viators.
(c) If the commissioner denies a license application or
suspends, revokes or refuses to renew the license of a viatical
settlement provider, viatical settlement broker or life insurance
producer operating as a viatical settlement broker, the
commissioner shall conduct a hearing in accordance with section
thirteen, article two of this chapter.
§33-13C-5. Approval of viatical settlement contracts and
disclosure statements.
(a) A person shall not use a viatical settlement contract form
or provide a disclosure statement form to a viator in this state
unless it has been filed with and approved by the commissioner.
The commissioner shall disapprove a viatical settlement contract form, disclosure statement form or any provision contained therein
if, in the commissioner's opinion, the contract, disclosure form or
any provision contained therein fail to meet the requirements of
section eight, ten, thirteen or fourteen of this article, is
unreasonable, is contrary to the interests of the public, or is
otherwise misleading or unfair to the viator. At the
commissioner's discretion, the commissioner may require the
submission of advertising material.
(b) Forms required to be filed are subject to the provisions
of section eight, article six of this chapter and shall be deemed
"forms for noncommercial insurance". The commissioner shall
establish fees for form filings by rule, including emergency rule.
§33-13C-6. Reporting requirements and privacy.
(a) On or before the first day of March of each year, each
viatical settlement provider shall file with the commissioner an
annual statement containing such information as the commissioner
may prescribe. The information shall be limited to only those
transactions where the viator is a resident of this state.
Individual transaction data regarding the business of viatical
settlements or data that could compromise the privacy of personal,
financial and health information of the viator or insured shall be
filed with the commissioner on a confidential basis.
(b) Except as otherwise allowed or required by law, a viatical
settlement provider, viatical settlement broker, insurance company, insurance producer, information bureau, rating agency or company or
any other person with actual knowledge of an insured's identity,
shall not disclose that identity as an insured, or the insured's
financial or medical information to any other person unless the
disclosure:
(1) Is necessary to effect a viatical settlement between the
viator and a viatical settlement provider and the viator and
insured have provided prior written consent to the disclosure;
(2) Is provided in response to an investigation or examination
by the commissioner or any other governmental officer or agency or
pursuant to the requirements of subsection (c), section fourteen of
this article;
(3) Is a term of or condition to the transfer of a policy by
one viatical settlement provider to another viatical settlement
provider;
(4) Is necessary to permit a financing entity, related
provider trust or special purpose entity to finance the purchase of
policies by a viatical settlement provider and the viator and
insured have provided prior written consent to the disclosure;
(5) Is necessary to allow the viatical settlement provider or
viatical settlement broker or their authorized representative to
make contacts for the purpose of determining health status; or
(6) Is required to purchase stop loss coverage or financial
guaranty insurance.
§33-13C-7. Examination or investigation.
(a) (1) The commissioner may conduct an examination under this
article of a licensee as often as he or she deems appropriate after
considering such matters as consumer complaints, results of
financial statement analyses and ratios, changes in management or
ownership, actuarial opinions, report of independent certified
public accountants, and other relevant criteria as determined by
the commissioner.
(2) For purposes of completing an examination of a licensee
under this article, the commissioner may examine or investigate any
person, or the business of any person, in so far as the examination
or investigation is, in the sole discretion of the commissioner,
necessary or material to the examination of the licensee.
(3) In lieu of an examination under this article of any
foreign or alien licensee licensed in this state, the commissioner
may, at the commissioner's discretion, accept an examination report
on the licensee as prepared by the commissioner for the licensee's
state of domicile or port-of-entry state; as far as practical, the
examination of a foreign or alien licensee shall be made in
cooperation with the insurance supervisory officials of other
states in which the licensee transacts business.
(b) (1) A person required to be licensed by this article shall
for five years retain copies of all records and documents related
to the requirements of this article, including but not limited to proposed, offered or executed contracts, purchase agreements,
underwriting documents, policy forms, and applications from the
date of the proposal, offer or execution of the contract or
purchase agreement, whichever is later; and all checks, drafts or
other evidence and documentation related to the payment, transfer,
deposit or release of funds from the date of the transaction:
Provided, That this subsection does not relieve a person of the
obligation to produce these documents to the commissioner after the
retention period has expired if the person has retained the
documents.
(2) Records required to be retained by this section shall be
legible and complete and may be retained in paper, photograph,
microprocess, magnetic, mechanical, or electronic media, or by any
process that accurately reproduces or forms a durable medium for
the reproduction of a record.
(c) (1) Upon determining that an examination should be
conducted, the commissioner shall issue an examination warrant
appointing one or more examiners to perform the examination and
instructing them as to the scope of the examination. In conducting
the examination, the examiner shall observe those guidelines and
procedures set forth in the Examiners Handbook adopted by the
National Association of Insurance Commissioners (NAIC). The
commissioner may also employ such other guidelines or procedures as
the commissioner may deem appropriate.
(2) Every licensee or person from whom information is sought,
its officers, directors and agents shall provide to the examiners
timely, convenient and free access at all reasonable hours at its
offices to all books, records, accounts, papers, documents, assets
and computer or other recordings relating to the property, assets,
business and affairs of the licensee being examined. The officers,
directors, employees and agents of the licensee or person shall
facilitate the examination and aid in the examination so far as it
is in their power to do so. The refusal of a licensee, by its
officers, directors, employees or agents, to submit to examination
or to comply with any reasonable written request of the
commissioner shall be grounds for suspension or refusal of, or
nonrenewal of any license or authority held by the licensee to
engage in the viatical settlement business or other business
subject to the commissioner's jurisdiction. Any proceedings for
suspension, revocation or refusal of any license or authority shall
be conducted pursuant to section eleven, article two of this
chapter.
(3) The commissioner shall have the power to issue subpoenas,
to administer oaths and to examine under oath any person as to any
matter pertinent to the examination. Upon the failure or refusal
of a person to obey a subpoena, the commissioner may petition a
court of competent jurisdiction, and upon proper showing, the court
may enter an order compelling the witness to appear and testify or produce documentary evidence. Failure to obey the court order is
punishable as contempt of court.
(4) When making an examination under this article, the
commissioner may retain attorneys, appraisers, independent
actuaries, independent certified public accountants or other
professionals and specialists as examiners, the reasonable cost of
which shall be borne by the licensee that is the subject of the
examination.
(5) Nothing contained in this article shall be construed to
limit the commissioner's authority to terminate or suspend an
examination in order to pursue other legal or regulatory action
pursuant to the insurance laws of this state. Findings of fact and
conclusions made pursuant to any examination shall be
prima facie
evidence in any legal or regulatory action.
(6) No later than sixty days following completion of the
examination, the examiner in charge shall file with the
commissioner a verified written report of examination under oath.
Upon receipt of the verified report, the commissioner shall
transmit the report to the licensee examined, together with a
notice that shall afford the licensee examined a reasonable
opportunity of not more than thirty days to make a written
submission or rebuttal with respect to any matters contained in the
examination report.
(7) In the event the commissioner determines that regulatory action is appropriate as a result of an examination, the
commissioner may initiate any proceedings or actions provided by
law.
(d) (1) Names and individual identification data for all
viators is considered private and confidential information and
shall not be disclosed by the commissioner, unless required by law.
(2) Except as otherwise provided in this article, all
examination reports, working papers, recorded information,
documents and copies thereof produced by, obtained by or disclosed
to the commissioner or any other person in the course of an
examination made under this article, or in the course of analysis
or investigation by the commissioner of the financial condition or
market conduct of a licensee is confidential by law and privileged,
is not subject to the public disclosure provisions of article one,
chapter twenty-nine-b of this code, is not subject to subpoena, and
is not subject to discovery or admissible in evidence in any
private civil action. The commissioner is authorized to use the
documents, materials or other information in the furtherance of any
regulatory or legal action brought as part of the commissioner's
official duties.
(3) Documents, materials or other information, including, but
not limited to, all working papers, and copies thereof, in the
possession or control of the NAIC and its affiliates and
subsidiaries is confidential by law and privileged, is not subject to subpoena, and is not subject to discovery or admissible in
evidence in any private civil action if they are:
(A) Created, produced or obtained by or disclosed to the NAIC
and its affiliates and subsidiaries in the course of assisting an
examination made under this article, or assisting a commissioner in
the analysis or investigation of the financial condition or market
conduct of a licensee; or
(B) Disclosed to the NAIC and its affiliates and subsidiaries
under subdivision (5) of this subsection by a commissioner.
(4) Neither the commissioner nor any person that received the
documents, material or other information while acting under the
authority of the commissioner, including the NAIC and its
affiliates and subsidiaries, shall be permitted to testify in any
private civil action concerning any confidential documents,
materials or information subject to subdivision (1) of this
subsection.
(5) In order to assist in the performance of the
commissioner's duties, the commissioner:
(A) May share documents, materials or other information,
including the confidential and privileged documents, materials or
information subject to subdivision (1) of this subsection, with
other state, federal and international regulatory agencies, with
the NAIC and its affiliates and subsidiaries, and with state,
federal and international law-enforcement authorities, provided that the recipient agrees to maintain the confidentiality and
privileged status of the document, material, communication or other
information;
(B) May receive documents, materials, communications or
information, including otherwise confidential and privileged
documents, materials or information, from the NAIC and its
affiliates and subsidiaries, and from regulatory and
law-enforcement officials of other foreign or domestic
jurisdictions, and shall maintain as confidential or privileged any
document, material or information received with notice or the
understanding that it is confidential or privileged under the
jurisdiction that is the source of the document, material or
information; and
(C) May enter into agreements governing sharing and use of
information consistent with this subsection.
(6) No waiver of any applicable privilege or claim of
confidentiality in the documents, materials or information shall
occur as a result of disclosure to the commissioner under this
section or as a result of sharing as authorized in subdivision (5)
of this subsection.
(7) A privilege established under the law of any state or
jurisdiction that is substantially similar to the privilege
established under this subsection shall be available and enforced
in any proceeding in, and in any court of, this state.
(8) Nothing contained in this article shall prevent or be
construed as prohibiting the commissioner from disclosing the
content of an examination report, preliminary examination report or
results, or any matter relating thereto, to the commissioner of any
other state or country, or to law-enforcement officials of this or
any other state or agency of the federal government at any time or
to the NAIC, so long as such agency or office receiving the report
or matters relating thereto agrees in writing to hold it
confidential and in a manner consistent with this article.
(e) (1) An examiner may not be appointed by the commissioner
if the examiner, either directly or indirectly, has a conflict of
interest or is affiliated with the management of or owns a
pecuniary interest in any person subject to examination under this
article. This section shall not be construed to automatically
preclude an examiner from being:
(A) A viator;
(B) An insured in a viaticated insurance policy; or
(C) A beneficiary in an insurance policy that is proposed to
be viaticated.
(2) Notwithstanding the requirements of this clause, the
commissioner may retain from time to time, on an individual basis,
qualified actuaries, certified public accountants, or other similar
individuals who are independently practicing their professions,
even though these persons may from time to time be similarly employed or retained by persons subject to examination under this
article.
(f) (1) No cause of action shall arise nor shall any liability
be imposed against the commissioner, the commissioner's authorized
representatives or any examiner appointed by the commissioner for
any statements made or conduct performed in good faith while
carrying out the provisions of this article.
(2) No cause of action shall arise, nor shall any liability be
imposed against any person for the act of communicating or
delivering information or data to the commissioner or the
commissioner's authorized representative or examiner pursuant to an
examination made under this article, if the act of communication or
delivery was performed in good faith and without fraudulent intent
or the intent to deceive. This subdivision does not abrogate or
modify in any way any common law or statutory privilege or immunity
heretofore enjoyed by any person identified in subdivision (1) of
this subsection.
(3) A person identified in subdivision (1) or (2) of this
subsection shall be entitled to an award of attorney's fees and
costs if he or she is the prevailing party in a civil cause of
action for libel, slander or any other relevant tort arising out of
activities in carrying out the provisions of this article and the
party bringing the action was not substantially justified in doing
so. For purposes of this section a proceeding is "substantially justified" if it had a reasonable basis in law or fact at the time
that it was initiated.
(g) The insurance fraud unit created in article forty-one of
this chapter may investigate suspected violations of this article
by persons engaged in the business of viatical settlements in the
same manner as the fraud unit investigates suspected violators of
those statutes set forth in subsection (b), section eight, article
forty-one of this chapter.
§33-13C-8. Disclosure to viator.
(a) With each application for a viatical settlement, a
viatical settlement provider or viatical settlement broker shall
provide the viator with at least the following disclosures no later
than the time the application for the viatical settlement contract
is signed by all parties. The disclosures shall be provided in a
separate document that is signed by the viator and the viatical
settlement provider or viatical settlement broker, and shall
provide the following information:
(1) That there are possible alternatives to viatical
settlement contracts, including any accelerated death benefits or
policy loans offered under the viator's life insurance policy;
(2) That a viatical settlement broker represents exclusively
the viator, and not the insurer or the viatical settlement
provider, and owes a fiduciary duty to the viator, including a duty
to act according to the viator's instructions and in the best interest of the viator;
(3) That some or all of the proceeds of the viatical
settlement may be taxable under federal income tax and state
franchise and income taxes, and assistance should be sought from a
professional tax advisor.
(4) That proceeds of the viatical settlement could be subject
to the claims of creditors.
(5) That receipt of the proceeds of a viatical settlement may
adversely affect the viator's eligibility for Medicaid or other
government benefits or entitlements, and advice should be obtained
from the appropriate government agencies.
(6) The viator has the right to rescind a viatical settlement
contract by providing notice of rescission and repaying all
viatical settlement proceeds paid to the viator pursuant to the
escrow agreement by the earlier of sixty calendar days after the
date upon which the viatical settlement contract is executed by all
parties or thirty calendar days after the viatical settlement
proceeds have been paid to the viator, as provided in subsection
(e), section ten of this article. If the insured dies during the
rescission period, the viatical settlement contract shall be deemed
to have been rescinded, subject to repayment by the viator or the
viator's estate of all viatical settlement proceeds to the
viatical settlement provider within sixty days of the insured's
death.
(7) That funds will be sent to the viator within three
business days after the viatical settlement provider has received
the insurer or group administrator's written acknowledgment that
ownership of the policy or interest in the certificate has been
transferred and the beneficiary has been designated.
(8) That entering into a viatical settlement contract may
cause other rights or benefits, including conversion rights and
waiver of premium benefits that may exist under the policy or
certificate, to be forfeited by the viator and that assistance
should be sought from a financial adviser.
(9) Disclosure to a viator shall include distribution of a
brochure prescribed by the commissioner describing the process of
viatical settlements.
(10) The disclosure document shall contain the following
language: "All medical, financial or personal information
solicited or obtained by a viatical settlement provider or viatical
settlement broker about an insured, including the insured's
identity or the identity of family members, a spouse or a
significant other may be disclosed as necessary to effect the
viatical settlement between the viator and the viatical settlement
provider. If you are asked to provide this information you will be
asked to consent to the disclosure. The information may be
provided to someone who buys the policy or provides funds for the
purchase. You may be asked to renew your permission to share information every two years."
(11) That following execution of a viatical contract, the
insured may be contacted for the purpose of determining the
insured's health status and to confirm the insured's residential or
business street address and telephone number, or as otherwise
provided in this article. This contact shall be limited to once
every three months if the insured has a life expectancy of more
than one year, and not more than once per month if the insured has
a life expectancy of one year or less. All such contracts shall be
made only by a viatical settlement provider licensed in the state
in which the viator resided at the time of the viatical settlement,
or by the authorized representative of a duly licensed viatical
settlement provider.
(b) A viatical settlement provider shall provide the viator
with at least the following disclosures no later than the date the
viatical settlement contract is signed by all parties. The
disclosures shall be conspicuously displayed in the viatical
settlement contract or in a separate document signed by the viator
and provide the following information:
(1) The affiliation, if any, between the viatical settlement
provider and the issuer of the insurance policy to be viaticated;
(2) The document shall include the name, business address and
telephone number of the viatical settlement provider;
(3) Any affiliations or contractual arrangements between the viatical settlement provider and the viatical settlement purchaser;
(4) If an insurance policy to be viaticated has been issued as
a point policy or involved family riders or any coverage of a life
other than the insured under the policy to be viaticated, the
viator shall be informed of the possible loss of coverage on the
other lives under the policy and shall be advised to consult with
his or her insurance producer or the insurer issuing the policy for
advice on the proposed viatical settlement;
(5) State the dollar amount of the current death benefit
payable to the viatical settlement provider under the policy or
certificate. If known, the viatical settlement provider shall also
disclose the availability of any additional guaranteed insurance
benefits, the dollar amount of any accidental death and
dismemberment benefits under the policy or certificate and the
extent to which the viator's interest in those benefits will be
transferred as a result of the viatical settlement contract; and
(6) State whether the funds will be escrowed with an
independent third party during the transfer process, and if so,
provide the name, business address, and telephone number of the
independent third party escrow agent, and the fact that the viator
or owner may inspect or receive copies of the relevant escrow or
trust agreements or documents.
(c) A viatical settlement broker shall provide the viator with
at least the following disclosures no later than the date the viatical settlement contract is signed by all parties. The
disclosures shall be conspicuously displayed in the viatical
settlement contract or in a separate document signed by the viator
and provide the following information:
(1) The name, business address and telephone number of the
viatical settlement broker;
(2) A full, complete and accurate description of all offers,
counter-offers, acceptances and rejections relating to the proposed
viatical settlement contract;
(3) A written disclosure of any affiliations or contractual
arrangements between the viatical settlement broker and any person
making an offer in connection with the proposed viatical settlement
contracts;
(4) The amount and method of calculating the broker's
compensation, which term "compensation" includes anything of value
paid or given to a viatical settlement broker for the placement of
a policy; and
(5) Where any portion of the viatical settlement broker's
compensation, as defined in subdivision (4) of this subsection, is
taken from a proposed viatical settlement offer, the broker shall
disclose the total amount of the viatical settlement offer and the
percentage of the viatical settlement offer comprised by the
viatical settlement broker's compensation.
(d) If the viatical settlement provider transfers ownership or changes the beneficiary of the insurance policy, the provider shall
communicate in writing the change in ownership or beneficiary to
the insured within twenty days after the change.
§33-13C-9. Disclosure to insurer.
Before the initiation of a plan, transaction or series of
transactions, a viatical settlement broker or viatical settlement
provider shall fully disclose to an insurer a plan, transaction or
series of transactions, to which the viatical settlement broker or
viatical settlement provider is a part, to originate, renew,
continue or finance a life insurance policy with the insurer for
the purpose of engaging in the business of viatical settlements at
anytime prior to, or during the first five years after, issuance of
the policy.
§33-13C-10. General rules.
(a)(1) A viatical settlement provider entering into a viatical
settlement contract shall first obtain:
(A) If the viator is the insured, a written statement from a
licensed attending physician that the viator is of sound mind and
under no constraint or undue influence to enter into a viatical
settlement contract; and
(B) A document in which the insured consents to the release of
his or her medical records to a licensed viatical settlement
provider, viatical settlement broker and the insurance company that
issued the life insurance policy covering the life of the insured.
(2) Within twenty days after a viator executes documents
necessary to transfer any rights under an insurance policy or
within twenty days of entering any agreement, option, promise or
any other form of understanding, expressed or implied, to viaticate
the policy, the viatical settlement provider shall give written
notice to the insurer that issued that insurance policy that the
policy has or will become a viaticated policy. The notice shall be
accompanied by the documents required by subdivision (3) of this
subsection.
(3) The viatical provider shall deliver a copy of the medical
release required under paragraph (B), subdivision (1) of this
subsection, a copy of the viator's application for the viatical
settlement contract, the notice required under subdivision (2) of
this subsection and a request for verification of coverage to the
insurer that issued the life insurance policy that is the subject
of the viatical transaction; the request for verification of
coverage shall be on a form prescribed by the commissioner.
(4) The insurer shall respond to a request for verification of
coverage within thirty calendar days of the date the request is
received and shall indicate whether, based on the medical evidence
and documents provided, the insurer intends to pursue an
investigation at this time regarding the validity of the insurance
contract or possible fraud. The insurer shall accept a request for
verification made on an approved form or any facsimile or electronic copy of such request and any accompanying authorization
signed by the viator. Failure by the insurer to meet its
obligations under this subsection shall be a violation of
subsection (c), section eleven and section sixteen of this article.
(5) Prior to or at the time of execution of the viatical
settlement contract, the viatical settlement provider shall obtain
a witnessed document in which the viator consents to the viatical
settlement contract, represents that the viator has a full
understanding of the viatical settlement contract, that he or she
has a full understanding of the benefits of the life insurance
policy, acknowledges that he or she is entering into the viatical
settlement contract freely and voluntarily and, for persons with a
terminal or chronic illness or condition, acknowledges that the
insured has a terminal or chronic illness and that the terminal or
chronic illness or condition was diagnosed after the life insurance
policy was issued.
(6) If a viatical settlement broker performs any of these
activities required of the viatical settlement provider, the
provider is deemed to have fulfilled the requirements of this
section.
(b) All medical information solicited or obtained by any
licensee shall be subject to the applicable provisions of state law
relating to confidentiality of medical information.
(c) All viatical settlement contracts entered into in this state shall provide the viator with an absolute right to rescind
the contract before the earlier of sixty calendar days after the
date upon which the viatical settlement contract is executed by all
parties or thirty calendar days after the viatical settlement
proceeds have been sent to the viator as provided in subsection (e)
of this section. Rescission by the viator may be conditioned upon
the viator both giving notice and repaying to the viatical
settlement provider within the rescission period all proceeds of
the settlement and any premiums, loans and loan interest paid by or
on behalf of the viatical settlement provider in connection with or
as a result of the viatical settlement. If the insured dies during
the rescission period, the viatical settlement contract shall be
deemed to have been rescinded, subject to repayment to the viatical
settlement provider or purchaser of all viatical settlement
proceeds, any premiums, loans and loan interest that have been paid
by the viatical settlement provider or purchaser, which shall be
paid within sixty calendar days of the death of the insured. In
the event of any rescission, if the viatical settlement provider
has paid commissions or other compensation to a viatical settlement
broker in connection with the rescinded transaction, the viatical
settlement broker shall refund all such commissions and
compensation to the viatical settlement provider within five
business days following receipt of written demand from the viatical
settlement provider, which demand shall be accompanied by either the viator's notice of rescission if rescinded at the election of
the viator, or notice of the death of the insured if rescinded by
reason of the death of the insured within the applicable rescission
period.
(d) The viatical settlement provider shall instruct the viator
to send the executed documents required to effect the change in
ownership, assignment or change in beneficiary directly to the
independent escrow agent. Within three business days after the
escrow agent receives the document or, if the viator erroneously
provides the documents directly to the provider, after the viatical
settlement provider receives the documents, the provider shall pay
or transfer the proceeds of the viatical settlement into an escrow
or trust account maintained in a state or federally-charted
financial institution whose deposits are insured by the Federal
Deposit Insurance Corporation (FDIC). Upon payment of the
settlement proceeds into the escrow account, the escrow agent shall
deliver the original change in ownership assignment or change in
beneficiary forms to the viatical settlement provider or related
provider trust or other designated representative of the viatical
settlement provider. Upon the escrow agent's receipt of the
acknowledgment of the properly completed transfer of ownership,
assignment or designation of beneficiary from the insurance
company, the escrow agent shall pay the settlement proceeds to the
viator.
(e) Failure to tender consideration to the viator for the
viatical settlement contract within the time set forth in the
disclosure pursuant to subdivision (7), subsection (a), section
eight of this article renders the viatical settlement contract
voidable by the viator for lack of consideration until the time
consideration is tendered to and accepted by the viator. Funds
shall be deemed sent by a viatical settlement provider to a viator
as of the date that the escrow agent either releases funds for wire
transfer to the viator or places a check for delivery to the viator
via United State Postal Service or other nationally recognized
delivery service.
(f) Contracts with the insured for the purpose of determining
the health status of the insured by the viatical settlement
provider or viatical settlement broker after the viatical
settlement has occurred shall only be made by the viatical
settlement provider or broker licensed in this state or its
authorized representatives and shall be limited to once every three
months for insureds with a life expectancy of more than one year,
and to no more than once per month for insureds with a life
expectancy of one year or less. The provider or broker shall
explain the procedure for these contacts at the time the viatical
settlement contract is entered into. The limitations set forth in
this subsection shall not apply to any contacts with an insured for
reasons other than determining the insured's health status. Viatical settlement providers and viatical settlement brokers shall
be responsible for the actions of their authorized representatives.
§33-13C-11. Prohibited practices.
(a) It is a violation of this article for any person to enter
into a viatical settlement contract at any time prior to the
application for or issuance of a policy that is the subject of a
viatical settlement contract or within a five-year period
commencing with the date of issuance of the insurance policy or
certificate unless the viator certifies to the viatical settlement
provider that one or more of the following conditions have been met
within the five year period after issuance of the policy or
certificate:
(1) The policy was issued upon the viator's exercise of
conversion rights arising out of a group or individual policy,
provided the total of the time covered under the conversion policy
plus the time covered under the prior policy is at least sixty (60)
months. The time covered under a group policy shall be computed
without regard to any change in insurance carriers, provided the
coverage has been continuous and under the same group sponsorship.
(2) The viator certifies and submits independent evidence to
the viatical settlement provider that one or more of the following
conditions have been met within that five-year period:
(A) The viator or insured is terminally or chronically ill;
(B) The viator's spouse dies;
(C) The viator divorces his or her spouse;
(D) The viator retires from full-time employment;
(E) The viator becomes physically or mentally disabled and a
physician determines that the disability prevents the viator from
maintaining full-time employment; or
(F) A court of competent jurisdiction enters a final order,
judgment or decree on the application of a creditor of the viator
and adjudicates the viator bankrupt or insolvent or approves a
petition seeking reorganization of the viator or appoints a
receiver, trustee or liquidator to all or a substantial part of the
viator's assets; or
(3) The viator enters into a viatical settlement contract more
than two years after the date of issuance of a policy and, at all
times during that two year period, all of the following conditions
are true with respect to the policy.
(A) Policy premiums have been funded exclusively with
unencumbered assets, including an interest in the life insurance
policy being financed only to the extent of its net cash surrender
value, provided by, or fully recourse liability incurred by, the
insured on a person described in subparagraph (iv), paragraph (C),
subdivision (13), section two of this article;
(B) There is no agreement or understanding with any other
person to guarantee any such liability or to purchase, or stand
ready to purchase, the policy, including through an assumption or forgiveness of the loan; and
(C) Neither the insured nor the policy has been evaluated for
settlement.
(b) Copies of the independent evidence described in
subdivision (2), subsection (a) of this section and documents
required by subsection (a), section ten of this article shall be
submitted to the insurer when the viatical settlement provider or
other party entering into a viatical settlement contract with a
viator submits a request to the insurer for verification of
coverage. The copies shall be accompanied by a letter of
attestation from the viatical settlement provider that the copies
are true and correct copies of the documents received by the
viatical settlement provider.
(c) If the viatical settlement provider submits to the insurer
a copy of the owner or insured's certification described in and the
independent evidence required by subdivision (2), subsection (a) of
this section when the provider submits a request to the insurer to
effect the transfer of the policy or certificate to the viatical
settlement provider, the copy shall be deemed to conclusively
establish that the viatical settlement contract satisfies the
requirements of this section and the insurer shall timely respond
to the request.
(d) No insurer may, as a condition of responding to a request
for verification of coverage or effecting the transfer of a policy pursuant to a viatical settlement contract, require that the
viator, insured, viatical settlement provider or viatical
settlement broker sign any forms, disclosures, consent or waiver
form that has not been expressly approved by the commissioner for
use in connection with viatical settlement contracts in this state.
(e) Upon receipt of a properly completed request for change of
ownership or beneficiary of a policy, the insurer shall respond in
writing within thirty calendar days with written acknowledgment
confirming that the change has been effected or specifying the
reasons why the request change cannot be processed. The insurer
shall not unreasonably delay effecting change of ownership or
beneficiary and shall not otherwise seek to interfere with any
viatical settlement contract lawfully entered into in this state.
§33-13C-12. Prohibited practices and conflicts of interest.
(a) With respect to any viatical settlement contract or
insurance policy, no viatical settlement broker knowingly shall
solicit an offer from, effectuate a viatical settlement with or
make a sale to any viatical settlement provider, viatical
settlement purchaser, financing entity or related provider trust
that is controlling, controlled by, or under common control with
such viatical settlement broker.
(b) With respect to any viatical settlement contract or
insurance policy, no viatical settlement provider knowingly may
enter into a viatical settlement contract with a viator, if, in connection with such viatical settlement contract, anything of
value will be paid to a viatical settlement broker that is
controlling, controlled by, or under common control with such
viatical settlement provider or the viatical settlement purchaser,
financing entity or related provider trust that is involved in such
viatical settlement contract.
(c) A violation of subsection (a) or subsection (b) of this
section shall be deemed a fraudulent viatical settlement act.
(d) No viatical settlement provider shall enter into a
viatical settlement contract unless the viatical settlement
promotional, advertising and marketing materials, as may be
prescribed by rule, have been filed with the commissioner. In no
event shall any marketing materials expressly reference that the
insurance is "free" for any period of time. The inclusion of any
reference in the marketing materials that would cause a viator to
reasonably believe that the insurance is free for any period of
time shall be considered a violation of this article.
(e) No life insurance producer, insurance company, viatical
settlement broker or viatical settlement provider shall make any
statement or representation to the applicant or policy holder in
connection with the sale or financing of a life insurance policy to
the effect that the insurance is free or without cost to the policy
holder for any period of time unless provided in the policy.
§33-13C-13. Advertising for viatical settlements.
(a) The purpose of this section is to provide prospective
viators with clear and unambiguous statements in the advertisement
of viatical settlements and to assure the clear, truthful and
adequate disclosure of the benefits, risks, limitations and
exclusions of any viatical settlement contract. This purpose is
intended to be accomplished by the establishment of guidelines and
standards of permissible and impermissible conduct in the
advertising of viatical settlements to assure that product
descriptions are presented in a manner that prevents unfair,
deceptive or misleading advertising and is conducive to accurate
presentation and description of viatical settlements through the
advertising media and material used by viatical settlement
licensees.
(b) This section shall apply to any advertising of viatical
settlement contracts or related products or services intended for
dissemination in this state, including Internet advertising viewed
by persons located in this state. Where disclosure requirements
are established pursuant to federal regulation, this section shall
be interpreted so as to minimize or eliminate conflict with federal
regulation wherever possible.
(c) Every viatical settlement licensee shall establish and at
all times maintain a system of control over the content, form and
method of dissemination of all advertisements of its contracts,
products and services. All advertisements, regardless of by whom written, created, designed or presented, shall be the
responsibility of the viatical settlement licensees, as well as the
individual who created or presented the advertisement. A system of
control shall include regular routine notification, at least once
a year, to agents and others authorized by the viatical settlement
licensee who disseminates advertisements of the requirements and
procedures for approval prior to the use of any advertisements not
furnished by the viatical settlement license.
(d) Advertisements shall be truthful and not misleading in
fact or by implication. The form and content of an advertisement
of a viatical settlement contract shall be sufficiently complete
and clear so as to avoid deception. It shall not have the capacity
or tendency to mislead or deceive. Whether an advertisement has
the capacity or tendency to mislead or deceive shall be determined
by the commissioner from the overall impression that the
advertisement may be reasonably expected to create upon a person of
average education or intelligence within the segment of the public
to which it is directed.
(e) The information required to be disclosed under this
section shall not be minimized, rendered obscure, or presented in
an ambiguous fashion or intermingled with the text of the
advertisement so as to be confusing or misleading.
(1) An advertisement shall not omit material information or
use words, phrases, statements, references or illustrations if the omission or use has the capacity, tendency or effect of misleading
or deceiving viators as to the nature or extent of any benefit,
loss covered, premium payable, or state or federal tax consequence.
The fact that the viatical settlement contract offered is made
available for inspection prior to consummation of the sale, or an
offer is made to refund the payment if the viator is not satisfied
or that the viatical settlement contract includes a "free look"
period that satisfies or exceeds legal requirements, does not
remedy misleading statements.
(2) An advertisement shall not use the name or title of a life
insurance company or a life insurance policy unless the
advertisement has been approved by the insurer.
(3) An advertisement shall not state or imply that interest
charged on an accelerated death benefit or a policy loan is unfair,
inequitable or in any manner an incorrect or improper practice.
(4) The words "free," "no cost," "without cost," "no
additional cost," "at no extra cost," or words of similar import
shall not be used with respect to any benefit or service unless
true. An advertisement may specify the charge for a benefit or a
service or may state that a charge is included in the payment or
use other appropriate language.
(5) Testimonials, appraisals or analysis used in
advertisements must be genuine; represent the current opinion of
the author; be applicable to the viatical settlement contract product or service advertised, if any; and be accurately reproduced
with sufficient completeness to avoid misleading or deceiving
prospective viators as to the nature or scope of the testimonials,
appraisals or analysis, a licensee under this article makes as its
own all the statements contained therein, and the statements are
subject to all the provisions of this section.
(A) If the individual making a testimonial, appraisal,
analysis or an endorsement has a financial interest in the party
making use of the testimonial, appraisal, analysis or endorsement,
either directly or through a related entity as a stockholder,
director, officer, employee or otherwise, or receives any benefit
directly or indirectly other than required union scale wages, that
fact shall be prominently disclosed in the advertisement.
(B) An advertisement shall not state or imply that a viatical
settlement contract benefit or service has been approved or
endorsed by a group of individuals, society, association or other
organization unless that is the fact and unless any relationship
between an organization and the viatical settlement licensee is
disclosed. If the entity making the endorsement or testimonial is
owned, controlled or managed by the viatical settlement licensee,
or receives any payment or other consideration from the viatical
settlement licensee for making an endorsement or testimonial, the
fact shall be disclosed in the advertisement.
(C) When an endorsement refers to benefits received under a viatical settlement contract all pertinent information shall be
retained for a period of five years after its use.
(f) An advertisement shall not contain statistical information
unless it accurately reflects recent and relevant facts. The
course of all statistics used in an advertisement shall be
identified.
(g) An advertisement shall not disparage insurers, viatical
settlement providers, viatical settlement brokers, viatical
settlement investment agents, insurance producers, policies,
services or methods of marketing.
(h) The name of the viatical settlement licensee shall be
clearly identified in all advertisements about the licensee or its
viatical settlement contract, products or services, and if any
specific viatical settlement contract is advertised, the viatical
settlement contract shall be identified either by form number or
some other appropriate description. If an application is part of
the advertisement, the name of the viatical settlement provider
shall be shown on the application.
(i) An advertisement shall not use a trade name, group
designation, name of the parent company of a viatical settlement
licensee, name of a particular division of the viatical settlement
licensee, service mark, slogan, symbol or other device or reference
without disclosing the name of the viatical settlement licensee, if
the advertisement would have the capacity or tendency to mislead or deceive as to the true identity of the viatical settlement
licensee, or to create the impression that a company other than the
viatical settlement licensee would have any responsibility for the
financial obligation under a viatical settlement contract.
(j) An advertisement shall not use any combination of words,
symbols or physical materials that by their content, phraseology,
shape, color or other characteristics are so similar to a
combination of words, symbols or physical materials used by a
government program or agency or otherwise appear to be of such a
nature that they tend to mislead prospective viators into believing
that the solicitation is in some manner connected with a government
program or agency.
(k) An advertisement may state that a viatical settlement
licensee is licensed in the state where the advertisement appears,
provided it does not exaggerate that fact or suggest or imply that
competing viatical settlement licensees may not be so licensed.
The advertisement may ask the audience to consult the licensee's
web site or contact the department of insurance to find out if the
state requires licensing and, if so, whether the viatical
settlement provider or viatical settlement broker is licensed.
(l) An advertisement shall not create the impression that the
viatical settlement provider, its financial condition or status,
the payment of its claims or the merits, desirability, or
advisability of its viatical settlement contracts are recommended or endorsed by any government entity.
(m) The name of the actual licensee shall be stated in all of
its advertisements. An advertisement shall not use a trade name,
any group designation, name of any affiliate or controlling entity
of the licensee, service mark, slogan, symbol or other device in a
manner that would have the capacity or tendency to mislead or
deceive as to the true identity of the actual licensee or create
the false impression that an affiliate or controlling entity would
have any responsibility for the financial obligation of the
licensee.
(n) An advertisement shall not directly or indirectly create
the impression that any division or agency of the state or of the
United States government endorses, approves or favors:
(1) Any viatical settlement licensee or its business practices
or methods of operation;
(2) The merits, desirability or advisability of any viatical
settlement contract;
(3) Any viatical settlement contract; or
(4) Any life insurance policy or life insurance company.
(o) If the advertiser emphasizes the speed with which the
viatication will occur, the advertising must disclose the average
time frame from completed application to the date of offer and from
acceptance of the offer to receipt of the funds by the viator.
(p) If the advertising emphasizes the dollar amounts available to viators, the advertising shall disclose the average purchase
price as a percent of face value obtained by viators contracting
with the licensee during the past six months.
§33-13C-14. Fraud prevention and control.
(a) Fraudulent viatical settlement acts, interference and
participation of convicted felons prohibited.
(1) A person shall not commit a fraudulent viatical settlement
act.
(2) A person shall not knowingly or intentionally interfere
with the enforcement of the provisions of this article or
investigations of suspected or actual violations of this article.
(3) A person in the business of viatical settlements shall not
knowingly or intentionally permit any person convicted of a felony
involving dishonesty or breach of trust to participate in the
business of viatical settlements.
(b) Fraud warning required.
(1) Viatical settlement contracts and applications for
viatical settlements, regardless of the form of transmission shall
contain the following statement or a substantially similar
statement:
"Any person who knowingly presents false information in an
application for insurance or viatical settlement contract is guilty
of a crime and may be subject to fines and confinement in prison"
(2) The lack of a statement as required in subdivision (1) of this subsection does not constitute a defense in any prosecution
for a fraudulent viatical settlement act.
(c) (1) Any person engaged in the business of viatical
settlements having knowledge or a reasonable suspicion that a
fraudulent viatical settlement act is being, will be or has been
committed shall provide to the commissioner such information to the
commissioner.
(2) Any other person having knowledge or a reasonable belief
that a fraudulent viatical settlement act is being, will be or has
been committed may provide to the commissioner the information
required by, and in a manner prescribed by, the commissioner.
(d) (1) No civil liability shall be imposed on and no cause of
action shall arise from a person's furnishing information
concerning suspected, anticipated or completed fraudulent viatical
settlement acts or suspected or completed fraudulent insurance
acts, if the information is provided without actual malice and is
provided to or received from:
(A) The commissioner or the commissioner's employees, agents
or representatives;
(B) Federal, state or local law enforcement or regulatory
officials or their employees, agents or representatives;
(C) A person involved in the prevention and detection of
fraudulent viatical settlement acts or that person's agents,
employees or representatives;
(D) The National Association of Insurance Commissioners
(NAIC), National Association of Securities Dealers (NASD), the
North American Securities Administrators Association (NASAA), or
their employees, agents or representatives, or other regulatory
body overseeing life insurance, viatical settlements, securities or
investment fraud; or
(E) The life insurer that issued the life insurance policy
covering the life of the insured.
(2) A person furnishing information pursuant to subdivision
(1) of this subsection shall be entitled to an award of attorney's
fees and costs if he or she is the prevailing party in a civil
cause of action for libel, slander or any other relevant tort
arising out of activities in carrying out the provisions of this
article and the party bringing the action was not substantially
justified in doing so.
(3) This subsection does not abrogate or modify common law or
statutory privileges or immunities enjoyed by a person described in
subdivision (1) of this subsection.
(e) (1) Documents and evidence provided pursuant to subsection
(d) of this section or obtained by the commissioner in an
investigation of suspected or actual fraudulent viatical settlement
acts shall be privileged and confidential and shall not be a public
record and shall not be subject to discovery or subpoena in a civil
or criminal action.
(2) The commissioner may release documents and evidence
obtained in an investigation of suspected or actual fraudulent
viatical settlement acts in administrative or judicial proceedings
to enforce laws administered by the commissioner; to federal, state
or local law enforcement or regulatory agencies, to an organization
established for the purpose of detecting and preventing fraudulent
viatical settlement acts or to the NAIC; or, at the discretion of
the commissioner, to a person in the business of viatical
settlements that is aggrieved by a fraudulent viatical settlement
act:
Provided, That release of documents and evidence under this
subdivision does not abrogate or modify the privilege granted in
subdivision (1) of this subsection.
(f) This section does not:
(1) Preempt the authority or relieve the duty of other law
enforcement or regulatory agencies to investigate, examine and
prosecute suspected violations of law;
(2) Prevent or prohibit a person from disclosing voluntarily
information concerning viatical settlement fraud to a law
enforcement or regulatory agency other than the insurance
department; or
(3) Limit the powers granted elsewhere by the laws of this
state to the commissioner or an insurance fraud unit to investigate
and examine possible violations of law and to take appropriate
action against wrongdoers.
(g) (1) Viatical settlement providers and viatical settlement
brokers shall have in place antifraud initiatives reasonably
computed to detect, prosecute and prevent fraudulent viatical
settlement acts. At the discretion of the commissioner, the
commissioner may order, or a licensee may request and the
commissioner may grant, such modifications of the following
required initiatives as necessary to ensure an effective antifraud
program. The modifications may be more or less restrictive than
the required initiatives so long as the modifications may
reasonably be expected to accomplish the purpose of this section.
(2) Antifraud initiatives shall include:
(A) Fraud investigators, who may be viatical settlement
provider or viatical settlement broker employees or independent
contractors; and
(B) An antifraud plan, which shall be submitted to the
commissioner. The antifraud plan shall include, but not be limited
to:
(i) A description of the procedures for detecting and
investigating possible fraudulent viatical settlement acts and
procedures for resolving material inconsistencies between medical
records and insurance applications;
(ii) A description of the procedures for reporting possible
fraudulent viatical settlement acts to the commissioner;
(iii) A description of the plan for antifraud education and training of underwriters and other personnel; and
(iv) A description or chart outlining the organization
arrangement of the antifraud personnel who are responsible for the
investigation and reporting of possible fraudulent viatical
settlement acts and investigating unresolved material
inconsistencies between medical records and insurance applications.
(3) Antifraud plans submitted to the commissioner shall be
privileged and confidential and shall not be a public record and
shall not be subject to discovery or subpoena in a civil or
criminal action.
§33-13C-15. Injunctions; civil remedies; cease and desist.
(a) In addition to the penalties and other enforcement
provisions of this chapter, if any person violates any provision of
this article or of any rule implementing this article, the
commissioner may seek an injunction in a court of competent
jurisdiction and may apply for temporary and permanent orders that
the commissioner determines are necessary to restrain the person
from committing the violation.
(b) Any person damaged by the acts of a person in violation of
this article may bring a civil action against the person committing
the violation in a court of competent jurisdiction.
(c) The commissioner may issue cease and desist order upon a
person that violates any provision of this article or any rule
promulgated thereunder, any order adopted by the commissioner, or any written agreement entered into with the commissioner.
(d) When the commissioner finds that an activity in violation
of this article presents an immediate danger to the public that
requires an immediate final order, the commissioner may issue an
emergency cease and desist order reciting with particularity the
facts underlying the findings. The emergency cease and desist
order is effective immediately upon service of a copy of the order
on the respondent and remains effective for ninety days. If the
commissioner begins nonemergency cease and desist proceedings, the
emergency cease and desist order remains effective, absent an order
by a court of competent jurisdiction pursuant to this chapter.
(e) In addition to the penalties and other enforcement
provisions of this article, any person who violates this article is
subject to civil penalties of up to ten thousand dollars per
violation. Imposition of civil penalties shall be pursuant to an
order of the commissioner issued after notice and hearing. The
commissioner's order may require a person found to be in violation
of this article to make restitution to persons aggrieved by
violations of this article.
§33-13C-16. Criminal penalties.
(a) A viator convicted of a fraudulent viatical settlement act
is guilty of a felony and, upon conviction thereof, shall be
sentenced as follows:
(1) Imprisonment in a state correctional facility for not more than twenty years or payment of a fine of not more than one hundred
thousand dollars, or both, if the value of the viatical settlement
contract is more than thirty-five thousand dollars;
(2) Imprisonment in a state correctional facility for not more
than ten years or to payment of a fine of not more than twenty
thousand dollars, or both if the value of the viatical settlement
contract is more than two-thousand five-hundred dollars, but not
more than thirty-five thousand dollars;
(3) Imprisonment in a state correctional facility for not more
than five years or payment of a fine of not more than ten thousand
dollars, or both, if the value of the viatical settlement contract
is more than five hundred dollars, but not more than two-thousand
five-hundred dollars.
(b) Any person who violates any other provision of this
article is guilty of a misdemeanor and, upon conviction thereof,
shall be fined not more than one-thousand dollars or confined in
jail not more than one year, or both fined and imprisoned.
§33-13C-17. Authority to promulgate rules.
The commissioner shall have the authority to promulgate
legislative rules, including emergency rules, implementing this
article, pursuant to article three, chapter twenty-nine-a of this
code. Such rules may include standards for evaluating
reasonableness of payments under viatical settlement contracts for
persons who are terminally or chronically ill; regulation of discount rates used to determine the amount paid in exchange for
assignment, transfer, sale, devise or bequest of a benefit under a
life insurance policy insuring the life of a person that is
chronically or terminally ill; and provisions governing the
relationship and responsibilities of both insurers and viatical
settlement providers and viatical settlement brokers during the
viatication of a life insurance policy or certificate.
NOTE: The purpose of this bill is to regulate the business of
viatical settlements between insureds and viatical settlement
companies with respect to life insurance policies. This bill will
regulate how the company will operate its business; will require
licensing of the company, as well as its brokers; and help to limit
fraudulent practices.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.