Bill Text: FL S1600 | 2017 | Regular Session | Comm Sub


Bill Title: Viatical Settlement Contracts

Spectrum: Bipartisan Bill

Status: (Failed) 2017-05-05 - Died in Rules, companion bill(s) passed, see CS/CS/CS/HB 1007 (Ch. 2017-178) [S1600 Detail]

Download: Florida-2017-S1600-Comm_Sub.html
       Florida Senate - 2017                      CS for CS for SB 1600
       
       
        
       By the Committees on Appropriations; and Banking and Insurance;
       and Senators Young and Broxson
       
       
       
       
       576-04144-17                                          20171600c2
    1                        A bill to be entitled                      
    2         An act relating to viatical settlement contracts;
    3         amending s. 626.9911, F.S.; defining the terms
    4         “fraudulent viatical settlement act” and “stranger
    5         originated life insurance practice” for purposes of
    6         provisions relating to the Viatical Settlement Act;
    7         amending ss. 626.9924 and 626.99245, F.S.; conforming
    8         cross-references; amending s. 626.99275, F.S.;
    9         providing additional prohibited acts related to
   10         viatical settlement contracts; amending s. 626.99287,
   11         F.S.; providing that a viatical settlement contract is
   12         void and unenforceable by either party if the viatical
   13         settlement policy is subject, within a specified
   14         timeframe, to a loan secured by an interest in the
   15         policy; revising conditions and requirements in which
   16         viatical settlement contracts entered into within
   17         specified timeframes are valid and enforceable;
   18         deleting provisions related to the transfer of
   19         insurance policies or certificates to viatical
   20         settlement providers; creating s. 626.99289, F.S.;
   21         providing that certain contracts, agreements,
   22         arrangements, or transactions relating to stranger
   23         originated life insurance practices are void and
   24         unenforceable; creating s. 626.99291, F.S.;
   25         authorizing a life insurer to contest policies
   26         obtained through such practices; creating s.
   27         626.99292, F.S.; requiring life insurers to provide a
   28         specified statement to individual life insurance
   29         policyholders; authorizing such statements to
   30         accompany or be included in notices or mailings
   31         provided to the policyholders; requiring such
   32         statements to include contact information; providing
   33         an effective date.
   34          
   35  Be It Enacted by the Legislature of the State of Florida:
   36  
   37         Section 1. Present subsections (2) through (7) of section
   38  626.9911, Florida Statutes, are renumbered as subsections (3)
   39  through (8), respectively, present subsections (8) through (14)
   40  of that section are renumbered as subsections (10) through (16),
   41  respectively, and new subsections (2) and (9) are added to that
   42  section, to read:
   43         626.9911 Definitions.—As used in this act, the term:
   44         (2)“Fraudulent viatical settlement act” means an act or
   45  omission committed by a person who knowingly, or with intent to
   46  defraud for the purpose of depriving another of property or for
   47  pecuniary gain, commits or allows an employee or agent to commit
   48  any of the following acts:
   49         (a)Presenting, causing to be presented, or preparing with
   50  the knowledge or belief that it will be presented to or by
   51  another person, false or concealed material information as part
   52  of, in support of, or concerning a fact material to:
   53         1.An application for the issuance of a viatical settlement
   54  contract or a life insurance policy;
   55         2.The underwriting of a viatical settlement contract or a
   56  life insurance policy;
   57         3.A claim for payment or benefit pursuant to a viatical
   58  settlement contract or a life insurance policy;
   59         4.Premiums paid on a life insurance policy;
   60         5.Payments and changes in ownership or beneficiary made in
   61  accordance with the terms of a viatical settlement contract or a
   62  life insurance policy;
   63         6.The reinstatement or conversion of a life insurance
   64  policy;
   65         7.The solicitation, offer, effectuation, or sale of a
   66  viatical settlement contract or a life insurance policy;
   67         8.The issuance of written evidence of a viatical
   68  settlement contract or a life insurance policy; or
   69         9.A financing transaction for a viatical settlement
   70  contract or life insurance policy.
   71         (b)Employing a plan, financial structure, device, scheme,
   72  or artifice relating to viaticated policies for the purpose of
   73  perpetrating fraud.
   74         (c)Engaging in a stranger-originated life insurance
   75  practice.
   76         (d)Failing to disclose, upon request by an insurer, that
   77  the prospective insured has undergone a life expectancy
   78  evaluation by a person other than the insurer or its authorized
   79  representatives in connection with the issuance of the life
   80  insurance policy.
   81         (e)Perpetuating a fraud or preventing the detection of a
   82  fraud by:
   83         1.Removing, concealing, altering, destroying, or
   84  sequestering from the office the assets or records of a licensee
   85  or other person engaged in the business of viatical settlements;
   86         2.Misrepresenting or concealing the financial condition of
   87  a licensee, financing entity, insurer, or other person;
   88         3.Transacting in the business of viatical settlements in
   89  violation of laws requiring a license, certificate of authority,
   90  or other legal authority to transact such business; or
   91         4.Filing with the office or the equivalent chief insurance
   92  regulatory official of another jurisdiction a document that
   93  contains false information or conceals information about a
   94  material fact from the office or other regulatory official.
   95         (f)Embezzlement, theft, misappropriation, or conversion of
   96  moneys, funds, premiums, credits, or other property of a
   97  viatical settlement provider, insurer, insured, viator,
   98  insurance policyowner, or other person engaged in the business
   99  of viatical settlements or life insurance.
  100         (g)Entering into, negotiating, brokering, or otherwise
  101  dealing in a viatical settlement contract, the subject of which
  102  is a life insurance policy that was obtained based on
  103  information that was falsified or concealed for the purpose of
  104  defrauding the policy’s issuer, viatical settlement provider, or
  105  viator.
  106         (h)Facilitating the viator’s change of residency state to
  107  avoid the provisions of this act.
  108         (i)Facilitating or causing the creation of a trust with a
  109  non-Florida or other nonresident entity for the purpose of
  110  owning a life insurance policy covering a Florida resident to
  111  avoid the provisions of this act.
  112         (j)Facilitating or causing the transfer of the ownership
  113  of an insurance policy covering a Florida resident to a trust
  114  with a situs outside this state or to another nonresident entity
  115  to avoid the provisions of this act.
  116         (k)Applying for or obtaining a loan that is secured
  117  directly or indirectly by an interest in a life insurance policy
  118  with intent to defraud, for the purpose of depriving another of
  119  property or for pecuniary gain.
  120         (l)Attempting to commit, assisting, aiding, or abetting in
  121  the commission of, or conspiring to commit, an act or omission
  122  specified in this subsection.
  123         (9)“Stranger-originated life insurance practice” means an
  124  act, practice, arrangement, or agreement to initiate a life
  125  insurance policy for the benefit of a third-party investor who,
  126  at the time of policy origination, has no insurable interest in
  127  the insured. Stranger-originated life insurance practices
  128  include, but are not limited to:
  129         (a)The purchase of a life insurance policy with resources
  130  or guarantees from or through a person who, at the time of such
  131  policy’s inception, could not lawfully initiate the policy and
  132  the execution of a verbal or written arrangement or agreement to
  133  directly or indirectly transfer the ownership of such policy or
  134  policy benefits to a third party.
  135         (b)The creation of a trust or other entity that has the
  136  appearance of an insurable interest in order to initiate
  137  policies for investors, in violation of insurable interest laws
  138  and the prohibition against wagering on life.
  139         Section 2. Subsection (7) of section 626.9924, Florida
  140  Statutes, is amended to read:
  141         626.9924 Viatical settlement contracts; procedures;
  142  rescission.—
  143         (7) At any time during the contestable period, within 20
  144  days after a viator executes documents necessary to transfer
  145  rights under an insurance policy or within 20 days of any
  146  agreement, option, promise, or any other form of understanding,
  147  express or implied, to viaticate the policy, the provider must
  148  give notice to the insurer of the policy that the policy has or
  149  will become a viaticated policy. The notice must be accompanied
  150  by the documents required by s. 626.99287 626.99287(5)(a) in
  151  their entirety.
  152         Section 3. Subsection (2) of section 626.99245, Florida
  153  Statutes, is amended to read:
  154         626.99245 Conflict of regulation of viaticals.—
  155         (2) This section does not affect the requirement of ss.
  156  626.9911(14) 626.9911(12) and 626.9912(1) that a viatical
  157  settlement provider doing business from this state must obtain a
  158  viatical settlement license from the office. As used in this
  159  subsection, the term “doing business from this state” includes
  160  effectuating viatical settlement contracts from offices in this
  161  state, regardless of the state of residence of the viator.
  162         Section 4. Subsection (1) of section 626.99275, Florida
  163  Statutes, is amended to read:
  164         626.99275 Prohibited practices; penalties.—
  165         (1) It is unlawful for a any person to:
  166         (a) To Knowingly enter into, broker, or otherwise deal in a
  167  viatical settlement contract the subject of which is a life
  168  insurance policy, knowing that the policy was obtained by
  169  presenting materially false information concerning any fact
  170  material to the policy or by concealing, for the purpose of
  171  misleading another, information concerning any fact material to
  172  the policy, where the viator or the viator’s agent intended to
  173  defraud the policy’s issuer.
  174         (b) To Knowingly or with the intent to defraud, for the
  175  purpose of depriving another of property or for pecuniary gain,
  176  issue or use a pattern of false, misleading, or deceptive life
  177  expectancies.
  178         (c) To Knowingly engage in any transaction, practice, or
  179  course of business intending thereby to avoid the notice
  180  requirements of s. 626.9924(7).
  181         (d) To Knowingly or intentionally facilitate the change of
  182  state of residency of a viator to avoid the provisions of this
  183  chapter.
  184         (e)Knowingly enter into a viatical settlement contract
  185  before the application for or issuance of a life insurance
  186  policy that is the subject of a viatical settlement contract or
  187  during an applicable period specified in s. 626.99287(1) or (2),
  188  unless the viator provides a sworn affidavit and accompanying
  189  independent evidentiary documentation in accordance with s.
  190  626.99287.
  191         (f)Engage in a fraudulent viatical settlement act, as
  192  defined in s. 626.9911.
  193         (g)Knowingly issue, solicit, market, or otherwise promote
  194  the purchase of a life insurance policy for the purpose of or
  195  with an emphasis on selling the policy to a third party.
  196         (h)Engage in a stranger-originated life insurance
  197  practice, as defined in s. 626.9911.
  198         Section 5. Section 626.99287, Florida Statutes, is amended
  199  to read:
  200         626.99287 Contestability of viaticated policies.—
  201         (1) Except as hereinafter provided, if a viatical
  202  settlement contract is entered into within the 2-year period
  203  commencing with the date of issuance of the insurance policy or
  204  certificate to be acquired, the viatical settlement contract is
  205  void and unenforceable by either party.
  206         (2) Except as hereinafter provided, if a viatical
  207  settlement policy is subject to a loan secured directly or
  208  indirectly by an interest in the policy within a 5-year period
  209  commencing on the date of issuance of the policy or certificate,
  210  the viatical settlement contract is void and unenforceable by
  211  either party.
  212         (3) Notwithstanding the limitations in subsections (1) and
  213  (2) this limitation, such a viatical settlement contract is not
  214  void and unenforceable if the viator provides a sworn affidavit
  215  and accompanying independent evidentiary documentation
  216  certifying to the viatical settlement provider that one or more
  217  of the following conditions were met during the periods
  218  applicable to the viaticated policy as stated in subsections (1)
  219  or (2):
  220         (a)(1) The policy was issued upon the owner’s exercise of
  221  conversion rights arising out of a group or term policy, if the
  222  total time covered under the prior policy is at least 60 months.
  223  The time covered under a group policy must be calculated without
  224  regard to any change in insurance carriers, provided the
  225  coverage has been continuous and under the same group
  226  sponsorship.;
  227         (b)(2) The owner of the policy is a charitable organization
  228  exempt from taxation under 26 U.S.C. s. 501(c)(3).;
  229         (3) The owner of the policy is not a natural person;
  230         (4) The viatical settlement contract was entered into
  231  before July 1, 2000;
  232         (c)(5) The viator certifies by producing independent
  233  evidence to the viatical settlement provider that one or more of
  234  the following conditions were have been met within the 2-year
  235  period:
  236         (a)1. The viator or insured is terminally or chronically
  237  ill diagnosed with an illness or condition that is either:
  238         a. Catastrophic or life threatening; or
  239         b. Requires a course of treatment for a period of at least
  240  3 years of long-term care or home health care; and
  241         2. the condition was not known to the insured at the time
  242  the life insurance contract was entered into;.
  243         2.(b) The viator’s spouse dies;
  244         3.(c) The viator divorces his or her spouse;
  245         4.(d) The viator retires from full-time employment;
  246         5.(e) The viator becomes physically or mentally disabled
  247  and a physician determines that the disability prevents the
  248  viator from maintaining full-time employment;
  249         6.(f) The owner of the policy was the insured’s employer at
  250  the time the policy or certificate was issued and the employment
  251  relationship terminated;
  252         7.(g) A final order, judgment, or decree is entered by a
  253  court of competent jurisdiction, on the application of a
  254  creditor of the viator, adjudicating the viator bankrupt or
  255  insolvent, or approving a petition seeking reorganization of the
  256  viator or appointing a receiver, trustee, or liquidator to all
  257  or a substantial part of the viator’s assets; or
  258         8.(h) The viator experiences a significant decrease in
  259  income which is unexpected by the viator and which impairs his
  260  or her reasonable ability to pay the policy premium.
  261         (d) The viator entered into a viatical settlement contract
  262  more than 2 years after the policy’s issuance date and, with
  263  respect to the policy, at all times before the date that is 2
  264  years after policy issuance, each of the following conditions is
  265  met:
  266         1. Policy premiums have been funded exclusively with
  267  unencumbered assets, including an interest in the life insurance
  268  policy being financed only to the extent of its net cash
  269  surrender value, provided by, or fully recourse liability
  270  incurred by, the insured;
  271         2. There is no agreement or understanding with any other
  272  person to guarantee any such liability or to purchase, or stand
  273  ready to purchase, the policy, including through an assumption
  274  or forgiveness of the loan; and
  275         3. Neither the insured or the policy has been evaluated for
  276  settlement.
  277  
  278  If the viatical settlement provider submits to the insurer a
  279  copy of the viator’s or owner’s certification described above,
  280  then the provider submits a request to the insurer to effect the
  281  transfer of the policy or certificate to the viatical settlement
  282  provider, the viatical settlement agreement shall not be void or
  283  unenforceable by operation of this section. The insurer shall
  284  timely respond to such request. Nothing in this section shall
  285  prohibit an insurer from exercising its right during the
  286  contestability period to contest the validity of any policy on
  287  grounds of fraud.
  288         Section 6. Section 626.99289, Florida Statutes, is created
  289  to read:
  290         626.99289 Void and unenforceable contracts, agreements,
  291  arrangements, and transactions.—Notwithstanding s. 627.455, a
  292  contract, agreement, arrangement, or transaction, including, but
  293  not limited to, a financing agreement or any other arrangement
  294  or understanding entered into, whether written or verbal, for
  295  the furtherance or aid of a stranger-originated life insurance
  296  practice is void and unenforceable.
  297         Section 7. Section 626.99291, Florida Statutes, is created
  298  to read:
  299         626.99291Contestability of life insurance policies.
  300  Notwithstanding s. 627.455, a life insurer may contest a life
  301  insurance policy if the policy was obtained by a stranger
  302  originated life insurance practice, as defined in s. 626.9911.
  303         Section 8. Section 626.99292, Florida Statutes, is created
  304  to read:
  305         626.99292 Notice to insureds.—
  306         (1) A life insurer shall provide an individual life
  307  insurance policyholder with a statement informing him or her
  308  that if he or she is considering making changes in the status of
  309  his or her policy, he or she should consult with a licensed
  310  insurance or financial advisor. The statement may accompany or
  311  be included in notices or mailings otherwise provided to the
  312  policyholder.
  313         (2)The statement must also advise the policyholder that he
  314  or she may contact the office for more information and include a
  315  website address or other location or manner by which the
  316  policyholder may contact the office.
  317         Section 9. This act shall take effect upon becoming a law.

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