Bill Text: PA HB2188 | 2009-2010 | Regular Session | Introduced

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Bill Title: Further providing for definitions, for reporting requirements and confidentiality and for disclosure; providing for disclosure to insurer; further providing for general rules and for prohibited practices; and providing for additional prohibited practices and conflicts of interest.

Spectrum: Strong Partisan Bill (Democrat 18-1)

Status: (Introduced - Dead) 2010-01-05 - Referred to INSURANCE [HB2188 Detail]

Download: Pennsylvania-2009-HB2188-Introduced.html

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PRINTER'S NO. 3050
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 2188 Session of2010
INTRODUCED BY FRANKEL, DeLUCA, MUSTIO, McILVAINE SMITH, BELFANTI, BRADFORD, D. COSTA, GERGELY, HALUSKA, JOSEPHS, KORTZ, MATZIE, MUNDY, PASHINSKI, PAYTON, SIPTROTH, M. SMITH, STABACK AND YOUNGBLOOD, JANUARY 5, 2010
REFERRED TO COMMITTEE ON INSURANCE, JANUARY 5, 2010
AN ACT
Amending the act of July 4, 2002 (P.L.699, No.107), entitled "An
act providing for the regulation of viatical settlements and
for powers and duties of the Insurance Department," further
providing for definitions, for reporting requirements and
confidentiality and for disclosure; providing for disclosure
to insurer; further providing for general rules and for
prohibited practices; and providing for additional prohibited
practices and conflicts of interest.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The definitions of "advertising," "fraudulent
viatical settlement act," "special purpose entity," "viatical
settlement broker," "viatical settlement contract," "viatical
settlement provider" and "viator" in section 2 of the act of
July 4, 2002 (P.L.699, No.107), known as the Viatical
Settlements Act, are amended and the section is amended by
adding definitions to read:
Section 2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Advertising." 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 before the public, directly or indirectly, 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.
* * *
"Fraudulent viatical settlement act." [An act or omission
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
commit any of the following acts:
(1) 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 broker, insurance agent 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
20100HB2188PN3050 - 2 -
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) The solicitation, offer, effectuation or sale
of a viatical settlement contract or insurance policy.
(viii) The issuance of written evidence of a
viatical settlement contract or insurance.
(ix) A financing transaction.
(2) In the furtherance of a fraud or to prevent the
detection of a fraud:
(i) destroys, removes, conceals or alters the assets
or records of a licensee or other person engaged in the
business of viatical settlements;
(ii) misrepresents or conceals the financial
condition of a licensee or insurer;
(iii) transacts 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) files with the Insurance Commissioner, the
Insurance Department or the chief insurance regulatory
official or agency of another jurisdiction a document
containing false information or otherwise conceals
information about a material fact.
(3) Presenting, causing to be presented or preparing
with knowledge or reason to believe that it will be presented
20100HB2188PN3050 - 3 -
to or by a viatical settlement provider, viatical settlement
broker, insurer, insurance agent, financing entity, viatical
settlement purchaser or any other person, in connection with
a viatical settlement transaction or insurance transaction,
an insurance policy, knowing the policy was fraudulently
obtained by the insured, owner or any agent thereof.
(4) Embezzlement, theft, misappropriation or conversion
of moneys, funds, premiums, credits or other property of a
viatical settlement provider, insurer, insured, viator,
insurance policy owner or any other person engaged in the
business of viatical settlements or insurance.
(5) Attempting to commit, assisting, aiding or abetting
in the commission of or the conspiracy to commit the acts or
omissions specified in this subsection.] Includes:
(1) acts or omissions committed by a 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 it will be presented to or by a
viatical settlement provider, viatical settlement broker,
viatical settlement purchaser, financing entity, insurer,
insurance producer or another 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:
(A) an application for the issuance of a
viatical settlement contract or insurance policy;
(B) the underwriting of a viatical settlement
20100HB2188PN3050 - 4 -
contract or insurance policy;
(C) a claim for payment or benefit pursuant to a
viatical settlement contract or insurance policy;
(D) premiums paid on an insurance policy;
(E) payments and changes in ownership or
beneficiary made in accordance with the terms of a
viatical settlement contract or insurance policy;
(F) the reinstatement or conversion of an
insurance policy;
(G) in the solicitation, offer, effectuation or
sale of a viatical settlement contract or insurance
policy;
(H) the issuance of written evidence of viatical
settlement contract or insurance;
(I) a financing transaction; or
(J) enter into any practice or plan which
involves STOLI; or
(ii) employing a plan, financial structure, device,
scheme or artifice to defraud related to viaticated
policies; or
(2) in the furtherance of a fraud or to prevent the
detection of a fraud, a person commits or permits his
employees or 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
20100HB2188PN3050 - 5 -
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 concealing information about a material fact
from the commissioner;
(3) embezzlement, theft, misappropriation or conversion
of moneys, funds, premiums, credits or other property of a
viatical settlement provider, insurer, insured, viator,
insurance policy owner or any other person engaged in the
business of viatical settlements or insurance;
(4) recklessly entering into, negotiating, brokering or
otherwise dealing in a viatical settlement contract, the
subject of which is a life insurance policy obtained by
presenting false information concerning a fact material to
the policy or by concealing, for the purpose of misleading
another, information concerning a 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;
(5) 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 act for the express purposes of evading or avoiding
the provisions of this act; or
(6) attempting to commit, assisting, aiding or abetting
in the commission of or conspiracy to commit the acts or
omissions specified in this definition.
20100HB2188PN3050 - 6 -
* * *
"Life insurance producer." A person licensed in this
Commonwealth as a resident or nonresident insurance producer who
has received qualification or authority for life insurance
coverage or a life line of coverage under Article VI-A of the
act of May 17, 1921 (P.L.789, No.285), known as The Insurance
Department Act of 1921.
* * *
"Premium finance loan." A loan made primarily for the
purposes of making premium payments on a life insurance policy
which is secured by an interest in the life insurance policy.
"Recklessly." Consciously engaging in conduct in clear,
unjustifiable disregard of a substantial likelihood of the
existence of the relevant facts or risks with the disregard
involving a gross deviation from acceptable standards of
conduct.
* * *
"Special purpose entity." [A corporation, partnership,
trust, limited liability company or other similar entity other
than a natural person formed solely to provide, either directly
or indirectly, access to institutional capital markets for a
financing entity or licensed viatical settlement provider.] A
corporation, partnership, trust, limited liability company or
other similar entity formed solely to provide either direct or
indirect access to institutional capital markets:
(1) for a financing entity or licensed viatical
settlement provider; or
(2) (i) in connection with a transaction in which the
securities in the special purposes entity are acquired by
the viator or by qualified institutional buyers as
20100HB2188PN3050 - 7 -
defined in 17 CFR § 230.144 (relating to persons deemed
not to be engaged in a distribution and therefore not
underwriters); or
(ii) the securities pay a fixed rate of return
commensurate with established asset-backed institutional
capital markets.
"Stanger-originated life insurance" or "STOLI." A practice
or plan to initiate a life insurance policy for the benefit of a
third-party investor who, at the time of policy origination, has
no insurable interest in the insured. STOLI practices include,
but are not limited to:
(1) Cases in which life insurance is purchased with
resources or guarantees from or through a person or entity
who, at the time of inception, has a verbal or written
arrangement or agreement to directly or indirectly transfer
the ownership of the policy or the policy benefits to a third
party.
(2) Trusts created to give the appearance of insurable
interest which are used to initiate policies for investors,
violate or evade insurable interest laws and the prohibition
against wagering on life.
* * *
"Viatical settlement broker." [A person that on behalf of a
viator and for a fee, commission or other valuable consideration
offers to negotiate or attempts to negotiate viatical
settlements between a viator and one or more viatical settlement
providers. The term does not include an attorney, certified
public accountant or financial planner accredited by a
nationally recognized accreditation agency who is retained to
represent the viator and whose compensation is not paid directly
20100HB2188PN3050 - 8 -
or indirectly by the viatical settlement provider or purchaser.
The term also does not include an investment advisor registered
under the Investment Advisers Act of 1940 (15 U.S.C. § 80b-1 et
seq.) or the act of December 5, 1972 (P.L.1280, No.284), known
as the Pennsylvania Securities Act of 1972, possessing a
designation recognized by the Pennsylvania Securities Commission
for the purposes of waiving any examination requirement under
the Pennsylvania Securities Act of 1972, who is retained to
represent the viator and whose compensation is not paid directly
or indirectly by the viatical settlement provider or purchaser.]
A person, including a life insurance producer working
exclusively on behalf of a viator and for a fee, commission or
other valuable consideration, who 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 retained to represent the viator whose compensation is
not paid directly or indirectly by the viatical settlement
provider or purchaser.
"Viatical settlement contract." [A written agreement entered
into between a viatical settlement provider and a person owning
a policy or group policy establishing the terms under which
compensation or anything of value will be paid, which
20100HB2188PN3050 - 9 -
compensation or value is less than the expected death benefit of
the insurance policy or certificate, in return for the viator's
assignment, transfer, sale, devise or bequest of the death
benefit or ownership of any portion of the insurance policy or
certificate of insurance. The term also includes a contract for
a loan or other financing transaction secured primarily by an
individual or group life insurance policy, other than a loan by
a life insurance company pursuant to the terms of the life
insurance contract, or a loan secured by the cash value of a
policy. A viatical settlement contract includes an agreement to
transfer ownership or change the beneficiary designation at a
later date regardless of the date that compensation is paid to
the viator. This term shall not include a written agreement
entered into between a viator and a person having an insurable
interest in the viator's life.]
(1) A written agreement between a viator and a viatical
settlement provider or 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 a portion of the insurance policy or certificate
of insurance. The term also includes the transfer of
ownership or beneficial interest in a trust or other entity
owning a life insurance policy for compensation or value if
the trust or other entity was formed or availed of for the
principal purpose of acquiring one or more life insurance
contracts which insure the life of a person residing in this
Commonwealth.
20100HB2188PN3050 - 10 -
(2) A premium finance loan made for a life insurance
policy by a lender to the viator on, before or after the date
of issuance of the policy where:
(i) the viator or the insured receives on or before
the date of the premium finance loan a guarantee of a
future viatical settlement value of the policy; or
(ii) the viator or the insured agrees on the date of
the premium finance loan to sell the policy or a portion
of its death benefit on a date following the issuance of
the policy.
(3) The term does not include:
(i) a policy loan or accelerated death benefit made
by the insurer under the policy's terms;
(ii) loan proceeds used solely to pay:
(A) premiums for the policy; or
(B) the costs of the loan, including, but not
limited to, 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 the policy
by the lender, provided the default itself is not under
an agreement or understanding with another person for the
purpose of evading regulation under this act;
(iv) an agreement where all the parties are closely
20100HB2188PN3050 - 11 -
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 trusts
established primarily for the benefit of the parties;
(v) a 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) a bona fide business succession planning
arrangement:
(A) 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;
(B) 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
(C) 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) another contract, transaction or arrangement
exempted from the definition of viatical settlement
20100HB2188PN3050 - 12 -
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 act.
["Viatical settlement provider." A person other than a
viator that enters into or effectuates a viatical settlement
contract. The term does not include:
(1) a bank, bank and trust, savings bank, savings and
loan association, credit union or other licensed lending
institution that takes an assignment of a life insurance
policy as collateral for a loan;
(2) the issuer of a life insurance policy providing
accelerated benefits pursuant to the contract;
(3) an authorized or eligible insurer that provides stop
loss coverage to a viatical settlement provider, purchaser,
financing entity, special purpose entity or related provider
trust;
(4) a natural person who enters into or effectuates no
more than one agreement in a calendar year for the transfer
of life insurance policies for any value less than the
expected death benefit;
(5) a financing entity;
(6) a special purpose entity;
(7) a related provider trust;
(8) a viatical settlement purchaser; or
(9) an accredited investor, qualified institutional
buyer or qualified purchaser as defined respectively in 17
CFR § 230.501 (relating to definitions and terms used in
Regulation D), 17 CFR § 230.144A (relating to private resales
of securities to institutions), section 18(b)(3) of the
Securities Act of 1933 (48 Stat. 74, 15 U.S.C. § 77c et seq.)
20100HB2188PN3050 - 13 -
and who purchases a viaticated policy from a licensed
viatical settlement provider.]
"Viatical settlement provider." A person other than a viator
entering into or effectuating a viatical settlement contract
with a viator residing in this Commonwealth. The term does not
include:
(1) 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;
(2) a premium finance company that takes an assignment
of a life insurance policy solely as collateral for a loan;
(3) the issuer of the life insurance policy;
(4) 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;
(5) a natural person who enters into or effectuates no
more than one agreement in a calendar year for the transfer
of life insurance policies for a value less than the expected
death benefit;
(6) a financing entity;
(7) a special purpose entity;
(8) a related provider trust;
(9) a viatical settlement purchaser; or
(10) another person the commissioner determines is not
the type of person intended to be covered by the definition
of viatical settlement provider.
* * *
["Viator." The owner of a life insurance policy or a
20100HB2188PN3050 - 14 -
certificate holder under a group policy who enters or seeks to
enter into a viatical settlement contract. For the purposes of
this act, 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 in this
act. The term does not include:
(1) a licensee under this act;
(2) an accredited investor or qualified institutional
buyer as defined respectively in 17 CFR § 230.501 (relating
to definitions and terms used in Regulation D), 17 CFR §
230.144A (relating to private resales of securities to
institutions);
(3) a financing entity;
(4) a special purpose entity; or
(5) a related provider trust.]
"Viator." The owner of a life insurance policy or a
certificate holder under a group policy who resides in this
Commonwealth and enters or seeks to enter into a viatical
settlement contract. For the purposes of this act, 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. The term does not include:
20100HB2188PN3050 - 15 -
(1) a licensee under this act, including a life
insurance producer acting as a viatical settlement broker
pursuant to this act;
(2) a qualified institutional buyer as defined in 17 CFR
§ 230.144A (relating to private resales of securities to
institutions);
(3) a financing entity;
(4) a special purpose entity; or
(5) a related provider trust.
Section 2. Section 6(b)(2) of the act is amended to read:
Section 6. Reporting requirements and confidentiality.
* * *
(b) Confidentiality.--Except as otherwise allowed or
required by law, a viatical settlement provider, viatical
settlement broker, insurance company, insurance agent, insurance
broker, information bureau, rating agency or company or any
other person with actual knowledge of an insured's identity,
health information or financial information may not disclose
that information as an insured to any other person unless the
disclosure is:
* * *
(2) [necessary to effect a viatical settlement purchase
agreement between the viatical settlement purchaser and a
viatical settlement provider, and the viator and insured have
provided prior written consent to the disclosure] (Reserved);
* * *
Section 3. Section 7(a)(5), (8) and (9) of the act are
amended and the subsection is amended by adding paragraphs to
read:
Section 7. Disclosure.
20100HB2188PN3050 - 16 -
(a) General rule.--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:
* * *
(5) [the viator has the right to rescind a viatical
settlement contract for 15 calendar days from the receipt of
the viatical settlement proceeds by the viator as provided in
section 8(g). If the insured dies during the rescission
period, the settlement contract shall be deemed to have been
rescinded, subject to repayment of all viatical settlement
proceeds and other payments made by the viatical settlement
provider on behalf of the viator or insured to the viatical
settlement provider;] the viator has the right to rescind a
viatical settlement contract before the earlier of 60
calendar days after the date upon which the viatical
settlement contract is executed by all parties or 30 calendar
days after the viatical settlement proceeds have been paid to
the viator. Rescission, if exercised by the viator, is
effective only if both notice of the rescission is given and
the viator repays the proceeds and premiums, loans and loan
interest paid on account of the viatical settlement within
the rescission period. If the insured dies during the
rescission period, the viatical settlement contract shall be
deemed to have been rescinded, subject to repayment by the
20100HB2188PN3050 - 17 -
viator or the viator's estate of all viatical settlement
proceeds and premiums, loans and loan interest on the
viatical settlement within 60 days of the insured's death;
* * *
(8) 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 and/or financing entities. If a
viator is asked to provide this information, the viator must
consent to the disclosure, and failure to consent may affect
the viator's ability to viaticate a life insurance policy.
The information may be provided to viatical settlement
purchasers, financing entities, special purpose entities or
related provider trusts; [and]
(9) all information provided by a viator or insured to a
viatical settlement provider or viatical settlement broker
will be shared with the insurer that issued the life
insurance policy that is the subject of the viatical
transaction[.];
(10) following the 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 act. This contact shall be
limited to once every three months if the insured has a life
expectancy of more than one year and no more than once per
month if the insured has a life expectancy of one year or
20100HB2188PN3050 - 18 -
less. The contacts shall be made only by a viatical
settlement provider licensed in this Commonwealth in which
the viator resided at the time of the viatical settlement or
by the authorized representative of a duly licensed viatical
settlement provider; and
(11) the fact that a future change of ownership could
limit the insured's ability to purchase additional life
insurance because there is a limit to how much coverage
insurers may issue on one life.
Section 4. The act is amended by adding a section to read:
Section 7.1. Disclosure to insurer.
Prior to 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 party, to
originate, renew, continue or finance a life insurance policy
with the insurer for the purpose of engaging in the business of
viatical settlements prior to or during the first five years
after the issuance of the policy.
Section 5. Section 8(e) of the act is amended by adding a
paragraph to read:
Section 8. General rules.
* * *
(e) Verification of coverage.--
* * *
(4) The insurer shall not unreasonably delay effecting
change of ownership or beneficiary with a viatical settlement
contract lawfully entered into in this Commonwealth or with a
resident of this Commonwealth.
20100HB2188PN3050 - 19 -
* * *
Section 6. Section 9 of the act is amended to read:
Section 9. Prohibited practices.
[It is a violation of this act for any person to:
(1) Enter into a viatical settlement contract the
subject of which is a life insurance policy that the licensee
knew or should have known was obtained by means of a false,
deceptive or misleading application for the life insurance
policy.
(2) Enter into a viatical settlement contract within a
two-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 of the following
conditions has been met within the two-year period:
(i) The policy was issued upon the owner'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 group
policy is at least 24 months. The time covered under the
group or individual policy shall be calculated without
regard to any change in insurance carriers, provided the
coverage has been continuous and under the same group
sponsorship.
(ii) The viator is not a natural person (e.g., the
viator is a corporation, limited liability company,
partnership, etc.).
(iii) A sworn statement by the viator and insured is
submitted to the viatical settlement provider, certifying
that one or more of the following conditions have been
met within the two-year period:
20100HB2188PN3050 - 20 -
(A) The viator or insured is terminally or
chronically ill.
(B) The viator's or insured's spouse dies.
(C) The viator or insured divorces his or her
spouse.
(D) The viator was the insured's employer at the
time the policy or certificate was issued and the
employment relationship has terminated.
(E) The viator experiences a significant
decrease in income that impairs the viator's
reasonable ability to pay the policy premium.
(F) The viator or insured disposes of his or her
ownership interests in a closely held corporation.
The sworn statement shall be submitted by the viator or
insured to the insurer when the viatical settlement
provider submits a request to the insurer for
verification of coverage pursuant to section 8(d). The
documents shall be accompanied by a letter of attestation
from the viatical settlement provider that the copies are
true and correct copies received by the viatical
settlement provider.
(iv) The viatical settlement provider submits to the
insurer a copy of the owner or insured's certification
described in subparagraph (iii) when the provider submits
a request to the insurer to effect the transfer of the
policy or certificate to the viatical settlement
provider. The certification 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.
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(v) A financing entity is a party to a viatical
settlement contract to which a licensed viatical
settlement provider is not a party or to a viatical
settlement purchase agreement.
(vi) A special purpose entity enters into a viatical
settlement contract.]
(a) Violation.--It is a violation of this act for a person
to enter into a viatical settlement contract prior to the
application or issuance of a policy which is the subject of
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:
(1) the policy was issued upon the viator's exercise of
conversion rights arising out of group or individual policy
provided the time covered under the conversion policy plus
the time covered under the prior policy is no fewer than 60
months. The time covered under a group policy shall be
calculated without regard to a change in insurance carriers
provided the coverage has been continuous and under the same
group sponsorship;
(2) the viator submits independent evidence to the
viatical settlement provider that one or more of the
following conditions have been met within the five-year
period:
(i) the viator insured is terminally or chronically
ill;
(ii) the viator's spouse dies;
(iii) the viator divorces his or her spouse;
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(iv) the viator retires from full-time employment;
(v) the viator becomes physically or mentally
disabled and a physician determines that the disability
prevents the viator from maintaining full-time
employment; or
(vi) a final order, judgment or decree is entered by
a court of competent jurisdiction, on the application of
a creditor of the viator, adjudicating the viator
bankrupt or insolvent, or approving a petition seeking
reorganization of the viator or appointing 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 prior to the date that is two years
after policy issuance, the following conditions are met:
(i) 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 or a person
described in paragraph (3)(v) of the definition of
"viatical settlement contract" under section 2.
(ii) There is no agreement or understanding with
another person to guarantee the liability or to purchase
or stand ready to purchase the policy, including through
an assumption or forgiveness of the loan.
(iii) Neither the insured nor the policy has been
evaluated for settlement, disclosures, consent or waiver
form that has not been expressly approved by the
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commissioner for use in connection viatical settlement
contracts in this Commonwealth.
(b) Copies.--Copies of the independent evidence described in
subsection (a)(2) and documents required by section 8 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 stating the
copies are true and correct copies of the documents received by
the viatical settlement provider.
(c) Submission of a copy of certification and independent
evidence.--If the viatical settlement provider submits to the
insurer a copy of the owner's or insured's certification
described in and the independent evidence required by subsection
(a)(2) 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) Prohibition.--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 the viator, insured, viatical
settlement provider or viatical settlement broker sign a form,
disclosure, consent or waiver form that has not been expressly
approved by the commissioner for use in connection with viatical
settlement contracts in this Commonwealth.
(e) Effect of receipt of request and delay ban.--Upon
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receipt of a properly completed request for change of ownership
or beneficiary of a policy, the insurer shall respond in writing
within 30 calendar days with written acknowledgment confirming
the change has been effected or specifying the reasons why the
requested change cannot be processed. The insurer shall not
unreasonably delay effecting change of ownership or beneficiary
and shall not otherwise seek to interfere with a viatical
settlement contract lawfully entered into in this Commonwealth.
Section 7. The act is amended by adding a section to read:
Section 9.1. Additional prohibited practices; conflicts of
interest.
(a) Prohibitions.--
(1) With respect to a viatical settlement contract or
insurance policy, no viatical settlement broker shall
knowingly solicit an offer from, effectuate a viatical
settlement with or make a sale to a viatical settlement
provider, viatical settlement purchaser, financing entity or
related provider trust that is controlling, controlled by or
under common control with the viatical settlement broker.
(2) With respect to a 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 the viatical settlement contract,
anything of value will be paid to a viatical settlement
broker that is controlling, controlled by or under common
control with the viatical settlement provider or the viatical
settlement purchaser, financing entity or related provider
trust that is involved in the viatical settlement contract.
(3) A viatical settlement provider shall not enter into
a viatical settlement contract unless the viatical settlement
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promotional, advertising and marketing materials, as may be
prescribed by regulation, have been filed with the
commissioner. In no event shall marketing materials expressly
reference the insurance is free for a period of time. The
inclusion of a reference in the marketing materials that
would cause a viator to reasonably believe the insurance is
free for a period of time shall be considered a violation of
this act.
(4) A life insurance producer, insurance company,
viatical settlement broker, viatical settlement provider or
viatical settlement investment agent shall not make a
statement or representation to the applicant or policyholder
in connection with the sale or financing of a life insurance
policy to the effect the insurance is free or without cost to
the policyholder for a period of time unless provided in the
policy.
(b) Violations.--A violation of subsection (a)(1) or (2)
shall be deemed a fraudulent viatical settlement act.
Section 8. This act shall take effect in 60 days.
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