Senate Bill No. 112
Introduced By van valkenburg
By Request of the State Auditor
A Bill for an Act entitled: "An Act creating a viatical settlement act; providing for licensure of viatical settlement providers and brokers; providing for regulation by the insurance commissioner; providing authority to promulgate rules; providing minimal requirements for viatical settlement contracts; providing for examination of licensees and license applicants; providing for disclosure of information; providing for conditions precedent to viatical settlement contracts; providing for confidentiality; and providing requirements for payment pursuant to viatical settlement contracts."
STATEMENT OF INTENT
A statement of intent is required for this bill because [section
16 15] grants rulemaking authority to the insurance
commissioner. The rulemaking authority is consistent with the requirements of Public Law 104-191, H.R. 3103, which
provides for the adoption of standards promulgated by the national association of insurance commissioners. The
commissioner in adopting rules needs to establish trade practice standards for regulating advertising and solicitation of
viatical settlement contracts, for evaluating reasonableness of payments under viatical settlement contracts, and for
determining the forms necessary to effectively administer the bill. The rules adopted should be consistent with any
regulations adopted under Public Law 104-191, H.R. 3103. [SECTION 15] ALSO REQUIRES THE COMMISSIONER
TO ADOPT RULES THAT ESTABLISH FEES THAT ARE COMMENSURATE WITH THOSE REQUIRED UNDER
Be it enacted by the Legislature of the State of Montana:
NEW SECTION. Section 1. Short title. [Sections 1 through
16 15] may be cited as the "Viatical Settlement Act".
NEW SECTION. Section 2. Definitions. As used in [sections 1 through
16 15], unless the context requires otherwise, the
following definitions apply:
(1) (a) "Viatical settlement broker" means an individual who, for a fee, commission, or other consideration:
(i) offers or advertises the availability of viatical settlement contracts;
(ii) introduces holders of life insurance policies or certificates insuring the lives of individuals with a terminal illness or condition to viatical settlement providers; or
(iii) offers or attempts to negotiate viatical settlement contracts between the policyholders or certificate holders and one or more viatical settlement providers.
(b) Viatical settlement broker does not mean an attorney, accountant, or financial planner retained to represent the policyholder or certificate holder unless compensation paid to the attorney, accountant, or consultant is paid by the viatical settlement provider.
(2) "Viatical settlement contract" means a written agreement between a viatical settlement provider and the holder of a group or individual life insurance policy insuring the life of an individual with a terminal illness or condition or between a viatical settlement provider and the certificate holder of a policy in which:
(a) the terms establish that the viatical settlement provider pays something of value in return for the policyholder's or certificate holder's assignment, transfer, sale, devise, or bequest of the death benefit or ownership of the insurance policy or certificate to the viatical settlement provider; and
(b) the policyholder or certificate holder holds an irrevocable right under the policy or certificate to name the beneficiary.
(3) (a) "Viatical settlement provider" means a person who solicits, enters into, or negotiates viatical settlement contracts or offers to enter into or negotiate viatical settlement contracts.
(b) A viatical settlement provider may use the term "life settlement provider" to describe the business transacted under the license and may use the term "life settlement contract" instead of "viatical settlement contract".
(c) Viatical settlement provider does not mean:
(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 only as collateral for a loan;
(ii) an insurer issuing a life insurance policy providing accelerated benefits pursuant to 33-20-127 or pursuant to the laws of the state to which the policy was subject when issued;
(iii) an individual who enters into a single agreement in a calendar year for the transfer of life insurance policies for any value less than the expected death benefit; or
(iv) any corporation, partnership, or partner that purchases a life insurance contract of an employee or retiree of the corporation or of a partner. The settlement made on any contract exempt under this section must be reasonable and subject to the standards imposed on licensees under [section 4].
NEW SECTION. Section 3. License application. (1) A person may not act as or purport to be a viatical settlement
provider or viatical settlement broker unless licensed as a viatical settlement provider or viatical settlement broker under
[sections 1 through
(2) In order to obtain a license to transact business as a viatical settlement provider or as a viatical settlement broker, an applicant shall apply for the license on forms prescribed by the commissioner and shall pay the fee required for the application.
(3) The commissioner may request biographical, organizational, locational, financial, employment, and other information on the application form that the commissioner determines to be relevant to the evaluation of applications and to the granting of the license. The commissioner may require a statement of the business plan or plan of operation of the applicant. The commissioner shall require an applicant for a viatical settlement provider license to file with the application for the commissioner's approval a copy of the viatical settlement contract that the applicant intends to use in business under the license.
(4) If an applicant is a corporation, the corporation must be:
(a) incorporated or organized under the laws of this state; or
(b) a foreign corporation authorized to transact business in this state.
(5) If the applicant is a partnership, the partnership must be organized under the laws of this state.
NEW SECTION. Section 4. Issuance of license. (1) The commissioner may issue a license to the applicant if the commissioner determines that the applicant:
(a) has satisfied all of the requirements for the license for which an application is made;
(b) has not engaged in conduct that would authorize the commissioner to refuse to issue a license under [sections 1 through
16 15]; and
(c) is financially responsible and has a good business reputation.
(2) The commissioner may issue a license to a nonresident applicant only if the nonresident applicant files with the commissioner in writing an appointment of the commissioner to be the agent of the applicant upon whom all legal process in any action or proceeding against the applicant may be served. In the appointment, the applicant shall agree that any lawful process against the applicant that is served upon the commissioner is of the same legal force and validity as if served upon the applicant and that the authority will continue in force as long as any liability remains outstanding in this state. An appointment under this subsection becomes effective on the date that the commissioner issues the license to the applicant.
(3) If the commissioner denies an application, the commissioner shall inform the applicant and state the grounds for the denial.
(4) An individual may act as a viatical settlement provider or viatical settlement broker under the authority of the license of a firm or of a corporate viatical settlement provider whether or not the individual holds a license as a viatical settlement provider if:
(a) the individual is a member or employee of the firm or is an employee, officer, or director of the corporation; and
(b) the individual is designated by the firm or corporation on its license application or on a form that amends or supplements the application as being authorized to act as a viatical settlement provider under the authority of the license.
NEW SECTION. Section 5. Expiration of license. (1) A license issued under [sections 1 through
16 15] expires on its
expiration date unless it is renewed on or before its expiration date.
(2) Unless the commissioner designates another date, a license expires on the last day of the month in which the second anniversary of the initial issuance date of the license occurs and on the last day of the month of the second anniversary following each renewal.
NEW SECTION. Section 6. Notification by licensee of material change affecting qualification for license. A licensee shall immediately notify the commissioner of any material change in ownership or control or in any other matter affecting the qualification of the licensee for the license in this state, including keeping the commissioner informed about personnel and address changes.
NEW SECTION. Section 7. Suspension -- revocation -- refusal to issue or renew license. (1) The commissioner may suspend, revoke, refuse to issue, or refuse to renew a license if the commissioner determines that the licensee or applicant for a license is untrustworthy or incompetent to act as a licensee or is guilty of one or more of the following:
(a) dishonesty, fraud, or gross negligence in the conduct of business as a licensee;
(b) a pattern of unreasonable payments to policyholders or certificate holders;
(c) falsification of an application for the license or renewal of the license or misrepresentation or engagement in any other dishonest act in relation to the application;
(d) conduct resulting in a conviction of a felony under the laws of any state or of the United States;
(e) conviction of any crime, an essential element of which is dishonesty or fraud, under the laws of any state or of the United States;
(f) refusal to renew or cancellation, revocation, or suspension of authority to transact insurance or business as a viatical settlement provider, viatical settlement broker, or similar entity in another state;
(g) failure to pay a civil penalty imposed by final order of the commissioner or to carry out terms of probation set by the commissioner;
(h) refusal by a licensee to be examined or to produce accounts, records, or files for examination, refusal by any officers or employees to give information with respect to the affairs of the licensee, or refusal to perform any other legal obligation as to the examination, when required by the commissioner;
(i) affiliation with or under the same general management or interlocking directorate or ownership as another viatical settlement provider, viatical settlement broker, or insurer, any of which unlawfully transacts business in this state;
(j) failure at any time to meet any qualification for which issuance of the license could have been refused had the failure then existed and been known to the commissioner; or
(k) violation of any rule or order of the commissioner or any provision of Montana law.
(2) The commissioner may suspend or refuse to renew a license immediately and without hearing if the commissioner determines that one or both of the following circumstances exist:
(a) the licensee is insolvent;
(b) the financial condition or business practices of the licensee otherwise pose an imminent threat to the public health, safety, or welfare of the residents of this state.
(3) The commissioner may refuse to issue a license in the name of any firm, partnership, or corporation if the commissioner believes that any officer, employee, stockholder, or partner who may materially influence the conduct of the applicant does not meet the standards of this section.
(4) A viatical settlement provider or viatical settlement broker holding a license that has not been renewed or that has been revoked shall surrender the license to the commissioner at the commissioner's request.
(5) The commissioner may take any other administrative action authorized under Montana law in addition to or in lieu of
the actions authorized under [sections 1 through
16 15]. NEW SECTION. Section 8. Maximum fees, commissions, or other valuable consideration. A viatical settlement
provider or viatical settlement broker may not charge or receive a fee, commission, or other valuable consideration in
excess of 2% of the amount paid to the policyholder or certificate holder on a policy that is the subject of the viatical
settlement provider's or viatical settlement broker's services unless the commissioner approves another rate of
compensation as reasonable and appropriate under the circumstances.
NEW SECTION. Section 8. Terms of contract. (1) A viatical settlement contract must be in writing. A viatical settlement provider shall establish in the contract the terms under which the viatical settlement provider will pay compensation or anything of value in return for the policyholder's or certificate holder's assignment, transfer, sale, devise, or bequest of the death benefit or ownership of the insurance policy or certificate to the viatical settlement provider.
(2) A viatical settlement provider may not use a viatical settlement contract in this state unless the viatical settlement provider has filed the contract form with the commissioner and the commissioner has approved the contract form according to the provisions set forth in 33-1-501. The commissioner shall disapprove a viatical settlement contract form if, in the commissioner's judgment, the contract or any provision of the contract is unreasonable, contrary to the interests of the public, or otherwise misleading or unfair to the policyholder or certificate holder.
(3) Each viatical settlement contract entered into in this state must contain a provision enabling the policyholder or certificate holder to rescind the contract not later than the 30th day after the date on which the contract is executed by all parties or not later than the 15th day after the policyholder or certificate holder receives the viatical settlement proceeds, whichever is the longer period. In order to rescind a contract, a policyholder or certificate holder who has received the proceeds shall return them to the viatical settlement provider.
NEW SECTION. Section 9. Annual report by provider. Unless the commissioner grants a time extension, a viatical settlement provider shall file a report for the preceding calendar year with the commissioner on or before March 1 of each year. The report must be in the form and must contain the information that the commissioner prescribes. The report must be verified as follows:
(1) if the viatical settlement provider is a corporation, by at least two principal officers of the viatical settlement provider;
(2) if the viatical settlement provider is a partnership, by two partners; or
(3) if the viatical settlement provider is not a corporation or a partnership, by the provider's owner and manager.
NEW SECTION. Section 10. Examination of business and practices of licensee or applicant -- maintenance of business records. (1) The commissioner may examine the business and practices of any licensee or applicant for a license when the commissioner determines an examination to be necessary. The commissioner may order a licensee or applicant to produce any records, books, files, or other information reasonably necessary to ascertain whether the licensee or applicant is acting or has acted in violation of the law or contrary to the interests of the public. The licensee or applicant shall pay the expenses incurred in conducting any examination.
(2) A viatical settlement provider shall maintain records of all transactions of viatical settlement contracts of the viatical settlement provider and shall make the records available to the commissioner for inspection during reasonable business hours. The records must be maintained for a period of not less than 5 years from the date of their creation.
(3) The commissioner may at any time require a licensee to fully disclose the identity of all stockholders, partners, officers, and employees.
(4) The names of and individual identification data for all policyholders and certificate holders who have entered viatical
settlement contracts with viatical settlement providers are confidential and may not be disclosed except as considered
necessary by the commissioner in administration of [sections 1 through
NEW SECTION. Section 11. Disclosure of information to policyholder. A viatical settlement provider shall disclose the information specified in this section to the policyholder or certificate holder entering the viatical settlement contract prior to the date on which the viatical settlement contract is signed by all parties. The disclosure must be in the form prescribed by the commissioner. The information must include the following:
(1) possible alternatives to viatical settlement contracts for persons with terminal illnesses or conditions, including but not limited to accelerated benefits offered by the issuer of the life insurance policy;
(2) the fact that some or all of the proceeds of the viatical settlement may be taxable and that assistance should be sought from a personal tax adviser. Viatical settlement brokers, viatical settlement providers, or their respective employees or agents may not act as personal tax advisers for purposes of this disclosure requirement.
(3) the fact that the viatical settlement could be subject to the claims of creditors;
(4) the fact that receipt of a viatical settlement may adversely affect the recipient's eligibility for medicaid or other government benefits or entitlement and that advice should be obtained from the appropriate agencies;
(5) the right of a policyholder or certificate holder to rescind a viatical settlement contract as provided in [section
9 8]. The
disclosure must state the deadlines for rescission and the return of proceeds received.
(6) the date by which the funds will be available to the policyholder or certificate holder and the source of the funds; and
(7) the fact that the viatical settlement contract is void if the viatical settlement provider or viatical settlement broker fails to tender payment of the proceeds as provided in the viatical settlement contract.
NEW SECTION. Section 12. Conditions precedent to entering into viatical settlement contract. (1) Before a viatical settlement provider enters into a viatical settlement contract with a policyholder or certificate holder who has a terminal illness or condition, the viatical settlement provider shall first obtain the following:
(a) a written statement from an attending physician that the policyholder or certificate holder is of sound mind and not under constraint or undue influence; and
(b) a witnessed document in which the policyholder or certificate holder:
(i) consents to the viatical settlement contract;
(ii) acknowledges that the illness or condition is terminal;
(iii) represents that the policyholder or certificate holder has a full and complete understanding of the viatical settlement contract;
(iv) confirms that the policyholder or certificate holder has a full and complete understanding of the benefits of the life insurance policy;
(v) releases the medical records of the policyholder or certificate holder relating to the terminal illness or condition; and
(vi) acknowledges that the policyholder or certificate holder has entered into the viatical settlement contract freely and voluntarily.
(2) A viatical settlement provider may enter a viatical settlement contract only after the individual whose life would be the subject of the viatical settlement contract is determined to have a terminal illness or condition, as follows:
(a) if the individual is the policyholder or certificate holder, an attending physician of the policyholder or certificate holder shall make the determination; or
(b) if the individual is a person other than the policyholder or certificate holder, an attending physician of the individual or of the policyholder or certificate holder shall make the determination.
(3) For purposes of this section, "attending physician" means a medical doctor, a doctor of osteopathy, or a naturopathic physician licensed in this state, who is primarily responsible for the treatment or a portion of treatment of the individual whose life would be the subject of the viatical settlement contract.
NEW SECTION. Section 13. Prohibitions on finder's fee -- solicitations -- discrimination -- false or misleading advertising or solicitation -- misuse of confidential information. (1) A licensee may not pay or offer to pay a finder's fee, commission, or other compensation to a person described in this subsection (1) in connection with a policy insuring the life of an individual with a terminal illness or condition. The prohibition under this subsection (1) applies with respect to payments or offers of payment to:
(a) the physician, attorney, or accountant of the policyholder, the certificate holder, or the insured individual;
(b) any person other than a physician, attorney, or accountant described in subsection (1)(a) who provides medical, legal, or financial planning services to the policyholder, to the certificate holder, or to the insured individual when the individual is other than the policyholder or certificate holder; or
(c) any person other than one described in subsection (1)(a) or (1)(b) who acts as an agent of the policyholder, certificate holder, or insured individual.
(2) A licensee may not solicit an investor who could influence the treatment of the illness or condition of the individual whose life would be the subject of a viatical settlement contract.
(3) All information solicited or obtained from a policyholder or certificate holder by a licensee is subject to the confidentiality requirements set forth in Title 33, chapter 19. For purposes of this subsection, a licensee must be considered an insurance-support organization as defined in 33-19-104.
(4) A licensee may not discriminate in the making of a viatical settlement contract on the basis of race, age, sex, national origin, creed, religion, occupation, marital or family status, or sexual orientation and may not discriminate between persons who have dependents and persons who do not have dependents.
(5) A person licensed pursuant to [section 4] may not engage in any false or misleading advertising, solicitation, or practice as described in 33-18-203.
(6) A person licensed pursuant to [section 4] may not sell another product of insurance to the contract holder unless approval is obtained from the commissioner.
NEW SECTION. Section 14. Payment to escrow or trust account -- lump- sum payment. (1) Immediately upon receipt of documents from the policyholder or certificate holder effecting the transfer of the insurance policy or certificate, the viatical settlement provider shall pay the proceeds of the settlement to an escrow or trust account managed by a trustee or escrow agent in a bank approved by the commissioner, pending acknowledgment of the transfer by the issuer of the life insurance policy. The trustee or escrow agent shall transfer the proceeds due to the policyholder or certificate holder immediately upon receipt of acknowledgment of the transfer from the insurer.
(2) A viatical settlement provider shall make payment of the proceeds of a viatical settlement contract in a lump sum except as provided in this subsection. A viatical settlement provider may not retain any portion of the proceeds. A viatical settlement provider may make installment payments only if the viatical settlement provider has purchased an annuity issued by an authorized insurer or a similar financial instrument issued by a financial institution authorized to engage in the business of a financial institution in this state.
(3) Failure by the viatical settlement provider to tender the viatical settlement by the date disclosed to the policyholder or certificate holder renders the contract void.
NEW SECTION. Section 15. Rules -- standards -- bond. The commissioner may, in accordance with the provisions of
33-1-313, adopt rules for the purpose of carrying out [sections 1 through
16 15]. In addition, the commissioner:
(1) may establish standards for evaluating reasonableness of payments under viatical settlement contracts. The authority includes but is not limited to 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. For the purpose of the standards, the commissioner shall consider payments made in regional and national viatical settlement markets to the extent that this information is available, as well as model standards developed by the national association of insurance commissioners.
(2) shall require a bond and an errors and omissions insurance policy of both kinds of licensees; and
(3) shall adopt rules to establish:
(A) trade practice standards for the purpose of regulating advertising and solicitation of viatical settlement contracts; AND
(B) FEES THAT ARE COMMENSURATE WITH FEES CHARGED PURSUANT TO 33-2-708.
NEW SECTION. Section 16. Codification instruction. [Sections 1 through
16 15] are intended to be codified as an
integral part of Title 33, and the provisions of Title 33 apply to [sections 1 through 16 15].