Bill Text: MI HB4230 | 2011-2012 | 96th Legislature | Introduced
Bill Title: Insurance; life; viatical settlement contracts and stranger-originated life insurance; regulate. Amends title of 1956 PA 218 (MCL 500.100 - 500.8302); adds ch. 43 & repeals 1996 PA 386 (MCL 550.521 - 550.528). TIE BAR WITH: HB 4229'11
Spectrum: Slight Partisan Bill (Democrat 7-4)
Status: (Introduced - Dead) 2011-02-15 - Printed Bill Filed 02/11/2011 [HB4230 Detail]
Download: Michigan-2011-HB4230-Introduced.html
HOUSE BILL No. 4230
February 10, 2011, Introduced by Reps. Byrum, Liss, Bauer, Hovey-Wright, Dillon, Darany, Horn, Barnett, McBroom, Genetski and Yonker and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
(MCL 500.100 to 500.8302) by amending the title, as amended by 2002
PA 304, and by adding chapter 43; and to repeal acts and parts of
acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
TITLE
An act to revise, consolidate, and classify the laws relating
to the insurance and surety business; to regulate the incorporation
or formation of domestic insurance and surety companies and
associations and the admission of foreign and alien companies and
associations; to provide their rights, powers, and immunities and
to prescribe the conditions on which companies and associations
organized, existing, or authorized under this act may exercise
their powers; to provide the rights, powers, and immunities and to
prescribe the conditions on which other persons, firms,
corporations, associations, risk retention groups, and purchasing
groups engaged in an insurance or surety business may exercise
their powers; to provide for the imposition of a privilege fee on
domestic insurance companies and associations and the state
accident fund; to provide for the imposition of a tax on the
business of foreign and alien companies and associations; to
provide for the imposition of a tax on risk retention groups and
purchasing groups; to provide for the imposition of a tax on the
business of surplus line agents; to provide for the imposition of
regulatory fees on certain insurers; to provide for assessment fees
on certain health maintenance organizations; to modify tort
liability arising out of certain accidents; to provide for limited
actions with respect to that modified tort liability and to
prescribe certain procedures for maintaining those actions; to
require security for losses arising out of certain accidents; to
provide for the continued availability and affordability of
automobile insurance and homeowners insurance in this state and to
facilitate the purchase of that insurance by all residents of this
state at fair and reasonable rates; to provide for certain
reporting with respect to insurance and with respect to certain
claims against uninsured or self-insured persons; to prescribe
duties for certain state departments and officers with respect to
that reporting; to provide for certain assessments; to establish
and continue certain state insurance funds; to modify and clarify
the status, rights, powers, duties, and operations of the nonprofit
malpractice insurance fund; to provide for the departmental
supervision and regulation of the insurance and surety business
within this state; to provide for regulation over worker's
compensation self-insurers; to provide for the conservation,
rehabilitation, or liquidation of unsound or insolvent insurers; to
provide for the protection of policyholders, claimants, and
creditors of unsound or insolvent insurers; to provide for
associations of insurers to protect policyholders and claimants in
the event of insurer insolvencies; to prescribe educational
requirements for insurance agents and solicitors; to provide for
the regulation of multiple employer welfare arrangements; to
provide for the regulation of viatical settlement contracts; to
create an automobile theft prevention authority to reduce the
number of automobile thefts in this state; to prescribe the powers
and duties of the automobile theft prevention authority; to provide
certain powers and duties upon certain officials, departments, and
authorities of this state; to provide for an appropriation; to
repeal acts and parts of acts; and to provide penalties for the
violation of this act.
CHAPTER 43
VIATICAL SETTLEMENT CONTRACTS
Sec. 4301. As used in this chapter:
(a) "Administrative procedures act of 1969" means the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328.
(b) "Advertising" or "advertisement" 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, but not
limited to, film strips, motion pictures, and videos, that is
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 purchase or sell,
assign, devise, bequeath, or transfer the death benefit or
ownership of a policy pursuant to a viatical settlement contract.
(c) "Business of viatical settlements" means an activity
involved in, but not limited to, the offering, solicitation,
negotiation, procurement, effectuation, purchasing, investing,
financing, monitoring, tracking, underwriting, selling,
transferring, assigning, pledging, or hypothecating or in any other
manner acquiring an interest in a policy by means of a viatical
settlement contract.
(d) "Chronically ill" means having been certified within the
preceding 12-month period by a licensed health professional as
meeting 1 of the following:
(i) Being unable to perform, without substantial assistance
from another individual, at least 2 activities of daily living,
including, but not limited to, eating, toileting, transferring,
bathing, dressing, or continence for at least 90 days due to a loss
of functional capacity.
(ii) Requiring substantial supervision to protect the
individual from threats to health and safety due to severe
cognitive impairment.
(e) "Escrow agent" means an independent third-party person
who, pursuant to a written agreement signed by the viatical
settlement provider and viator, provides escrow services related to
the acquisition of a policy pursuant to a viatical settlement
contract. Escrow agent does not include any person associated with,
affiliated with, or under the control of a person licensed under
this chapter or described in section 4305(2) or (3).
(f) "Financing entity" means an underwriter, placement agent,
lender, purchaser of securities, purchaser of a policy from a
viatical settlement provider, or any other person, other than a
nonaccredited investor or viatical settlement purchaser, that has a
direct ownership interest in a policy that is the subject of a
viatical settlement contract and to which both of the following
apply:
(i) Its principal activity related to the transaction is
providing money to effect the business of viatical settlements or
the purchase of 1 or more viaticated policies.
(ii) It has an agreement in writing with 1 or more licensed
viatical settlement providers to finance the acquisition of
viatical settlement contracts.
(g) "Freedom of information act" means the freedom of
information act, 1976 PA 442, MCL 15.231 to 15.246.
(h) "Licensee" means a person licensed as a viatical
settlement provider or viatical settlement facilitator under this
chapter.
(i) "Life expectancy" means the arithmetic mean of the number
of months the insured under the policy to be settled can be
expected to live as determined by a life expectancy company or
other expert considering medical records and appropriate
experiential data.
(j) "NAIC" means the national association of insurance
commissioners.
(k) "Policy" means an individual or group life insurance
policy or certificate, a death benefit under an individual or group
annuity contract or certificate, or other contract or arrangement
of life insurance affecting the rights of a resident of this state
or bearing a reasonable relation to this state, regardless of
whether delivered or issued for delivery in this state and
regardless of whether held individually, jointly, or by a trust or
other legal entity.
(l) "Qualified institutional buyer" has the same meaning as
that term as defined in 17 CFR 230.144a.
(m) "Regulated financial institution" means a state or
nationally chartered bank or a state or federally chartered savings
and loan association, savings bank, or credit union whose deposits
are insured by an agency of the United States government.
(n) "Related provider trust" means a titling trust or any
other trust established by a licensed viatical settlement provider
or a financing entity for the sole purpose of holding ownership or
beneficial interest in purchased policies in connection with a
financing transaction, provided that the trust has 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.
(o) "Special purpose entity" means a corporation, partnership,
trust, limited liability company, or other entity formed solely for
1 of the following purposes:
(i) To provide access, either directly or indirectly, to
institutional capital markets for a financing entity or licensed
viatical settlement provider.
(ii) In connection with a transaction in which the securities
in the special purpose entity are acquired by qualified
institutional buyers or the securities pay a fixed rate of return
commensurate with established asset backed institutional capital
markets.
(p) "Stranger-originated life insurance" or "STOLI" means an
act, practice, arrangement, or agreement initiated at or before the
issuance of a policy that includes the purchase or acquisition of a
policy primarily benefiting 1 or more persons who, at the time of
issuance of the policy, lack insurable interest in the person
insured under the policy and the transfer at any time of the legal
or beneficial ownership of the policy or benefits of the policy or
both, in whole or in part, including through an assumption or
forgiveness of a loan to fund premiums. Stranger-originated life
insurance also includes trusts or other arrangements that are
created to give the appearance of insurable interest and are used
to initiate 1 or more policies for investors but violate insurable
interest laws and the prohibition against wagering on life.
Stranger-originated life insurance does not include those practices
described in section 4303 unless part of a plan, scheme, device, or
artifice to avoid the application of this chapter.
(q) "Terminally ill" means certified by a physician as having
an illness or physical condition that can reasonably be expected to
result in death in 24 months or less.
(r) "Viatical settlement facilitator" means a person that, 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 1 or more viatical settlement
providers or viatical settlement facilitators, represents only the
viator, and owes a fiduciary duty to the viator to act according to
the viator's instructions and in the best interests of the viator,
notwithstanding the manner in which the viator is compensated.
Viatical settlement facilitator does not include an individual who
is licensed as an attorney, a certified public accountant, or a
certified financial planner accredited by a nationally recognized
accreditation agency, who is acting in his or her professional
capacity, who is retained to represent the viator, and whose
compensation is not paid directly or indirectly by the viatical
settlement provider or viatical settlement purchaser.
(s) "Viatical settlement contract", "life settlement
contract", or "senior settlement contact" means any of the
following:
(i) A written agreement between a viator and a viatical
settlement provider that establishes the terms under which
compensation or anything of value that is less than the expected
death benefit of the policy is or will be paid in return for the
viator's present or future assignment, transfer, sale, release,
devise, or bequest of the death benefit or ownership of any portion
of the policy or any beneficial interest in the policy or its
ownership.
(ii) The transfer or acquisition for compensation or anything
of value for ownership or beneficial interest in a trust or an
interest in another person that owns such a policy if the trust or
other person was formed or availed of for the principal purpose of
acquiring 1 or more life insurance policies.
(iii) A premium finance loan or agreement made for a policy that
is subject to or becomes a viatical settlement contract described
in subparagraph (i), is held by a trust or person described in
subparagraph (ii), or contains any of the following contract terms:
(A) An agreement by the viator or insured that the policy or
the viatical settlement contract constitutes security for the loan.
(B) A guarantee to the viator or insured of a viatical
settlement value for the policy.
(C) An agreement by the viator or insured to sell the policy
or any portion of the policy's death benefit.
(t) "Viatical settlement provider" means a person, other than
a viator or viatical settlement facilitator, that enters into or
effectuates a viatical settlement contract. Viatical settlement
provider does not include any of the following:
(i) A regulated financial institution that takes an assignment
of a policy solely as a collateral for a loan.
(ii) The issuer of a policy.
(iii) An authorized or eligible insurer that provides stop-loss
coverage or financial guarantee insurance to a viatical settlement
provider, purchaser, financing entity, special purpose entity, or
related provider trust.
(iv) A financing entity.
(v) A special purpose entity.
(vi) A related provider trust.
(vii) A viatical settlement purchaser.
(viii) Any other person exempt from the definition of viatical
settlement provider by order of the commissioner based on his or
her reasonable determination that the person does not meet the
definition of viatical settlement provider.
(u) "Viaticated policy" means a policy that has been acquired
by a viatical settlement provider pursuant to a viatical settlement
contract.
(v) "Viator" means the owner of a policy or a certificate
holder under a group policy that has not previously been viaticated
who, in return for compensation or anything of value that is less
than the expected death benefit of the policy or certificate,
assigns, transfers, sells, releases, devises, or bequeaths the
death benefit or ownership of any portion of the policy or
certificate of insurance. For the purposes of this chapter, a
viator is not limited to an owner of a policy or a certificate
holder under a group policy insuring the life of an individual who
is terminally or chronically ill except where specifically
addressed. Viator does not include any of the following:
(i) A licensee under this chapter.
(ii) A qualified institutional buyer.
(iii) A financing entity.
(iv) A special purpose entity.
(v) A related provider trust.
(w) "Viatical settlement purchaser" means a person who
provides a sum of money or anything of value as consideration for a
policy or an interest in the death benefits of a policy that is the
subject of a viatical settlement contract, or a person who owns,
acquires, or is entitled to a beneficial interest in a trust or
other arrangement that owns a viatical settlement contract or is
the beneficiary of a policy that is the subject of a viatical
settlement contract, for the purpose of deriving an economic
benefit. Viatical settlement purchaser does not include any of the
following:
(i) A licensee under this chapter.
(ii) A qualified institutional buyer.
(iii) A financing entity.
(iv) A special purpose entity.
(v) A related provider trust.
Sec. 4303. A 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 chapter:
(a) A policy loan or accelerated death benefit made by the
insurer pursuant to the policy's terms whether issued with the
original policy or a rider.
(b) 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.
(c) A loan made by a regulated financial institution in which
the lender takes an interest in a 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 neither the default itself nor the transfer is pursuant to an
agreement or understanding with any other person for the purpose of
evading regulation under this chapter.
(d) A premium finance loan made by a lender not in violation
of chapter 15.
(e) An agreement where all 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 is a trust established primarily for the benefit
of such parties.
(f) 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 as described in this act.
(g) Any business succession planning arrangement, including,
but not limited to, all of the following if the arrangements are
bona fide arrangements:
(i) An arrangement between 1 or more shareholders in a
corporation or between a corporation and 1 or more of its
shareholders or 1 or more persons or trusts established by its
shareholders.
(ii) An arrangement between 1 or more partners in a partnership
or between a partnership and 1 or more of its partners or 1 or more
trusts established by its partners.
(iii) An arrangement between 1 or more members in a limited
liability company or between a limited liability company and 1 or
more of its members or 1 or more trusts established by its members.
(h) An agreement entered into by a service recipient, 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.
(i) An arrangement or agreement with a special purpose entity.
(j) Any other contract, transaction, or arrangement exempted
from the definition of viatical settlement contract by order
adopted by the commissioner based on his or her reasonable
determination that the contract, transaction, or arrangement is not
of the type regulated by this chapter.
Sec. 4304. (1) If there is more than 1 owner on a single
policy and the owners are residents of different states, the
viatical settlement contract shall be governed by the law of the
state in which the owner having the largest percentage ownership of
the policy resides or, if the owners hold equal ownership, the
state of residence of 1 owner agreed upon in writing by all owners.
The law of the state of the insured governs if equal owners fail to
agree in writing on a state of residence for jurisdictional
purposes.
(2) If the viator is a resident of this state, the viatical
settlement contract and all documents to be signed by the viator
shall provide exclusive jurisdiction to courts of this state and
the laws of this state shall govern the viatical settlement
contract and all documents. Nothing in the agreements shall
abrogate the viator's right to a trial by jury.
Sec. 4305. (1) Except as provided in subsections (2) and (3),
a person shall not operate in this state as a viatical settlement
provider or viatical settlement facilitator without first having
obtained a license from the commissioner. This subsection takes
effect 90 days after the effective date of this chapter. Licensure
under this chapter is in addition to and not in substitution for
any applicable licensure and registration requirements under the
uniform securities act (2002), 2008 PA 551, MCL 451.2101 to
451.2703, the securities act of 1933, 15 USC 77a to 77aa, or the
securities exchange act of 1934, 15 USC 78a to 78oo.
(2) A person who represents the viator and is not compensated
directly or indirectly by the viatical settlement provider or
viatical settlement purchaser, and who is licensed as an attorney,
certified public accountant, or certified financial planner
accredited by a nationally recognized accreditation agency, may
negotiate viatical settlement contracts on behalf of a viator
without obtaining a license pursuant to subsection (1).
(3) An individual life insurance producer who has been
licensed in this state for at least 1 year and an individual life
insurance producer with a life line of authority in his or her home
state for at least 1 year who has been licensed as a nonresident
individual life insurance producer in this state shall be
considered to meet the licensing requirements of section 4307(1) to
(3)(c) and (8) to (11) and may operate as a viatical settlement
facilitator. Except as otherwise specifically provided in this
subsection, an individual life insurance producer is otherwise
subject to this chapter.
(4) At least 45 days before operating as a viatical settlement
facilitator, an individual life insurance producer shall notify the
commissioner in writing on a form prescribed by the commissioner
that he or she intends to operate as a viatical settlement
facilitator.
(5) An applicant for a license as a viatical settlement
provider or viatical settlement facilitator shall appear before the
sheriff or any police agency for the county in which the applicant
resides and request an impression of his or her fingerprints and
shall pay the costs incurred. To the extent allowed by federal law,
the commissioner shall request, and the department of state police
shall provide, state, multistate, and federal criminal history
records for the commissioner's use in determining whether a license
shall be issued, suspended, or revoked. This subsection does not
apply to an individual life insurance producer who has a resident
or nonresident life line of authority in this state on the
effective date of this chapter.
Sec. 4307. (1) An applicant for a license as a viatical
settlement provider or viatical settlement facilitator shall submit
an application for the license in a manner prescribed by the
commissioner in accordance with chapter 12. The application for a
viatical settlement provider license shall be accompanied by a fee
of $1,000.00. The application for a viatical settlement facilitator
license shall be accompanied by a fee of $200.00.
(2) A license issued under this chapter to a person other than
an individual authorizes all partners, officers, members, or
designated employees of the person to act as viatical settlement
providers or viatical settlement facilitators, as applicable, and
all those partners, officers, members, or designated employees
shall be named in the application and any supplements to the
application.
(3) Upon the filing of an application under this section and
the payment of the license fee, the commissioner shall make an
investigation of the applicant and issue to the applicant a license
that states in substance that the person is authorized to act as a
viatical settlement provider or viatical settlement facilitator, as
applicable, if all of the following apply:
(a) If the application is for a license as a viatical
settlement provider, the applicant provides all of the following:
(i) A detailed plan of operation.
(ii) Proof of financial responsibility as provided in this
section.
(iii) A general description of the method the applicant will use
to determine life expectancies, including a description of the
applicant's intended receipt of life expectancies, the applicant's
intended use of life expectancies, the applicant's intended use of
life expectancy providers, and a written plan of policies and
procedures used to determine life expectancies.
(b) The commissioner finds all of the following:
(i) The applicant, including, if applicable, each partner,
officer, member, or designated employee, is competent and
trustworthy and intends to act in good faith in the capacity of a
viatical settlement provider or viatical settlement facilitator, as
applicable.
(ii) The applicant, including, if applicable, each partner,
officer, member, or designated employee, has a good business
reputation and has had experience, training, or education so as to
be qualified to act in the capacity of a viatical settlement
provider or viatical settlement facilitator, as applicable.
(c) If the applicant is a person other than an individual, the
applicant provides a certificate of good standing from the state of
its organization.
(d) The applicant provides an antifraud plan that meets the
requirements of section 4353.
(4) An applicant for licensure as a viatical settlement
provider may provide proof of financial responsibility through 1 of
the following means:
(a) Submitting audited financial statements that show a
minimum equity of not less than $250,000.00 in cash or cash
equivalents.
(b) Submitting audited annual financial statements that show
positive equity and 1 of the following:
(i) A surety bond in the amount of $250,000.00 in favor of this
state issued by an insurer authorized to issue surety bonds in this
state. The surety bond shall specifically authorize recovery by the
commissioner on behalf of any person in this state who sustains
damages resulting from a viatical settlement provider's or viatical
settlement facilitator's erroneous act, failure to act, conviction
for fraud, or conviction of an unfair trade practice.
(ii) An unconditional and irrevocable letter of credit, deposit
of cash, or securities, in any combination, in the aggregate amount
of $250,000.00.
(5) If an applicant is licensed as a viatical settlement
provider in another state, the commissioner may accept as valid any
similar proof of financial responsibility similar to subsection (4)
that the applicant filed in that state.
(6) The commissioner may request proof of financial
responsibility at any time the commissioner considers necessary.
(7) An applicant shall provide all information requested by
the commissioner. The commissioner may, at any time, require an
applicant to fully disclose the identity of all shareholders,
partners, directors, officers, members, and employees, and may, in
the exercise of the commissioner's discretion, refuse to issue a
license to an applicant that is not an individual if the
commissioner is not satisfied that each officer, employee,
shareholder, partner, or member who may materially influence the
applicant's conduct meets the standards set forth in this chapter.
(8) Except as otherwise provided, a license as a viatical
settlement provider or viatical settlement facilitator expires
biennially as provided in a schedule established by the
commissioner not later than 90 days after the effective date of
this chapter. A license as a viatical settlement provider or
viatical settlement facilitator may, in the discretion of the
commissioner and after the payment of a renewal fee of $500.00 for
a viatical settlement provider and of $100.00 for a viatical
settlement facilitator, be continued past its expiration date as
provided in the schedule established by the commissioner. Failure
to pay a renewal fee by the required date results in the expiration
of the license.
(9) Any individual licensed as a viatical settlement
facilitator shall complete 15 hours or more of continuing education
biennially. The commissioner shall approve continuing education
courses that are related to viatical settlements and viatical
settlement transactions. The commissioner may adopt rules to
enforce this subsection.
(10) As a condition of doing business in this state, a
viatical settlement provider or a viatical settlement facilitator
that is not organized under the laws of this state shall file with
the application filed with the commissioner the name and address of
a resident agent upon which any local service of process affecting
the applicant may be served. The designation shall remain in force
as long as any liability remains within the state.
(11) A viatical settlement provider or viatical settlement
facilitator shall provide to the commissioner new or revised
information regarding any change in its officers, any shareholder
owning 10% or more of its voting securities, or its partners,
directors, members, or designated employees within 30 days of the
change.
Sec. 4309. Any corporation, partnership, or other business
that is licensed as a viatical settlement facilitator shall
maintain at least 1 designated individual who is individually
licensed as a viatical settlement facilitator to be responsible for
the licensee's compliance with this chapter.
Sec. 4311. A person shall not use a viatical settlement
contract form or provide a disclosure statement form to a viator in
this state unless the viatical settlement contract form or the
disclosure statement form is filed with and approved by the
commissioner. The commissioner shall disapprove a viatical
settlement contract form or a disclosure statement form if, in the
commissioner's opinion, the viatical settlement contract form, the
disclosure statement form, or any provision contained in the form
fails to meet the requirements of this chapter, is unreasonable, is
contrary to the interests of the public, or is otherwise misleading
or unfair to the viator. If not disapproved by the commissioner, a
filing made pursuant to this section shall be considered approved
45 days after the contract form or disclosure form is filed.
Sec. 4313. (1) All disclosures provided pursuant to this
chapter shall be understandable, readable, and not misleading.
(2) Before a viatical settlement facilitator or viatical
settlement provider presents any application for a viatical
settlement contract to a prospective viator, policy owner, or
insured person for signature, he or she shall disclose in writing
at least all of the following:
(a) A description of how viatical settlements operate,
including distribution of the NAIC's brochure on viatical
settlements unless another form is developed and approved by the
commissioner.
(b) Possible alternatives to viatical settlement contracts,
including any accelerated death benefits, cash surrender values, or
policy loans available under the policy to be viaticated.
(c) That the life settlement facilitator owes a fiduciary duty
to the policy owner, including a duty to act according to the
owner's instructions and in the owner's best interests.
(d) That entering into a viatical settlement contract will
result in investors having a financial interest in the insured's
death.
(e) That the proceeds of the viatical settlement may be
subject to federal and state income taxation and that the policy
owner should seek advice on tax consequences from a professional
tax adviser.
(f) That the proceeds of the viatical settlement may be
subject to the claims of creditors.
(g) That receipt of the proceeds of the viatical settlement
contract may disqualify the owner, the owner's spouse, and the
owner's dependents from eligibility for governmental medical and
public assistance programs.
(h) That entering into a viatical settlement contract may
result in forfeiture of other rights and benefits under the policy,
such as conversion rights or waiver of premium, and exactly which
other rights or benefits may or will be affected.
(i) That entering into a viatical settlement contract may
prevent the insured from purchasing other life insurance if the
settled policy remains in force.
(j) How and to whom the identity of the insured and medical,
financial, and personal information about the insured will be
disclosed.
(k) That if any other persons are insured under the policy,
coverage on the other lives may be terminated.
(l) The dollar amount of the current death benefit payable to
the beneficiary under the policy, the availability of any
additional guaranteed insurance benefits, the dollar amount of any
accidental death and dismemberment benefits under the policy, and
the extent to which the viator's interest in each benefit will be
transferred as a result of the viatical settlement contract.
(m) That when viatical settlement proceeds are paid, the
viator has the right to rescind the viatical settlement contract
for 30 days after the contract is signed or for 15 days after the
viator receives the viatical settlement proceeds, whichever time
period expires last. If the viator dies during the rescission
period, the death rescinds the viatical settlement contract,
subject to repayment of all viatical settlement proceeds to the
viatical settlement provider.
(n) That after execution of an application for a viatical
settlement contract and until payment of the viatical settlement
contract proceeds, the viatical settlement provider or his or her
authorized representative may contact the insured for the purpose
of determining the insured's health status, to confirm the
insured's residential or business address and telephone number, and
for other purposes permitted by law.
(3) The viatical settlement provider or viatical settlement
facilitator shall provide the disclosures under subsection (2) in a
separate document that is dated and signed by the viator and the
viatical settlement provider or viatical settlement facilitator,
who shall deliver 1 copy to the viator.
(4) The disclosure document under subsection (2) shall contain
the following language:
"All medical, financial, or personal information solicited or
obtained by a viatical settlement provider or viatical settlement
facilitator 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 to someone who buys the policy or provides funds for
the purchase. You may be asked to renew your permission to share
medical and financial information until the viatical settlement
contract is signed and you receive its proceeds and to share
personal location and contact information every 2 years until the
viatical settlement contract is fully effectuated.".
(5) In addition to the disclosures required by subsection (1)
and before the date the viatical settlement contract is signed by
the viator and all the necessary parties, a viatical settlement
provider shall disclose to the viator at least all of the
following:
(a) The affiliation, if any, between the viatical settlement
provider and the issuer of the policy.
(b) The name, business address, and telephone number of the
viatical settlement provider.
(c) The amount and method of calculating the viatical
settlement facilitator's compensation. As used in this subdivision,
"compensation" includes anything of value paid or given to a
viatical settlement facilitator for the placement of a policy.
(d) Any affiliations or contractual arrangements between the
viatical settlement provider and the viatical settlement
facilitator.
(e) That an escrow agent shall provide escrow services to the
parties pursuant to a written agreement, signed by the viatical
settlement provider, the viatical settlement facilitator, and the
viator. At the close of escrow, the escrow agent will distribute
the proceeds of the sale to the viator, minus any compensation to
be paid to any other persons who provided services and the viator
has agreed to compensate out of the gross amount offered by the
viatical settlement purchaser. All persons receiving any form of
compensation under the escrow agreement shall be clearly
identified, including name, business address, telephone number, and
tax identification number.
(f) Any other disclosure as may be required by the
commissioner.
(6) In addition to the disclosures required by subsection (1)
and before the date the viatical settlement contract is signed by
the viator and all the necessary parties, a viatical settlement
facilitator shall disclose to the viator at least all of the
following:
(a) The name, business address, and telephone number of the
viatical settlement facilitator.
(b) A full, complete, and accurate description with dollar
amounts of all offers, counteroffers, acceptances, and rejections
from all viatical settlement providers contacted relating to the
proposed viatical settlement contract.
(c) Any affiliations or contractual agreements between the
viatical settlement facilitator and any person making an offer in
connection with the proposed viatical contract.
(d) The source of continued premium payments under the policy
and the identity of each beneficiary of any proceeds of each policy
benefit.
(e) The dollar amount of the viatical settlement provider's
gross final offer.
(f) The identity of any person receiving any compensation
directly or indirectly from the viatical settlement provider with
respect to the viatical settlement contract.
(g) The amount, terms, and methods of computing compensation
in dollars and as a percentage of the total.
(h) The net amount payable to the viator.
(i) Any other disclosure required by the commissioner.
(7) The viatical settlement provider or viatical settlement
facilitator shall conspicuously display the disclosures required by
subsections (5) and (6) in the viatical settlement contract or in a
separate attachment signed by the viator and the viatical
settlement provider and viatical settlement facilitator, as
appropriate.
(8) If the viatical settlement provider transfers ownership or
changes the beneficiary of the policy, the viatical settlement
provider shall communicate in writing the change in ownership or
beneficiary to the viator or insured immediately, and within 20
days after the change.
Sec. 4315. (1) A viatical settlement provider entering into a
viatical settlement contract shall first obtain all of the
following:
(a) If the viator is the insured, a written statement from an
attending physician that the viator is of sound mind and under no
constraint or undue influence to enter into a viatical settlement
contract. As used in this subdivision, "physician" means a person
licensed in this state to engage in the practice of medicine or
practice of osteopathic medicine and surgery.
(b) A document in which the insured consents in writing, as
required by this chapter, to the release of the insured's medical
records to a viatical settlement provider or viatical settlement
facilitator.
(2) Within 20 days after a viator executes documents necessary
to transfer any rights under a policy or within 20 days of entering
any expressed or implied agreement, option, promise, or other form
of understanding to viaticate the policy, the viatical settlement
provider shall give written notice to the insurer that issued that
policy that the policy has or will become a viaticated policy. The
notice shall be accompanied by the documents required by subsection
(3).
(3) The viatical settlement provider shall deliver a copy of
the medical release required under subsection (1)(b), a copy of the
viator's application for the viatical settlement contract, and a
request for verification of coverage to the insurer that issued the
policy that is the subject of the viatical settlement transaction.
The viatical settlement provider shall use the NAIC's form for
verification of coverage unless another form is approved by the
commissioner.
(4) The insurer shall respond to a request for verification of
coverage submitted on an approved form by a viatical settlement
provider or viatical settlement facilitator within 30 calendar days
after the date the request is received. The insurer shall accept an
original or facsimile or electronic copy of a request for
verification and any accompanying authorization signed by the
viator.
(5) Before 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 and
complete understanding of the viatical settlement contract and a
full and complete understanding of the benefits of the policy, and
acknowledges that the viator is entering into the viatical
settlement contract freely and voluntarily and, if the viator is
terminally or chronically ill, acknowledges that the insured is
terminally or chronically ill and that the terminal or chronic
illness was diagnosed after the policy was issued.
(6) If a viatical settlement facilitator performs any of the
activities specified in this section on behalf of the viatical
settlement provider, the viatical settlement provider shall be
considered to have fulfilled the requirements of this section.
(7) All medical information solicited or obtained by any
licensee is subject to the applicable provisions of state and
federal law relating to confidentiality of medical information.
Sec. 4317. (1) 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 escrow agent. Within 3 business days after the date the
escrow agent receives the documents, or after the date the viatical
settlement provider receives the documents if the viator
erroneously provides the documents directly to the viatical
settlement provider, the viatical settlement provider shall pay or
transfer the gross amount to be paid by the viatical settlement
provider to the escrow agent for deposit in a trust or escrow
account set up for that purpose by the escrow agent in a regulated
financial institution. Upon payment of the settlement proceeds into
the escrow or trust account, the escrow agent or trustee shall
deliver the original change in ownership, assignment, or change in
beneficiary forms to the viatical settlement provider, a
representative of the viatical settlement provider, or related
provider trust. Upon the escrow agent's receipt of the
acknowledgment of the properly completed transfer of ownership,
assignment, or designation of beneficiary from the insurer, the
escrow agent shall pay the settlement proceeds to the viator and
any other person pursuant to the viatical settlement contract and
the escrow agreement. The escrow agent shall make payment within 3
business days of the date the escrow agent received the
acknowledged forms from the insurer. Money is considered sent to a
viator as of the date that the escrow agent either releases the
money for wire transfer to the viator or places a check for
delivery to the viator via United States postal service or other
nationally recognized delivery service.
(2) Failure to transfer the proceeds to the viator as provided
in subsection (1) 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. If a
viatical settlement contract is voided by the viator pursuant to
this subsection, ownership of the policy reverts to the viator or
to the viator's estate if the viator is deceased, irrespective of
any transfer of ownership of the policy by the viator, viatical
settlement provider, or any other person.
Sec. 4319. (1) After a viatical settlement has been entered
into, the viatical settlement provider, viatical settlement
facilitator, or authorized representative shall not contact the
insured for any reason related to the viatical settlement, except
to obtain personal location and contact information, which shall
not be obtained more often than once every 2 years.
(2) For the purposes of this section, viatical settlement
providers and viatical settlement facilitators are responsible for
the actions of their authorized representatives.
Sec. 4321. (1) A licensee under this chapter shall retain
copies of all of the following for 5 years:
(a) All proposed, offered, or executed viatical settlement
contracts, purchase agreements, underwriting documents, policy
forms, and applications from the date of the proposal, offer, or
execution of the viatical settlement contract or purchase
agreement, whichever is later.
(b) All checks, drafts, or other evidence and documentation
related to the payment, transfer, deposit, or release of money from
the date of the viatical settlement transaction.
(c) All other records and documents related to the
requirements of this chapter.
(2) This section does not relieve a person of the obligation
to produce the documents described in subsection (1) to the
commissioner after the retention period specified in that
subsection has expired if the person has retained the documents.
(3) 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.
Sec. 4323. (1) The commissioner or any of his or her
authorized deputies or examiners may examine in person any or all
of the books, records, documents, and papers of any applicant or
licensee, domestic or foreign, under this chapter, including, but
not limited to, those of any officer, director, employee, agent of
the licensee, person affiliated or associated with a licensee, or
any other person who in the commissioner's discretion may have
information material or necessary to an examination of the
licensee.
(2) Instead of an examination under this chapter of any
foreign or alien licensee doing business in this state, the
commissioner may accept an examination report on the licensee as
prepared by the insurance regulator for the licensee's state of
domicile or port-of-entry state if that state accepts examination
reports prepared by the commissioner.
(3) The commissioner has 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) All actual and necessary expenses incurred in connection
with the examination or other investigation of a licensee or other
person regulated under the commissioner's authority shall be
certified by the commissioner, together with a statement of the
work performed including the number of days spent by the
commissioner and each of the commissioner's deputies, assistants,
employees, and others acting under the commissioner's authority. If
correct, the expenses shall be paid to the persons by whom they
were incurred, upon the warrant of the state treasurer payable from
appropriations made by the legislature for this purpose. The
commissioner shall prepare and present to the licensee or other
person examined or investigated a statement of the expenses and
reasonable cost incurred for each person engaged upon the
examination or investigation, including amounts necessary to cover
the pay and allowances granted to the persons by the Michigan civil
service commission, and the administration and supervisory expense
including an amount necessary to cover fringe benefits in
conjunction with the examination or investigation. The licensee or
other person, upon receiving the statement, shall pay to the
commissioner the stated amount. The commissioner shall deposit the
funds in the insurance bureau fund as provided in section 225. The
commissioner may employ attorneys, actuaries, accountants,
investment advisers, and other expert personnel not otherwise
employees of this state reasonably necessary to assist in the
conduct of the examination, investigation, or proceeding with
respect to a licensee or other person regulated under the
commissioner's authority at the licensee's or other person's
expense. Upon certification by the commissioner of the reasonable
expenses incurred under this section, the insurer or other person
examined or investigated shall pay those expenses directly to the
person or firm rendering assistance to the commissioner. Expenses
paid directly to such person or firm and the regulatory fees
imposed by this section are examination fees under section 239(1)
of the Michigan business tax act, 2007 PA 36, MCL 208.1239.
(5) Nothing contained in this chapter limits 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) This chapter does not limit the commissioner's authority
to use and, if appropriate, to make public any final or preliminary
examination report, any examiner or licensee working papers or
other documents, or any other information discovered or developed
during the course of any examination in the furtherance of any
legal or regulatory action that the commissioner, in the
commissioner's sole discretion, considers appropriate.
Sec. 4325. (1) Upon completion of an examination under section
4323, the examiner in charge shall file with the commissioner a
verified written report of the examination. Examination reports
shall be based on only facts appearing upon the books, records, or
other documents of the licensee, its agents, or other persons
examined, or as ascertained from the testimony of its officers,
agents, or other persons examined concerning its affairs, and the
conclusions and recommendations that the examiners find reasonably
warranted from the facts.
(2) Upon receipt of the verified report, the commissioner
shall transmit the report to the licensee examined and provide
notice to the licensee that the licensee has the right, pursuant to
the administrative procedures act of 1969, to show that the
licensee is in compliance with this chapter as to any matters
contained in the examination report.
(3) If 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.
(4) Names and individual identification data for all viators
shall be considered private and confidential information and shall
not be disclosed by the commissioner, unless required by law.
(5) Except as otherwise provided in this chapter or in the law
of another state or jurisdiction that is substantially similar to
this chapter, all examination reports, working papers, recorded
information, documents, and copies of those reports, papers,
information, and documents produced by, obtained by, or disclosed
to the commissioner or to any other person in the course of an
examination made under this chapter or under the law of another
state or jurisdiction that is substantially similar to this
chapter, or in the course of the commissioner's analysis or
investigation of the financial condition or market conduct of a
licensee are confidential by law and privileged, are not subject to
the disclosure requirements of the freedom of information act, are
not subject to subpoena, and are not subject to discovery or
admissible in evidence in any private civil action. The
commissioner may 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.
(6) Documents, materials, or other information, including, but
not limited to, all working papers, and copies of working papers,
in the possession or control of the NAIC and its affiliates and
subsidiaries are confidential by law and privileged, are not
subject to subpoena, and are not subject to discovery or admissible
in evidence in any private civil action, if either of the following
applies:
(a) They are 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 chapter or assisting the
commissioner or the comparable official in another state in the
analysis or investigation of the financial condition or market
conduct of a licensee.
(b) The commissioner or the comparable official in another
state discloses them to the NAIC and its affiliates and
subsidiaries under subsection (8) or under a comparable provision
in the law of the other state.
(7) 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 subsection (4).
(8) In order to assist in the performance of the
commissioner's duties, the commissioner may do any of the
following:
(a) Share documents, materials, or other information,
including the confidential and privileged documents, materials, or
information subject to subsection (4), 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, if the recipient agrees
to maintain the confidentiality and privileged status of the
document, material, communication, or other information.
(b) 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.
(c) Enter into agreements governing sharing and use of
information consistent with this section.
(9) The commissioner shall maintain as confidential or
privileged any document, material, or information received under
subsection (8)(b) with notice or the understanding that it is
confidential or privileged under the laws of the jurisdiction that
is the source of the document, material, or information.
(10) A privilege or claim of confidentiality in documents,
materials, or information is not waived by disclosure to the
commissioner under this section or as a result of sharing as
authorized in subsection (8).
(11) A privilege established under the law of any state or
jurisdiction that is substantially similar to the privilege
established under this section shall be available and enforced in
any proceeding in, and in any court of, this state.
(12) Nothing contained in this chapter prevents or prohibits
the commissioner from disclosing the content of an examination
report, preliminary examination report or results, or any matter
relating to those reports or results, to the official of any other
state or country that is comparable to the commissioner, or to law
enforcement officials of this or any other state or agency of the
federal government at any time, or to the NAIC, if the agency or
office receiving the report or matters relating to it agrees in
writing to hold it confidential and in a manner consistent with
this chapter.
(13) The commissioner may not appoint an examiner 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 chapter.
This does not automatically preclude a viator, an insured in a
viaticated policy, or a beneficiary in a policy that is proposed to
be viaticated from being an examiner.
Sec. 4333. (1) Each viatical settlement provider shall file
with the commissioner, on or before the first day of March of each
year, an annual statement verified under oath by 2 officers in the
form prescribed by the commissioner. The annual statement for a
viatical settlement provider shall include the following
information about the viatical settlement provider's transactions:
(a) Aggregate total of the value of unsettled viatical
settlement contracts that have been signed by the viator but have
not been settled as of the date of the report categorized by the
number of days since the viator signed the contract.
(b) Number of policies purchased, total amount of settlement
paid for policies purchased, and total face value of policies
purchased beginning with the reporting year and most recent 5
years.
(c) Number of settlements paid in the preceding calendar year,
allocated by state or territory.
(d) Any other information required by the commissioner.
(2) On or before the first day of May of each year, a viatical
settlement provider licensed in this state shall file with the
commissioner its financial statement, audited by an independent
certified public accountant, and a letter stating whether any
significant deficiencies or material weaknesses were detected
during the audit.
(3) Each viatical settlement provider shall file with the
commissioner interim unaudited financial statements, including
comparative results and footnotes to the financial statements, on a
quarterly basis within 45 days after the end of each quarter. The
interim financial statements shall meet all of the following
requirements:
(a) Be certified by the chief executive officer and chief
financial officer as to the accuracy and fair presentation.
(b) Include disclosures either on the face of the financial
statements or in accompanying footnotes sufficient so as to make
the interim information not misleading.
(4) Viatical settlement providers may assume that the users of
the interim financial statements have access to the prior fiscal
year-end audited financial statements and that the adequacy of
additional disclosure needed for a fair presentation, except in
regard to material contingencies, may be determined in that
context. A footnote disclosure that would substantially duplicate
the disclosure contained in the audited financial statements for
the preceding fiscal year may be omitted. A footnote disclosure
shall be provided if events subsequent to the fiscal year end have
a material impact on the viatical settlement provider.
(5) A viatical settlement provider that willfully fails to
file the annual statements required by this section, or willfully
fails to reply within 30 calendar days to a written inquiry from
the commissioner or the commissioner's designee, is, in addition to
other penalties or remedies provided by this chapter, subject to an
administrative fine of up to $250.00 per day, not to exceed
$25,000.00 in the aggregate for each such failure.
(6) The commissioner shall keep confidential and not a matter
of public record all proprietary information of the licensee, all
individual transaction data regarding the business of viatical
settlements, and data that could compromise the privacy of
personal, financial, and health information of the viator or
insured.
Sec. 4335. Except as otherwise permitted or required by law, a
viatical settlement provider, viatical settlement facilitator,
insurer, insurance producer, information bureau, rating agency or
company, or any other person with actual knowledge of a viator's or
an insured's identity shall not disclose that identity, including
the viator's or insured's name and individual identification data,
or the viator's or insured's financial or medical information,
unless any of the following apply:
(a) The disclosure is necessary to effect a viatical
settlement, and the viator and insured have provided prior written
consent to the disclosure.
(b) The disclosure is provided in response to an investigation
or examination by the commissioner or by any other governmental
officer or agency or pursuant to this chapter.
(c) The disclosure is a term of, or condition to, the transfer
of a viaticated policy by 1 viatical settlement provider to another
viatical settlement provider.
(d) The disclosure 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.
(e) The disclosure is necessary to allow the viatical
settlement provider or its authorized representatives to make
contacts for the purpose of determining health status. However,
contacts for the purpose of determining health status are not
allowed after the viator receives the viatical settlement contract
proceeds.
(f) The disclosure is required to purchase stop-loss coverage
or financial guaranty insurance.
Sec. 4339. (1) The commissioner may refuse to issue or may
suspend, revoke, or refuse to renew the license of a viatical
settlement provider or viatical settlement facilitator if the
commissioner finds that any of the following apply:
(a) There was a material misrepresentation in the application
for the license.
(b) The applicant or licensee or any officer, partner, member,
or designated employee of the applicant or licensee has been
convicted of fraudulent or dishonest practices, is or has been
subject to an administrative or civil action in this state or
another state, or is otherwise shown to be untrustworthy or
incompetent.
(c) The licensee is a viatical settlement provider that
demonstrates a pattern of unreasonable payments to viators.
(d) The licensee or any officer, partner, member, or
designated employee of the licensee has been convicted of or has
pleaded guilty or no contest to a felony, or to a misdemeanor
involving fraud, moral turpitude, dishonesty, or breach of trust,
regardless of whether a judgment of conviction has been entered by
the court.
(e) The licensee is a viatical settlement provider or viatical
settlement facilitator that has used a viatical settlement contract
or disclosure form that has not been approved under this chapter.
(f) The licensee is a viatical settlement provider that has
failed to honor contractual obligations set out in a viatical
settlement contract.
(g) The licensee no longer meets the requirements for initial
licensure.
(h) The licensee is a viatical settlement provider that has
assigned, transferred, or pledged a viaticated policy to a person
that the licensee knew or should have known was not 1 of the
following:
(i) A viatical settlement provider licensed in this state.
(ii) A viatical settlement purchaser.
(iii) A qualified institutional buyer.
(iv) A financing entity.
(v) A special purpose entity.
(vi) A related provider trust.
(i) The licensee or any officer, partner, member, key
management personnel, or designee of the licensee has violated any
provision of this chapter or any rule adopted under this chapter.
(j) The licensee or any officer, partner, member, or
designated employee of the licensee has committed any coercive,
fraudulent, or dishonest act, or made any untrue, deceptive, or
misleading statement, in connection with a viatical settlement
transaction or a proposed viatical settlement transaction.
(2) Before the commissioner suspends, revokes, or refuses to
renew the license of a viatical settlement provider or viatical
settlement facilitator, the commissioner shall provide the licensee
or applicant with notice and an opportunity for hearing as provided
in the administrative procedures act of 1969.
Sec. 4341. (1) It is a violation of this chapter for any
person to enter into a viatical settlement contract before the
application for or issuance of a policy that is the subject of the
viatical settlement contract.
(2) It is a violation of this chapter for any person to issue,
solicit, market, or otherwise promote the purchase of a policy for
the purpose of or with an emphasis on selling the policy.
(3) It is a violation of this chapter for any person to enter
into a viatical settlement contract within a 5-year period
commencing with the date of issuance of the policy unless the
viator certifies to the viatical settlement provider that 1 or more
of the following conditions have been met within 5 years after the
issuance of the policy:
(a) The policy was issued upon the viator's exercise of
conversion rights arising out of a group policy, provided the total
of the time covered under the conversion policy plus the time
covered under the prior policy is at least 60 months. The time
covered under a group policy shall be calculated without regard to
any change in insurance carriers, if the coverage has been
continuous and under the same group sponsorship.
(b) The viator is a charitable organization with an insurable
interest exempt from federal income tax under section 501(c)(3) of
the internal revenue code of 1986, 26 USC 501.
(c) The viator certifies and submits independent evidence to
the viatical settlement provider that 1 or more of the following
conditions have arisen after the issuance of the policy:
(i) The viator or insured is terminally or chronically ill.
(ii) The viator's spouse dies.
(iii) The viator divorces the viator's spouse.
(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.
(vi) 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 appointing a
receiver, trustee, or liquidator to all or a substantial part of
the viator's assets.
(vii) The sole beneficiary of the policy is a family member of
the viator and the beneficiary dies.
(viii) The viator faces financial hardship or distress short of
bankruptcy, including, but not limited to, foreclosure or threat of
foreclosure, that was not present at the time of the inception of
the policy.
(d) The viator enters into a viatical settlement contract more
than 2 years after the date of issuance of a policy and certifies
that all of the following are true:
(i) The viator has funded the policy using personal assets,
which may include an interest in the policy being viaticated up to
the cash surrender value of the policy or any financing agreement
to fund the policy premiums entered into before policy issuance or
within 2 years of policy issuance was provided to the insurer
within 30 days of the date the agreement was executed and the
financing agreement was secured with personal assets.
(ii) The viator had no agreement or understanding with any
other person to viaticate the policy or transfer the benefits of
the policy, including through an assumption or forgiveness of a
premium finance loan at any time before issuance of the policy or
during the 2 years after the date of issuance of the policy.
(iii) If requested by the insurer, the viator both disclosed to
the insurer whether a person other than the insurer obtained a life
expectancy evaluation for settlement purposes in connection with
the application, underwriting, and issuance of the policy and
provided a copy of any such life expectancy evaluation to the
insurer at the time of application.
(iv) The viator disclosed any financial arrangement, trust, or
other arrangement, transaction, or device that conceals the
ownership or beneficial interest of the policy to the insurer
before the issuance of the policy.
(4) Copies of the independent evidence described in subsection
(3)(c) and documents required by section 4315 shall be submitted to
the insurer when the viatical settlement provider or any 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.
(5) If the viatical settlement provider submits to the insurer
a copy of the owner's or insured's certification and independent
evidence described in subsection (3)(c) when the viatical
settlement provider submits a request to the insurer to effect the
transfer of the policy or certificate to the viatical settlement
provider, the copy conclusively establishes that the viatical
settlement contract satisfies the requirements of this section, and
the insurer shall timely respond to the request.
(6) An insurer, 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, shall not require the
viator, insured, viatical settlement provider, or viatical
settlement facilitator to sign any form, disclosure, consent, or
waiver form that has not been approved by the commissioner for use
in connection with viatical settlement contracts.
(7) Upon 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 to confirm that the insurer has
made the change or specify reasons that the change cannot be
processed. An insurer shall not unreasonably delay effecting change
in ownership or beneficiary or seek to interfere with any viatical
settlement contract lawfully entered into in this state.
(8) A viatical settlement provider or viatical settlement
facilitator that is party to a plan, transaction, or series of
transactions to originate, renew, continue, or finance a policy
with the insurer for the purpose of engaging in the business of
viatical settlements at any time before or during the first 5 years
after the insurer issues the policy shall fully disclose the plan,
transaction, or series of transactions to the commissioner.
Sec. 4343. (1) This section applies to any advertising of
viatical settlement contracts, or any related products or services
intended for dissemination in this state, including, but not
limited to, internet advertising viewed by persons located in this
state. If 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.
(2) Every licensee shall establish and at all times shall
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 they are
written, created, designed, or presented, are the responsibility of
the licensee that uses or disseminates them.
(3) All advertisements subject to this section shall be
truthful and not deceptive or misleading in fact or by implication.
The commissioner at any time may require any licensee to file with
the office of insurance and financial regulation any advertisement
of any product or service regulated under this chapter. Upon
written notice to the licensee, the commissioner may disapprove the
advertisement and order the licensee to cease use of the
advertisement in this state if the commissioner finds it to be
untruthful, deceptive, misleading, or otherwise in violation of
this chapter. The order or notice shall state the reasons for the
disapproval and the effective date of the disapproval. A
disapproval may take effect immediately for advertisements not
currently in use and shall take effect 30 days after disapproval
for advertisements currently in use, if the licensee is entitled
upon written demand to an administrative review before the
commissioner or his or her deputy within 30 days after the demand.
After the administrative review, the commissioner shall either
affirm, modify, or withdraw his or her original order or
disapproval. Any order or disapproval issued under this chapter is
subject to judicial review as provided in section 244.
(4) Viatical settlement advertisements containing any
representation described in this subsection are considered false
and misleading on their face and are prohibited. False and
misleading viatical settlement advertisements include, but are not
limited to, all of the following representations:
(a) "Guaranteed", "fully secured", "100 percent secured",
"fully insured", "secure", "safe", "backed by rated insurance
companies", "backed by federal law", "backed by state law", "state
guaranty funds", or similar representations.
(b) "No risk", "minimal risk", "low risk", "no speculation",
"no fluctuation", or similar representations.
(c) "Qualified or approved for individual retirement accounts
(IRAs), Roth IRAs, 401(k) plans, simplified employee pensions
(SEPs), 403(b) plans, Keogh plans, TSAs, or other retirement
account rollovers", "tax deferred", or similar representations.
(d) Utilization of the word "guaranteed" to describe the fixed
return, annual return, principal, earnings, profits, or investment,
or similar representations.
(e) "No sales charges or fees" or similar representations.
(f) "High yield", "superior return", "excellent return", "high
return", "quick profit", or similar representations.
(g) Purported favorable representations or testimonials about
the benefits of viatical settlement contracts or viatical
settlement purchase agreements as an investment, taken out of
context from any newspaper, trade paper, journal, radio or
television program, or any other form of print and electronic
media.
(h) Use of the words "free", "no cost", "without cost", "no
additional cost", "at no extra cost", or words of similar import
for any policy or for any benefit or service. 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) An advertisement shall not do any of the following:
(a) Omit material information in statements, references, or
illustrations as to the nature or extent of any benefit, loss
covered, premium payable, or state or federal tax consequence.
Offering a viatical settlement contract for inspection before sale,
offering a refund if the viator is not satisfied, or offering a
"free look" period that satisfies or exceeds legal requirements
does not remedy omissions of material information regarding
benefits, coverage, or premiums.
(b) Use the name or title of a life insurer or a policy unless
the advertisement has been approved by that insurer.
(c) Represent that any premium payments will not be required
to be paid on the policy that is the subject of a viatical
settlement contract in order to maintain that policy.
(d) 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.
(6) All of the following apply to testimonials, appraisals,
analyses, or endorsements used in advertisements:
(a) They 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, analyses, or endorsements.
(b) The licensee must make as its own all the statements
contained in the testimonials, appraisals, analyses, or
endorsements, and the statements are subject to all the provisions
of this section.
(c) If the individual making a testimonial, appraisal,
analysis, or endorsement has a financial interest in the subject of
that testimonial, appraisal, analysis, or endorsement directly or
indirectly as a shareholder, 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.
(d) 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 the group of individuals, society, association, or
organization and the viatical settlement provider is disclosed. If
the entity making the endorsement or testimonial is owned,
controlled, or managed by the viatical settlement provider, or
receives any payment or other consideration from the viatical
settlement provider for making an endorsement or testimonial, that
fact shall be disclosed in the advertisement.
(e) If an endorsement refers to benefits received under a
viatical settlement contract, all pertinent information shall be
retained for a period of at least 5 years after its use.
(f) An advertisement shall not contain statistical information
unless the information accurately reflects recent and relevant
facts. The source of all statistics used in an advertisement shall
be identified.
(g) An advertisement shall not disparage any insurer, viatical
settlement provider, viatical settlement facilitator, insurance
producer, policy, service, or method of marketing.
(h) All advertisements about a viatical settlement provider or
its viatical settlement contracts, products, or services shall
clearly identify the viatical settlement provider's name. 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 licensee, name of a
particular division of the licensee, service mark, slogan, symbol,
or other device or reference without clearly disclosing the name of
the licensee as the person responsible for the financial obligation
under a 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 as to suggest that the advertisement
is sponsored by, recommended by, or endorsed by any state or
federal government program or agency.
(k) An advertisement may state that a licensee is licensed in
the state in which the advertisement appears, if it does not
exaggerate that fact or suggest or imply that competitors may not
be so licensed. The advertisement may ask the audience to consult
the licensee's website or contact the office of financial and
insurance regulation to find out if the state in which the
advertisement appears requires licensing and, if it does, whether
the person is licensed.
(l) If the advertiser emphasizes the speed with which the
viatication will occur, the advertising shall 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.
(m) 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 6 months.
Sec. 4344. The commissioner may investigate suspected
fraudulent viatical settlement acts and persons engaged in the
business of viatical settlements.
Sec. 4345. A person shall not commit a fraudulent viatical
settlement act. All of the following acts are fraudulent viatical
settlement acts if the person knowingly, with intent to defraud,
and for the purpose of depriving another of property or for
pecuniary gain, commits them or permits any of its employees or its
agents to commit them:
(a) 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 facilitator, life
expectancy provider, viatical settlement purchaser, financing
entity, insurer, insurance facilitator, insurance producer, or any
other person any false material information, or concealing any
material information, as part of, in support of, or concerning a
fact material to 1 or more of the following:
(i) An application for the issuance of a viatical settlement
contract or a policy.
(ii) The underwriting of a viatical settlement contract or a
policy.
(iii) A claim for payment or benefit pursuant to a viatical
settlement contract or a policy.
(iv) Any premiums paid on a policy.
(v) Any payments and changes in ownership or beneficiary made
in accordance with the terms of a viatical settlement contract or a
policy.
(vi) The reinstatement or conversion of a policy.
(vii) The solicitation, offer, effectuation, or sale of a
viatical settlement contract or a policy.
(viii) The issuance of written evidence of a viatical settlement
contract or a policy.
(ix) A financing transaction.
(x) Any application for, the existence of, or any payments
related to a loan secured directly or indirectly by any interest in
a policy.
(b) Failing to disclose to the insurer, if the insurer has
requested such disclosure, that the prospective insured has
undergone a life expectancy evaluation by any person or entity
other than the insurer or its authorized representatives in
connection with the application, underwriting, and issuance of the
policy.
(c) In the furtherance of a fraud or to prevent the detection
of a fraud, doing any of the following:
(i) Removing, concealing, altering, destroying, or sequestering
from the commissioner the assets or records of a licensee or
another person engaged in the business of viatical settlements.
(ii) Misrepresenting or concealing the financial condition of a
licensee, financing entity, insurer, or any other person.
(iii) Transacting the business of viatical settlements in
violation of any law of this state requiring a license, certificate
of authority, or other legal authority for the transaction of the
business of viatical settlements.
(iv) Filing with the commissioner or the chief insurance
regulatory official of another jurisdiction a document containing
false information or otherwise concealing from the commissioner any
information about a material fact.
(d) Recklessly entering into, negotiating, brokering, or
otherwise dealing in a viatical settlement contract involving a
policy that was obtained by presenting false, deceptive, or
misleading information of any fact material to the policy, or by
concealing information concerning any fact material to the policy,
for the purpose of misleading and with the intent to defraud the
issuer of the policy, the viatical settlement provider, or the
viator.
(e) Committing any embezzlement, theft, misappropriation, or
conversion of money, funds, premiums, credits, or other property of
a viatical settlement provider, insurer, insured, viator,
policyowner, or any other person engaged in the business of
viatical settlements or insurance.
(f) Employing any plan, financial structure, device, scheme,
or artifice to defraud in the business of viatical settlements.
(g) Misrepresenting the state of residence or facilitating the
change of the state in which a person owns a policy or the state of
residency of a viator to a state or jurisdiction that does not have
laws similar to this chapter for the express purposes of evading or
avoiding the provisions of this chapter.
(h) In the solicitation, application, or issuance of a policy,
employing any device, scheme, or artifice in violation of chapter
20.
(i) Engaging in any conduct related to a viatical settlement
contract if the person knows or should have known that the intent
of the transaction was to avoid the disclosure and notice
requirements of this chapter.
(j) Entering into a premium finance agreement with any person
pursuant to which the person will receive, directly or indirectly,
any proceeds, fees, or other considerations from the policy, the
owner of the policy, the issuer of the policy, or any other person
with respect to the premium finance agreement or any viatical
settlement contract, or from any transaction related to the policy,
that are in addition to the amount required to pay the principal,
interest, costs, and expenses related to the policy premiums
pursuant to the premium finance agreement or subsequent sale of the
agreement. Any payments, charges, fees, or other amounts in
addition to the amounts required to pay the principal, interest,
costs, and expenses related to policy premiums paid under the
premium finance agreement shall be remitted to the original owner
of the policy or, if the owner is not living at the time of the
determination of the overpayment, to the estate of the owner.
(k) For any viatical settlement contract or a policy, for a
viatical settlement facilitator or individual life insurance
producer operating as a viatical settlement facilitator, to
knowingly 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 facilitator or individual life insurance
producer unless both of the following are true:
(i) The viatical settlement facilitator or individual life
insurance producer disclosed that affiliation to the viator.
(ii) The viatical settlement facilitator or individual life
insurance producer is controlled by or under common control with a
person that is regulated under the securities act of 1933, 15 USC
77a to 77aa, or the securities exchange act of 1934, 15 USC 78a to
78oo.
(l) For any viatical settlement contract or a policy, for a
viatical settlement provider to knowingly 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 facilitator or individual life insurance
producer operating as a viatical settlement facilitator 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 unless both of the following are
true:
(i) The viatical settlement facilitator or individual life
insurance producer disclosed that affiliation to the viator.
(ii) The viatical settlement facilitator or individual life
insurance producer is controlled by or under common control with a
person that is regulated under the securities act of 1933, 15 USC
77a to 77aa, or the securities exchange act of 1934, 15 USC 78a to
78oo.
(m) Issuing, soliciting, marketing, or otherwise promoting the
purchase of a policy for the purpose of or with emphasis on
settling the policy.
(n) Issuing or using a pattern of false, misleading, or
deceptive life expectancies.
(o) Issuing, soliciting, marketing, or otherwise promoting
stranger-originated life insurance.
(p) Attempting to commit, assisting, aiding or abetting the
commission of, or conspiracy to commit any act or omission
specified in this section.
Sec. 4347. (1) Any contract, agreement, arrangement, or
transaction, including, but not limited to, a financing agreement
or arrangement, entered into for the furtherance or aid of a
stranger-originated life insurance act, practice, arrangement, or
agreement is void and unenforceable.
(2) A trust or other person that is created to give the
appearance of insurable interest and is used to initiate 1 or more
policies for investors violates insurable interest laws and the
prohibition against wagering on life.
Sec. 4348. (1) A life insurer issuing life insurance policies
in this state shall adopt and have in operation measures to detect
and prevent stranger-originated life insurance.
(2) The commissioner by order may require that measures to
detect and prevent stranger-originated life insurance adopted by a
life insurer under subsection (1) be submitted to the commissioner.
If the commissioner requires that these measures be submitted to
the commissioner, the plans submitted are privileged and
confidential, are not a public record open for inspection under the
freedom of information act, and are not subject to discovery or
subpoena in a civil or criminal action.
Sec. 4349. (1) A person shall not knowingly or intentionally
interfere with the enforcement of this chapter or with
investigations of suspected or actual violations of this chapter.
(2) A person in the business of viatical settlements shall not
knowingly or intentionally permit any person convicted of a felony
to participate in the business of viatical settlements.
(3) Each viatical settlement contract and each application for
a viatical settlement, 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 imprisonment.".
(4) The lack of a statement described in subsection (3) does
not constitute a defense in any prosecution for a fraudulent
viatical settlement act.
(5) Every person engaged in the business of viatical
settlements having knowledge or a reasonable belief that a
fraudulent viatical settlement act is being, will be, or has been
committed shall provide to the commissioner the information
required by the commissioner. The person shall provide the
information in a manner prescribed by the commissioner.
(6) Every person having knowledge or a reason to believe that
a fraudulent viatical settlement act is being, will be, or has been
committed may provide to the commissioner the information required
by the commissioner. The person shall provide the information in a
manner prescribed by the commissioner.
(7) Any life insurer that has a good faith belief that a
person is participating or has participated in a stranger-
originated life insurance transaction shall report the person to
the commissioner in a form and manner prescribed by the
commissioner. Upon receipt of the insurer's report, the
commissioner shall conduct an investigation to determine whether
there is probable cause, based on the totality of the facts and
circumstances, to believe that the person has engaged in a
stranger-originated life insurance transaction. If the commissioner
finds probable cause, the commissioner shall do 1 of the following:
(a) If the person is licensed or regulated by the office of
financial and insurance regulation, the commissioner shall provide
the person an opportunity for notice and hearing pursuant to the
administrative procedures act of 1969. If the person waives or does
not request a hearing pursuant to the administrative procedures act
of 1969, or a hearing is held and the person is found to have
participated in 1 or more stranger-originated life insurance
transactions, the commissioner shall publish the order on the
office of financial and insurance regulation's website and shall
notify each insurer licensed in this state that the person has been
adjudicated as having participated in 1 or more stranger-originated
life insurance transactions.
(b) If the person is not licensed or regulated by the office
of financial and insurance regulation, the commissioner shall
provide the commissioner's findings to the appropriate licensing,
law enforcement, or regulatory authority.
(8) Civil liability shall not be imposed for, 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 to or received from any of the
following:
(a) The commissioner or the commissioner's employees, agents,
or representatives.
(b) Law enforcement or regulatory officials of this state,
another state, the United States, or a political subdivision of
this state or another state, or any employee, agent, or
representative of any of those officials.
(c) A person involved in the prevention and detection of
fraudulent viatical settlement acts or any agent, employee, or
representative of any person so involved.
(d) The NAIC, financial industry regulatory authority (FINRA),
the North American securities administrators association (NASAA),
any employee, agent, or representative of any of those
associations, or any other regulatory body overseeing life
insurance, viatical settlements, securities, or investment fraud.
(e) The life insurer that issued the life insurance policy
covering the life of the insured.
(9) The immunity provided in subsection (8) does not apply to
any statement made with actual malice. In an action brought against
a person for filing a report or furnishing other information
concerning a fraudulent viatical settlement act, the party bringing
the action shall plead specifically any allegation that the
immunity provided in subsection (8) does not apply because the
person filing the report or furnishing the information did so with
actual malice.
(10) If a person is the prevailing party in a civil action for
libel, slander, or any other relevant tort arising out of
activities in carrying out the provisions of this chapter, if the
prevailing party is a person identified in subsection (8) and the
immunity described in subsection (8) applies to the person, and if
the party who brought the action was not substantially justified in
doing so, the person who is the prevailing party is entitled to an
award of attorney fees and costs arising out of the action.
However, the person is not entitled to an award of attorney fees if
the person provided information about the person's own fraudulent
viatical settlement acts. For purposes of this subsection, an
action is "substantially justified" if it had a reasonable basis in
law or fact at the time that it was initiated.
(11) This section does not abrogate or modify any common law
or statutory privilege or immunity enjoyed by a person described in
subsection (8).
(12) The documents and evidence provided pursuant to
subsections (8) to (11) or obtained by the commissioner in an
investigation of any suspected or actual fraudulent viatical
settlement act are privileged and confidential, are not a public
record open for inspection under the freedom of information act,
and are not subject to discovery or subpoena in a civil or criminal
action.
(13) Subsection (12) does not prohibit release by the
commissioner of any document or evidence obtained in an
investigation of suspected or actual fraudulent viatical settlement
acts, in any of the following manners or circumstances:
(a) In any administrative or judicial proceeding to enforce
any laws administered by the commissioner.
(b) To any law enforcement or regulatory agency of this state,
another state, the United States, or a political subdivision of
this state or another state, to an organization established for the
purpose of detecting and preventing fraudulent viatical settlement
acts, or to the NAIC.
(c) At the discretion of the commissioner, to a person in the
business of viatical settlements that is aggrieved by a fraudulent
viatical settlement act.
(14) Release of documents and evidence under subsection (13)
does not abrogate or modify the privilege granted in subsection
(12).
Sec. 4351. This chapter does not do any of the following:
(a) Preempt the authority or relieve the duty of any other law
enforcement or regulatory agencies to investigate, examine, or
prosecute suspected violations of law.
(b) Prevent or prohibit a person from disclosing voluntarily
any information concerning fraudulent viatical settlement acts to a
law enforcement or regulatory agency other than the office of
financial and insurance regulation.
(c) Limit any power granted elsewhere by the law 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.
Sec. 4353. (1) Viatical settlement providers and viatical
settlement facilitators shall adopt and have in place antifraud
initiatives reasonably calculated to detect, prosecute, and prevent
fraudulent viatical settlement acts. At the discretion of the
commissioner, the commissioner may order, or a viatical settlement
provider or viatical settlement facilitator may request and the
commissioner may grant, any modifications of the following required
initiatives described in this subsection that are necessary to
ensure an effective antifraud plan. The modifications may be more
or less restrictive than the required initiatives if the
modifications may reasonably be expected to accomplish the purpose
of this section. Antifraud initiatives under this subsection shall
include all of the following:
(a) Fraud investigators, who may be licensed viatical
settlement provider or licensed viatical settlement facilitator
employees or independent contractors.
(b) An antifraud plan that includes, but is not limited to,
all of the following:
(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.
(iv) A description or chart outlining the organizational
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.
(v) A description of the procedures used to perform initial
and continuing review of the accuracy of life expectancies used in
connection with a viatical settlement contract.
(2) The commissioner, by rule adopted in accordance with the
administrative procedures act of 1969, may require that antifraud
plans required under subsection (1) be submitted to the
commissioner. If the commissioner requires that antifraud plans be
submitted to the commissioner, the plans so submitted are
privileged and confidential, are not a public record open for
inspection under the freedom of information act, and are not
subject to discovery or subpoena in a civil or criminal action.
Sec. 4355. An insurer that issued a policy being viaticated is
not responsible, under this chapter, for any act or omission of a
viatical settlement facilitator 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 facilitator in
connection with the viatical settlement contract.
Sec. 4357. (1) In addition to the penalties and other
enforcement provisions of this chapter, if any person violates this
chapter, any order, rule, or regulation issued under this chapter,
or any written agreement entered into with the commissioner, the
commissioner may do any of the following:
(a) Issue cease and desist orders as specified in this
section.
(b) Seek an injunction in the Ingham county circuit court or
another court of competent jurisdiction.
(c) Apply for temporary and permanent orders.
(2) Any person damaged by the acts of another person in
violation of this chapter or any order, rule, or regulation issued
under this chapter may bring a civil action for damages against the
person committing the violation in a court of competent
jurisdiction. A civil action brought under this chapter does not
preclude the commissioner from exercising any regulatory,
enforcement, or other authority available to the commissioner.
(3) The commissioner may issue a cease and desist order in
accordance with the administrative procedures act of 1969. If the
commissioner finds that an action presents an immediate danger to
the public and requires an immediate final order, the commissioner
may issue an emergency cease and desist order reciting with
particularity the facts underlying his or her 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 90 days. If nonemergency cease and desist proceedings
are begun, the emergency cease and desist order remains effective,
absent an order by an appellate court of competent jurisdiction
pursuant to the administrative procedures act of 1969.
(4) If the commissioner finds that a person has committed a
fraudulent viatical settlement act or violated any other provision
of this chapter, the commissioner may order the payment of a civil
penalty not exceeding $10,000.00 and the amount of the claim for
each violation. The commissioner's order may require a person found
to be in violation of this chapter to make full restitution to
persons aggrieved by violations of this chapter.
(5) This chapter does not preempt, supersede, or limit the
application of the uniform securities act (2002), 2008 PA 551, MCL
451.2101 to 451.2703, the securities act of 1933, 15 USC 77a to
77aa, or the securities exchange act of 1934, 15 USC 78a to 78oo,
or any rules adopted pursuant to those acts.
Sec. 4358. (1) A person that commits a fraudulent viatical
settlement act is guilty of a felony punishable by imprisonment for
not more than 10 years, or a fine of not more than $100,000.00 for
a single violation or $500,000.00 for multiple violations, or both
imprisonment and fine, together with full restitution.
(2) A person that operates or attempts to operate as a
viatical settlement facilitator or viatical settlement provider in
this state without the licensure required under this chapter is
guilty of a felony punishable by imprisonment for not more than 5
years, or a fine of not more than $1,000.00, or both imprisonment
and fine, together with full restitution.
Sec. 4359. Except for a fraudulent viatical settlement act
knowingly committed by a viator, the penalties of this chapter do
not apply to a viator.
Sec. 4360. The commissioner may adopt rules in accordance with
the administrative procedures act of 1969 to implement this
chapter, including, but not limited to, rules that do the
following:
(a) Govern the relationship and responsibilities of insurers,
viatical settlement providers, and viatical settlement facilitators
during the viatication of a policy.
(b) Establish standards for evaluating the reasonableness of
payments under viatical settlement contracts for persons who are
terminally or chronically ill. This authority includes, but is not
limited to, the regulation of discount rates used to determine the
amount paid in exchange for the assignment, release, transfer,
sale, devise, or bequest of a benefit under a policy insuring
persons who are terminally or chronically ill.
(c) Establish appropriate licensing requirements, fees, and
standards for continued licensure for viatical settlement providers
and viatical settlement facilitators.
Enacting section 1. 1996 PA 386, MCL 550.521 to 550.528, is
repealed.
Enacting section 2. This amendatory act does not take effect
unless Senate Bill No. _____ or House Bill No. _____ (request no.
00306'11 a) of the 96th Legislature is enacted into law.
