SB513: Bill Text

SB513,37,20 (10) Disclosure to insurer. Before initiating a plan, transaction, or series of transactions, a broker or provider shall fully disclose to the insurer a plan, transaction, or series of transactions to which the broker or provider is a party to originate, renew, continue, or finance a policy with the insurer for the purpose of engaging in the business of life settlements at any time prior to, or during the first 5 years after, issuance of the policy.

SB513,37,22 (11) General requirements. (a) 1. Before entering into a life settlement contract, a provider shall obtain all of the following:

SB513,37,25 a. If the owner is the insured, a written statement from a licensed attending physician that the owner is of sound mind and under no constraint or undue influence to enter into a life settlement contract.

SB513,38,3 b. A document in which the insured consents to the release of his or her medical records to a licensed provider, licensed broker, and the insurer that issued the policy covering the life of the insured.

SB513,38,8 2. Within 20 days after an owner executes documents necessary to transfer any rights under a policy or within 20 days after the owner enters any agreement, option, promise, or any other form of understanding, express or implied, to settle the policy, the provider shall give written notice to the insurer that issued the policy that the policy has or will become a settled policy.

SB513,38,15 3. The provider shall deliver a copy of the medical release required under subd. 1. b., a copy of the owner's application for the life settlement contract, the notice required under subd 2., and a request for verification of coverage to the insurer that issued the policy that is the subject of the life settlement. The provider shall use a form created by the National Association of Insurance Commissioners for verification of coverage unless the commissioner develops and approves another form.

SB513,38,24 4. The insurer shall respond to a request for verification of coverage that is submitted on an approved form by a provider or broker within 30 calendar days after the date the request is received and shall indicate whether, based on the medical evidence and documents provided, the insurer intends to pursue an investigation regarding the validity of the insurance contract or possible fraud. The insurer shall accept a request for verification of coverage made on a form created by the National Association of Insurance Commissioners or any other form approved by the commissioner, and shall accept an original, facsimile, or electronic copy of the request and any accompanying signed authorization.

SB513,39,2 5. Before or at the time of execution of the life settlement contract, the provider shall obtain a witnessed document in which the owner does all of the following:

SB513,39,3 a. Consents to the life settlement contract.

SB513,39,5 b. Represents that he or she has a complete understanding of the life settlement contract.

SB513,39,7 c. Represents that he or she has a complete understanding of the benefits of the policy.

SB513,39,9 d. Acknowledges that he or she is entering into the life settlement contract freely and voluntarily.

SB513,39,12 e. If applicable, acknowledges that the insured has a terminal or chronic illness and that the terminal or chronic illness or condition was diagnosed after the policy was issued.

SB513,39,14 6. If a broker performs any of the activities required in subd. 1., 2., 3., or 5., the provider shall be considered to have performed that activity.

SB513,39,17 (b) All medical information solicited or obtained by any licensee shall be subject to the applicable provisions of state law relating to confidentiality of medical information, including s. 610.70.

SB513,40,14 (c) All life settlement contracts entered into in this state shall provide the owner with an absolute right to rescind the contract before the earlier of 30 calendar days after the date on which the life settlement contract is executed by all parties or 15 calendar days after the life settlement proceeds have been sent to the owner as provided in par. (d). Rescission by the owner may be conditioned upon the owner both giving notice and repaying to the provider, within the rescission period, all proceeds of the settlement and any premiums, loans, and loan interest paid by or on behalf of the provider in connection with or as a consequence of the life settlement. If the insured dies during the rescission period, the life settlement contract is rescinded, subject to repayment, within 60 calendar days after the death of the insured, by the owner or the owner's estate to the provider or purchaser of all life settlement proceeds and any premiums, loans, and loan interest that have been paid by the provider or purchaser. If a life settlement contract is rescinded under this paragraph, ownership of the policy shall revert to the owner or the owner's estate if the owner is deceased, irrespective of any transfer of ownership of the policy by the owner, provider, or any other person. In the event of any rescission, if the provider has paid commissions or other compensation to a broker in connection with the rescinded life settlement contract, the broker shall refund the commissions and compensation to the provider within 5 business days following receipt of written demand from the provider, which demand shall be accompanied by the applicable document initiating the rescission within the rescission period, either the owner's notice of rescission or the notice of death of the insured.

SB513,41,5 (d) The provider shall instruct the owner to send the executed documents required to effect the change in ownership, assignment, or change in beneficiary directly to the independent escrow agent. Within 3 business days after the date the independent escrow agent receives the documents, or after the date the provider receives the documents if the owner erroneously provides the documents directly to the provider, the provider shall pay or transfer the proceeds of the life settlement into an escrow or trust account that is maintained in a state or federally chartered financial institution whose deposits are insured by the Federal Deposit Insurance Corporation and managed by an independent trustee or escrow agent. Upon payment of the life settlement proceeds into the escrow account, the independent escrow agent shall deliver the original change in ownership, assignment, or change in beneficiary form to the provider or related provider trust or other designated representative of the provider. Upon the escrow agent's receipt of acknowledgement of the properly completed transfer of ownership, assignment, or designation of beneficiary from the insurer, the independent escrow agent shall pay the life settlement proceeds to the owner.

SB513,41,12 (e) Failure to tender the life settlement proceeds to the owner within the time set forth in the disclosure under sub. (8) (a) 1. g., renders the life settlement contract voidable by the owner for lack of consideration until the time the proceeds are tendered to and accepted by the owner. Funds are sent by a provider to an owner as of the date that the escrow agent either releases funds for wire transfer to the owner or places a check for delivery to the owner via the U.S. postal service or other nationally recognized delivery service.

SB513,41,22 (f) For the purpose of determining the health status of the insured after the life settlement has occurred, only the provider or broker licensed in this state or a person it authorizes may contact the insured. Contact with the insured shall be limited to once every 3 months for an insured with a life expectancy of more than one year, and to no more than once per month for an insured with a life expectancy or one year or less. The provider or broker shall explain the procedure for the contacts to the owner at the time the life settlement contract is entered into. The limitations in this paragraph do not apply to any contacts with an insured for reasons other than determining the insured's health status. Providers and brokers shall be responsible for the actions of a person they authorize to make the contact.

SB513,42,2 (12) Prohibited contracts; required form; acknowledgement; fiduciary duty. (a) No person may enter into a life settlement contract at any time before the application or issuance of a policy that is the subject of a life settlement contract or within a 5-year period commencing with the date of issuance of the policy unless any of the following conditions have been met:

SB513,42,8 1. The owner certifies to the provider that, within the 5-year period, the policy was issued upon the owner's exercise of conversion rights arising out of a group or individual policy, provided the total of the time covered under the conversion policy plus the time covered under the prior policy is at least 60 months. The time covered under the 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.

SB513,42,10 2. The owner submits independent evidence to the provider that any of the following conditions have been met within the 5-year period:

SB513,42,11 a. The owner or insured is terminally or chronically ill.

SB513,42,12 b. The owner's spouse or child dies.

SB513,42,13 c. The owner divorces his or her spouse.

SB513,42,14 d. The owner retires from full-time employment.

SB513,42,17 e. The owner becomes physically or mentally disabled and a physician determines that the disability prevents the owner from maintaining full-time employment.

SB513,42,22 f. A final order, judgment, or decree is entered by a court of competent jurisdiction, on the application of a creditor of the owner, adjudicating the owner bankrupt or insolvent, approving a petition seeking reorganization of the owner, or appointing a receiver, trustee, or liquidator to all or a substantial part of the owner's assets.

SB513,42,24 g. The sole beneficiary of the policy is a family member of the owner and the beneficiary dies.

SB513,43,5 h. The owner is a charitable organization with an insurable interest that has received from the federal Internal Revenue Service a determination letter that is currently in effect stating that the charitable organization is described in section 501 (c) (3) of the Internal Revenue Code and is exempt from federal income taxation under section 501 (a) of the Internal Revenue Code.

SB513,43,8 i. The owner or insured disposes of ownership interests in a closely held corporation pursuant to the terms of a buyout or other similar agreement in effect at the time the policy was initially issued.

SB513,43,11 j. Other circumstances exist that are established as eligible exemptions by the commissioner by rule, including substantial adverse financial circumstances or other factors substantially affecting the owner.

SB513,43,15 3. The owner certifies to the provider that the owner is entering into a life settlement contract more than 2 years after the date of issuance of a policy and, with respect to the policy, at all times before the date that is 2 years after policy issuance all of the following conditions are met:

SB513,43,19 a. Policy premiums are funded exclusively with unencumbered assets, including an interest in the policy being financed only to the extent of its net cash surrender value, provided by, or full recourse liability incurred by, the owner or a person described in sub. (1) (j) 2. e.

SB513,43,22 b. There is no agreement or understanding with any other person to guarantee any liability or to purchase, or stand ready to purchase, the policy, including through an assumption or forgiveness of a loan.

SB513,43,23 c. Neither the insured nor the policy has been evaluated for settlement.

SB513,44,4 (b) Copies of the independent evidence described in par. (a) 2. and documents required by sub. (11) (a) shall be submitted to the insurer when the provider entering into a life settlement contract with an owner submits a request to the insurer for verification of coverage. The provider shall submit, along with the copies, a letter of attestation from the provider that the copies are true and correct copies of the documents received by the provider.

SB513,44,9 (c) If the provider submits to the insurer a copy of the owner's certification under par. (a) 1. or 3. or independent evidence under par. (a) 2. when the provider submits a request to the insurer to effect the transfer of the policy to the provider, the copy conclusively establishes that the life settlement contract satisfies the requirements of this subsection and the insurer shall timely respond to the request.

SB513,44,14 (d) No insurer may, as a condition of responding to a request for verification of coverage or effecting the transfer of a policy pursuant to a life settlement contract, require that the owner, insured, provider, or broker sign any form, disclosure, consent, or waiver that has not been expressly approved by the commissioner for use in connection with life settlement contracts in this state.

SB513,44,18 (e) 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 with acknowledgement confirming that the change has been effected or specifying the reasons why the requested change cannot be processed.

SB513,44,21 (f) A broker represents only the owner and owes a fiduciary duty to the owner to act according to the owner's instructions and in the best interest of the owner, notwithstanding the manner in which the broker is compensated.

SB513,44,25 (13) Prohibited practices and conflicts of interest. (a) No person may enter into a life settlement contract if the person knows or reasonably should have known that the policy that is the subject of the life settlement contract was obtained by means of a false, deceptive, or misleading application for the policy.

SB513,45,3 (b) No person may engage in any transaction, practice, or course of business if the person knows or reasonably should know that the intent is to avoid the notice requirements of this section.

SB513,45,5 (c) No person may engage in any fraudulent act or practice in connection with any transaction relating to any life settlement involving an owner.

SB513,45,7 (d) No person may issue, solicit, market, or otherwise promote the purchase of a policy for the primary purpose of or with a primary emphasis on settling the policy.

SB513,45,20 (e) No person may enter into a premium finance agreement with any person or agency, or any person affiliated with such person or agency, pursuant to which the person who is providing premium financing receives any proceeds, fees, or other consideration, directly or indirectly, from the policy or owner of the policy or any other person with respect to the premium finance agreement or any life settlement contract or other transaction related to the policy that is in addition to the amounts required to pay the principal, interest, and service charges related to 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, and service charges related to policy premiums paid under the premium finance agreement shall be remitted to the original owner of the policy or to the owner's estate if the owner is not living at the time of the determination of the overpayment.

SB513,45,25 (f) With respect to any life settlement contract or policy, no broker may knowingly solicit an offer from, effectuate a life settlement with, or make a sale to any provider, purchaser, financing entity, or related provider trust that is controlling, controlled by, or under common control with the broker unless the relationship is disclosed to the owner.

SB513,46,6 (g) With respect to any life settlement contract or policy, no provider may knowingly enter into a life settlement contract with an owner, if, in connection with the life settlement contract, anything of value will be paid to a broker that is controlling, controlled by, or under common control with the provider or the purchaser, financing entity, or related provider trust that is involved in the life settlement contract unless the relationship is disclosed to the owner.

SB513,46,10 (h) No life settlement promotional, advertising, or marketing materials may represent that the insurance is "free" for any period of time, or include any reference that would cause an owner to reasonably believe that the insurance is free for any period of time.

SB513,46,14 (i) No producer, insurer, broker, or provider may make any statement or representation to an applicant or policyholder in connection with the sale or financing of a policy to the effect that the insurance is free or without cost to the policyholder for any period of time unless provided in the policy.

SB513,46,18 (14) Advertisements of life settlement contracts and purchase agreements. (a) This subsection applies to any advertising of life settlement contracts, purchase agreements, or related products or services intended for dissemination in this state, including Internet advertising viewed by persons located in this state.

SB513,46,21 (b) If disclosure requirements are established by federal regulation, this subsection shall be interpreted so as to minimize or eliminate conflict with federal regulation.

SB513,46,23 (c) The commissioner may require a broker or provider to submit advertising material at any time.

SB513,47,7 (d) Every licensee shall establish and maintain a system of control over the content, form, and method of dissemination of all advertisements of its life settlement contracts, products, and services. All advertisements, regardless who wrote, created, designed, or presented the advertisement, shall be the responsibility of the licensee and the person who created or presented the advertisement. The system of control shall include regular routine notification of the requirements and procedures for approval prior to use of any advertisements not furnished by the licensee, at least once a year, to producers, brokers, and others authorized by the licensee who disseminate advertisements.

SB513,47,15 (e) Advertisements shall be truthful and not misleading in fact or by implication. The form and content of an advertisement of a life settlement contract or purchase agreement, product, or service shall be sufficiently complete and clear so as to avoid deception. The advertisement may not have the capacity or tendency to mislead or deceive. The commissioner shall determine whether an advertisement has the capacity or tendency to mislead or deceive from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence within the segment of the public to which it is directed.

SB513,47,18 (f) Disclosures that are required under this subsection may not be minimized, rendered obscure, presented in an ambiguous fashion, or intermingled with the text of the advertisement so as to be confusing or misleading.

SB513,47,19 (g) An advertisement may not do any of the following:

SB513,47,24 1. Omit material information or use words, phrases, statements, references, or illustrations if the omission or use has the capacity, tendency, or effect of misleading or deceiving an owner, purchaser, or prospective purchaser as to the nature or extent of any benefit, covered loss, premium payable, or state or federal tax consequences. A misleading statement is not remedied by any of the following:

SB513,48,2 a. Making the life settlement contract or purchase agreement available for inspection prior to consummation of the sale.

SB513,48,3 b. Offering to refund payment if the owner is not satisfied.

SB513,48,5 c. Including in the life settlement contract or purchase agreement a "free look" period that satisfies or exceeds the requirements of law.

SB513,48,7 2. Use the name or title of a life insurance company or a policy unless the advertisement has been approved by the insurer.

SB513,48,10 3. Represent that premium payments will not be required on the policy that is the subject of a life settlement contract or purchase agreement in order to maintain the policy unless that is the fact.

SB513,48,12 4. State or imply that interest charged on an accelerated death benefit or loan is unfair, inequitable, or, in any manner, an incorrect or improper practice.

SB513,48,16 5. Use the words "free," "no cost," "without cost," "no additional cost," "at no extra cost," or similar words or phrases with respect to any benefit or services, unless true. An advertisement may specify the charge for a benefit or service or may state that a charge is included in the payment or use other appropriate language.

SB513,49,2 6. Use testimonials, appraisals, analyses, or endorsements in advertisements unless they are genuine; represent the current opinion of the author; are applicable to the life settlement contract or purchase agreement, product, or service advertised; and are reproduced with sufficient completeness to avoid misleading or deceiving prospective owners or purchasers as to the nature or scope of the testimonial, appraisal, analysis, or endorsement. Any financial interest in or benefit received from the licensee by the person making a testimonial, appraisal, or analysis, directly or indirectly, shall be prominently disclosed in the advertisement. If an endorsement refers to benefits received under a life settlement contract or purchase agreement, the licensee shall retain all pertinent information forming a basis of the endorsement for a period of 5 years following its use.

SB513,49,9 7. State or imply that a life settlement contract or purchase agreement, benefit, or service has been approved or endorsed by a group, society, association, or other organization unless that is the fact and unless any relationship between the organization and the licensee is disclosed. If the entity making the endorsement is owned, controlled, or managed by the licensee, or receives any payment or other consideration from the licensee for making an endorsement or testimonial, that fact must be disclosed in the advertisement.

SB513,49,12 8. Contain statistical information unless the information accurately reflects recent and relevant facts. An advertisement shall identify the source of all statistics used in the advertisement.

SB513,49,14 9. Disparage insurers, providers, brokers, producers, policies, services, or methods of marketing.

SB513,49,22 10. Omit the name of the actual licensee from any advertisement. No advertisement may use a trade name, group designation, name of the parent company of a licensee, name of a division of a life settlement licensee, service mark, slogan, symbol, or other device or reference if the advertisement would have the capacity or tendency to mislead or deceive as to the true identity of the licensee or to create the impression that any entity other than the licensee would have any responsibility for the financial obligation under a life settlement contract or purchase agreement.

SB513,50,3 11. Use any combination of words, symbols, or physical materials that by the 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 that they tend to mislead or deceive prospective owners or purchasers into believing the advertisement is in some manner connected with a government program or agency.

SB513,50,8 12. Exaggerate the fact that a licensee under this section is licensed in the state where the advertisement appears or suggest or imply that competing licensees may not be so licensed. An advertisement may ask the audience to consult the licensee's Web site or contact the office of the commissioner for licensing requirements and the status of a license.

SB513,50,12 13. Create the impression, directly or indirectly, that a licensee; its business practices or methods of operation; the merits desirability or advisability of any life settlement contract or purchase agreement; or any life insurance company are recommended, approved, or endorsed by any government entity.

SB513,50,16 14. Emphasize the speed with which the settlement will occur, except that the advertisement may disclose the average time from the completion of the application to the date of offer and from the acceptance of the offer to receipt of the settlement funds by the owner.

SB513,50,19 15. Emphasize the dollar amounts available to an owner, except that the advertisement may disclose the average purchase price as a percent of the face value obtained by owners contracting with the licensee during the prior 6 months.

SB513,50,25 (h) The name of the licensee shall be clearly identified in all advertisements about the licensee or its life settlement contracts, purchase agreements, products, or services. If any specific life settlement contract or purchase agreement of a licensee is advertised, the contract or agreement shall be identified either by form number or other appropriate description. If an application is part of the advertisement, the name of the provider shall be shown on the application.

SB513,51,1 (15) Fraud prevention and control; fraudulent life settlement acts.

SB513,51,2 (a) No person may commit a fraudulent life settlement act.

SB513,51,5 (b) No person may knowingly or intentionally interfere with the enforcement of this subsection or sub. (13) or investigations of suspected or actual violations of this subsection or sub. (13).

SB513,51,8 (c) No person in the business of life settlements may knowingly or intentionally permit any person convicted of a felony involving dishonesty or breach of trust to participate in the business of life settlements.

SB513,51,13 (d) 1. Life settlement contracts, purchase agreements, and applications for life settlements, regardless of the form of transmission, shall contain the following statement or a substantially similar statement: "Any person who knowingly presents false information in an application for insurance, a life settlement, or a purchase agreement may be subject to civil and criminal penalties."

SB513,51,15 2. A person may not use the lack of the statement required under subd. 1. as a defense to any prosecution for a violation of this subsection or sub. (13).

SB513,51,19 (e) 1. Any person engaged in the business of life settlements having knowledge or a reasonable belief that a violation of this subsection or sub. (13) is being, will be, or has been committed shall provide to the commissioner the information required by, and in a manner prescribed by, the commissioner.

SB513,51,23 2. Any other person having knowledge or a reasonable belief that a violation of this subsection or sub. (13) is being, will be, or has been committed may provide to the commissioner the information required by, and in a manner prescribed by, the commissioner.

SB513,52,3 (f) 1. In the absence of actual malice, no civil liability shall be imposed on and no cause of action shall arise from a person's furnishing information concerning suspected, anticipated, or completed violations of this subsection or sub. (13) or suspected, anticipated, or completed fraudulent insurance acts, if the information is provided to or received from any of the following:

SB513,52,5 a. The commissioner or the commissioner's employees, agents, or representatives.

SB513,52,7 b. Federal, state, or local law enforcement or regulatory officials or their employees, agents, or representatives.

SB513,52,9 c. A person involved in the prevention and detection of fraud or that person's agents, employees, or representatives.

SB513,52,13 d. The National Association of Insurance Commissioners, the Financial Industry Regulatory Authority, the North American Securities Administrators Association, or their employees, agents, or representatives or other regulatory body overseeing life insurance, life settlements, securities, or investment fraud.