1995 WISCONSIN ACT 371
An Act to renumber 71.26 (3) (a); and to create 71.05 (1) (f), 71.26 (3) (ag), 71.45 (2) (a) 14., 601.31 (1) (mm), 601.31 (1) (mp), 601.31 (1) (mr), 601.31 (1) (ms) and 632.68 of the statutes; relating to: regulation of viatical settlement contracts, exempting from the income tax income that is received from the sale of a life insurance policy under a viatical settlement contract and granting rule-making authority.
The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:
371,1
Section 1
. 71.05 (1) (f) of the statutes is created to read:
71.05 (1) (f) Income from the sales of certain insurance policies. Income received by the original policyholder or original certificate holder from the sale of a life insurance policy or certificate, or the sale of the death benefit under a life insurance policy or certificate, under a viatical settlement contract, as defined in s. 632.68 (1) (d).
371,2
Section 2
. 71.26 (3) (a) of the statutes is renumbered 71.26 (3) (ar).
371,3
Section 3
. 71.26 (3) (ag) of the statutes is created to read:
71.26 (3) (ag) Section 61 (relating to the definition of gross income) is modified to exclude income received by the original policyholder or original certificate holder from the sale of a life insurance policy or certificate, or the sale of the death benefit under a life insurance policy or certificate, under a viatical settlement contract, as defined in s. 632.68 (1) (d).
371,4
Section 4
. 71.45 (2) (a) 14. of the statutes is created to read:
71.45 (2) (a) 14. By subtracting from federal taxable income the amount that is included in that income from the sale by the original policyholder or original certificate holder of a life insurance policy or certificate, or the sale of the death benefit under a life insurance policy or certificate, under a viatical settlement contract, as defined in s. 632.68 (1) (d).
371,5
Section 5
. 601.31 (1) (mm) of the statutes is created to read:
601.31 (1) (mm) For initial issuance of a license as a viatical settlement provider under s. 632.68 (2), $750.
371,6
Section 6
. 601.31 (1) (mp) of the statutes is created to read:
601.31 (1) (mp) For each annual renewal of a license as a viatical settlement provider under s. 632.68 (2), $250.
371,7
Section 7
. 601.31 (1) (mr) of the statutes is created to read:
601.31 (1) (mr) For initial issuance of a license as a viatical settlement broker under s. 632.68 (4), $750.
371,8
Section 8
. 601.31 (1) (ms) of the statutes is created to read:
601.31 (1) (ms) For each annual renewal of a license as a viatical settlement broker under s. 632.68 (4), $250.
371,9
Section 9
. 632.68 of the statutes is created to read:
632.68 Regulation of viatical settlement contracts. (1) Definitions. In this section:
(a) “Catastrophic or life-threatening illness or condition" includes AIDS, as defined in s. 49.486 (1) (a), and HIV infection, as defined in s. 49.486 (1) (d).
(b) “Viatical settlement" means payment to the policyholder of a life insurance policy, or to the certificate holder of a group life insurance certificate, insuring the life of a person who has a catastrophic or life-threatening illness or condition, in an amount that is less than the expected death benefit under the policy or certificate, for assigning, selling, devising or otherwise transferring the ownership of or the death benefit under the policy or certificate to the person paying the viatical settlement.
(c) “Viatical settlement broker" means a person that, for a fee, commission or other valuable consideration, offers or attempts to negotiate settlements between a life insurance policyholder or certificate holder and one or more viatical settlement providers. The term does not include a viatical settlement agent, as defined by the commissioner by rule under sub. (11) (b) 4., or an attorney, accountant or financial planner retained by a policyholder or certificate holder to represent the policyholder or certificate holder.
(d) “Viatical settlement contract" means a written agreement providing for and establishing the terms of a viatical settlement.
(e) “Viatical settlement provider" means a person that pays a viatical settlement. The term does not include any of the following:
1. A financial institution, as defined in s. 705.01 (3), that takes an assignment of a life insurance policy or certificate as collateral for a loan.
2. The issuer of a life insurance policy or certificate providing accelerated benefits under the policy or certificate.
3. A natural person who enters into no more than one agreement in a year for the transfer of the ownership of or the death benefit under a life insurance policy or a group life insurance certificate for an amount that is less than the expected death benefit under the policy or certificate.
4. A natural person who enters into an agreement for the transfer of the ownership of or the death benefit under a life insurance policy or a group life insurance certificate for an amount that is less than the expected death benefit under the policy or certificate and who is a member of the immediate family, as defined in s. 23.33 (1) (h), of the life insurance policyholder or certificate holder.
(2) Viatical settlement provider license requirement. (a) Except as provided in sub. (1) (e) 3. and 4., no person may act as a viatical settlement provider, solicit or pay viatical settlements or enter into a viatical settlement contract with the policyholder of the life insurance policy, or the certificate holder of the group life insurance certificate, that is the subject of a viatical settlement contract unless the person obtains and has in effect a viatical settlement provider license under this subsection.
(b) A person may apply to the commissioner for a viatical settlement provider license on a form prescribed by the commissioner for that purpose. The fee specified in s. 601.31 (1) (mm) shall accompany the application. After any investigation of the applicant that the commissioner determines is sufficient, the commissioner shall issue a viatical settlement provider license to an applicant that satisfies all of the following:
1. Pays the applicable fee.
2. Provides complete information on the application.
3. Provides a detailed plan of operation.
4. Fully discloses the identity of all stockholders, partners, officers and employes, if applicable.
5. If a corporation, is incorporated under the laws of this state or is authorized to transact business in this state.
6. Shows to the satisfaction of the commissioner all of the following:
a. If a natural person, that the applicant is competent and trustworthy, or, if a partnership, corporation or limited liability company, that all partners, members, directors or principal officers or persons in fact having comparable powers are competent and trustworthy.
b. If a natural person, that the applicant has the intent in good faith to do business as a viatical settlement provider, or, if a partnership, corporation or limited liability company, that the applicant has that intent and has included that purpose in the articles of association, incorporation or organization.
c. That the applicant has a good business reputation and, if a natural person, has had experience, training or education that qualifies the applicant to be a viatical settlement provider, or, if a partnership, corporation or limited liability company, that all partners, members, directors or principal officers or persons in fact having comparable powers have had experience, training or education that qualifies the applicant to be a viatical settlement provider.
7. If a nonresident, files with the commissioner a written designation of the applicant's agent in this state for service of process or executes in a form acceptable to the commissioner an agreement to be subject to the jurisdiction of the commissioner and the courts of this state on any matter related to the applicant's viatical settlement activities in this state, on the basis of service of process under ss. 601.72 and 601.73.
(c) If the commissioner denies an application for a license under this subsection, the applicant may, within 20 days after receiving notice of the denial, demand a hearing. The demand shall be in writing and shall be served on the commissioner by delivering a copy to the commissioner or by leaving it at the commissioner's office. The commissioner shall hold a hearing not less than 10 days nor more than 30 days after service of the demand. Failure to demand a hearing within the required time constitutes waiver of a hearing.
(d) A license issued under this subsection to a partnership, corporation or limited liability company authorizes all partners, members, directors or principal officers or persons in fact having comparable powers to act as a viatical settlement provider under the license. All persons acquiring authority under this paragraph to act under the license shall be named in the application and any supplements to the application.
(e) Except as provided in sub. (3), a license issued under this subsection shall be renewed annually on the anniversary date upon payment of the fee specified in s. 601.31 (1) (mp).
(3) Viatical settlement provider license revocation. The commissioner may revoke, suspend or refuse to renew a viatical settlement provider license if, after a hearing, the commissioner finds any of the following:
(a) That the licensee misrepresented information in the application.
(b) That the licensee has engaged in fraudulent or dishonest practices or is otherwise shown to be untrustworthy or incompetent to act as a viatical settlement provider.
(c) That the licensee has failed to meet the minimum settlement payment requirements under sub. (9) (c) or has demonstrated a pattern of making unreasonable payments to policyholders or certificate holders.
(d) Notwithstanding ss. 111.321, 111.322 and 111.335, that the licensee has been convicted of a misdemeanor or felony involving fraud, deceit or misrepresentation.
(e) That the licensee has violated any provision of this section.
(4) Viatical settlement broker license and other requirements. (a) Except as provided in sub. (1) (c), no person may act as a viatical settlement broker unless the person obtains and has in effect a viatical settlement broker license under this subsection.
(b) A person may apply to the commissioner for a viatical settlement broker license on a form prescribed by the commissioner for that purpose. The fee specified in s. 601.31 (1) (mr) shall accompany the application.
(c) Except as provided in sub. (5), a license issued under this subsection shall be renewed annually on the anniversary date upon payment of the fee specified in s. 601.31 (1) (ms).
(d) A licensee under this subsection shall acquire and maintain professional liability insurance in an amount that is satisfactory to the commissioner.
(e) A licensee under this subsection is not subject to any prelicensing or continuing education that may be required by rule under ch. 628.
(5) Viatical settlement broker license revocation. The commissioner may revoke, suspend or refuse to renew a viatical settlement broker license if, after a hearing, the commissioner finds any of the following:
(a) That the licensee misrepresented information in the application.
(b) That the licensee has engaged in fraudulent or dishonest practices or is otherwise shown to be untrustworthy or incompetent to act as a viatical settlement broker.
(c) Notwithstanding ss. 111.321, 111.322 and 111.335, that the licensee has been convicted of a misdemeanor or felony involving fraud, deceit or misrepresentation.
(d) That the licensee has violated any provision of this section.
(6) Approval of viatical settlement contracts. No viatical settlement contract form may be used in this state unless it has been filed with and approved by the commissioner. Any viatical settlement contract form filed with the commissioner is approved if it is not disapproved within 60 days after filing. The commissioner shall disapprove a viatical settlement contract form if, in the commissioner's opinion, the contract or any of its provisions is unreasonable, contrary to any provision of this section, contrary to the public interest or otherwise misleading or unfair to the policyholder or certificate holder.
(7) Reporting requirements. Annually, on or before March 1, every licensee under this section shall file with the commissioner a statement containing any information that the commissioner requires by rule.
(8) Record keeping. Every licensee under this section shall maintain and make available for inspection by the commissioner records of all viatical settlement transactions. Names and other individual identifying information related to policyholders or certificate holders shall be considered confidential and may not be disclosed by the commissioner.
(9) Requirements for viatical settlements and contracts. (a) If the policyholder or certificate holder who desires to enter into a viatical settlement contract is the person with a catastrophic or life-threatening illness or condition whose life is insured under the policy or certificate, the viatical settlement provider shall obtain all of the following before entering into the contract:
1. A written statement from the person's attending physician that the person is of sound mind.
2. A written statement, signed by the person and witnessed by 2 disinterested adults, in which the person does all of the following:
a. Consents to the viatical settlement contract.
b. Acknowledges his or her catastrophic or life-threatening illness or condition.
c. Releases his or her medical records to the viatical settlement provider.
d. Represents that he or she understands the viatical settlement contract, the benefits under the life insurance policy or certificate and the relationship between the viatical settlement contract and the life insurance policy or certificate.
e. Acknowledges that he or she is entering into the viatical settlement contract freely and voluntarily.
f. Affirms that he or she has received a recommendation from a viatical settlement provider or a viatical settlement broker in writing to seek financial advice from an individual or entity other than the viatical settlement provider or a viatical settlement broker regarding the effect of the viatical settlement on creditor claims, income taxes and government benefits.
(b) Before the execution of a viatical settlement contract, a viatical settlement provider or a viatical settlement broker shall disclose to the policyholder or certificate holder all of the following:
1. That he or she is a viatical settlement provider or broker.
1m. That there may be alternatives to viatical settlements for persons with a catastrophic or life-threatening illness or condition and what those alternatives are, including accelerated benefits under the life insurance policy or certificate.
2. That the policyholder or certificate holder should obtain financial advice from a financial counselor, a tax adviser or an appropriate agency.
3. That some or all of the viatical settlement proceeds may be taxable and that he or she should seek advice from a personal tax adviser.
4. That the viatical settlement proceeds may be subject to the claims of creditors.
