AN ACT REGULATING VIATICAL SETTLEMENTS AGREEMENTS.
Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:
SECTION 1. Chapter 175 of the General Laws is hereby amended by adding the following 12 sections:-
Section 212. Sections 212 to 223, inclusive, may be cited as the Viatical Settlements Act.
Section 213. As used in sections 212 to 223, inclusive, the following words shall, unless the context requires otherwise have the following meanings:-
"Accelerated benefits", a policy provision allowing full or partial payment of the death benefit before the death of the insured based on the physical condition of the insured.
"Catastrophic condition", a medical condition reasonably expected to result in death within 36 months, whether or not medical treatment is provided, where such condition has been certified to by a physician, including, but not limited to, metastasized cancers, renal failure in persons not candidates for transplants, heart or lung disease in persons not candidates for transplants and Acquired Immune Deficiency Syndrome.
"Commissioner", the commissioner of insurance.
"Financing entity", a person who is (1) an underwriter, placement agent, lender, purchaser of securities, purchaser of a policy or certificate from a viatical settlement provider or viatical loan provider, credit enhancer, reinsurer, or who may be a party to a viatical settlement or a viatical loan, (2) who has a direct ownership or security interest in any policy or certificate which is the subject of a viatical settlement contract or viatical loan contract, but (3) whose sole activity related to the transaction is providing funds to effect the viatical settlement or viatical loan and (4) who has an agreement in writing with a duly licensed viatical settlement provider or viatical loan provider to act as a participant in a financing transaction.
"Financing transaction", a transaction in compliance with federal and state securities laws in which a duly licensed viatical settlement provider or viatical loan provider or financing entity obtains financing for viatical settlement contracts, viatical loan contracts, viaticated policies or interests therein including, without limitation, any secured or unsecured financing, any securitization transaction or any securities offering, either registered or exempt from registration under federal and state securities law.
"Insured", an individual who is the subject of a life insurance policy or group life insurance contract. For the purposes of sections 212 to 223, inclusive it is the insured's privacy which shall be protected, regardless of whether the insured is also the policy owner or certificate holder.
"Person", a natural or artificial entity, including but not limited to, individuals, partnerships, associations, trusts or corporations.
"Viatical loan borrower", the owner of a life insurance policy or the certificate holder under a group life insurance contract insuring the life of a person with a catastrophic, life-threatening or chronic illness or condition who enters into a viatical loan contract with a viatical loan provider.
"Viatical loan broker", a person that, on behalf of a viatical loan borrower and for a fee, commission or other valuable consideration, offers or attempts to negotiate viatical loan contracts between a viatical loan borrower and one or more viatical loan providers. Irrespective of the manner in which the viatical loan broker is compensated, a viatical loan broker is deemed to represent only the viatical loan borrower and owes a fiduciary duty to the viatical loan borrower to act according to the borrower's instructions and in the best interest of the borrower. A viatical loan broker does not include an attorney, accountant or financial planner retained to represent the borrower and whose compensation is paid directly by or at the direction of the borrower regardless of whether the viatical loan is completed.
"Viatical loan contract", a written agreement through which a person owning a life insurance policy or who owns or is covered under a group policy insuring the life of a person who has a catastrophic, life-threatening or chronic illness or condition secures a loan from a viatical loan provider by using the policy as collateral. The secured loan is an amount less than the face value of the policy, with the difference between the loan principal and the face value of the policy being used to pay, among other things, the accrued loan interest. Upon repayment of the viatical loan, the viatical loan provider's collateral interest in the policy terminates and the security interest is released to the original policyholder, or his or her designee. Viatical loans do not include loans taken against the cash value of a life insurance policy for the purpose of paying premiums due.
"Viatical loan provider", a person, other than a viatical loan borrower, that enters into a viatical loan contract. A viatical loan provider does not include:
(1) a natural person who enters into not more than one loan agreement in a calendar year for any value less than the expected death benefit;
(2) a family member or friend, who is not in the business of providing or obtaining viatical loans, who enters into a loan agreement for any value less than the expected death benefit; or
(3) a financing entity.
"Viatical loan representative", a person who is an authorized agent of a duly licensed viatical loan provider or viatical loan broker and who acts or assists in any manner in the solicitation of a viatical loan on behalf of such viatical loan provider or viatical loan broker, as applicable. A viatical loan representative does not include:
(1) an attorney, an accountant, an investment or financial planner or any person exercising a power of attorney granted by a viatical loan borrower;
(2) a person who is retained to represent a viatical loan borrower and whose compensation is paid by or at the discretion of the viatical loan borrower regardless of whether the viatical loan transaction is completed; or
(3) a credit union, trade union, not-for-profit entity or an employer or association that makes information about viatical loans available to its employees or members unless such information is distributed in exchange for financial consideration.
A viatical loan representative is deemed to represent only the viatical loan provider or viatical loan broker, as applicable.
"Viatical settlement broker", a person that, on behalf of a viator and for a fee, commission or other valuable consideration, offers or attempts to negotiate viatical settlements between a viator and one or more viatical settlement providers. Irrespective of the manner in which the viatical settlement broker is compensated a viatical settlement broker is deemed to represent only the viator and owes a fiduciary duty to the viator to act according to the viator's instructions and in the best interest of the viator. A viatical settlement broker does not include an attorney, accountant or financial planner retained to represent the viator whose compensation is paid directly by or at the direction of the viator regardless of whether the viatical settlement is completed.
"Viatical settlement contract", a written agreement entered into between a viatical settlement provider and a viator. The agreement shall establish the terms under which the viatical settlement provider will pay compensation or anything of value, which compensation or value is less than the expected death benefit of the insurance policy or certificate, in return for the viator's assignment, transfer, sale, devise or bequest of the death benefit or ownership of all or a portion of the insurance policy or certificate of insurance to the viatical settlement provider.
"Viatical settlement provider", a person, other than a viator, who enters into a viatical settlement contract, or who obtains financing from a financing entity for the purchase, acquisition, transfer or other assignment of one or more viatical settlement contracts, viaticated policies or interests therein or who otherwise sells, assigns, transfers, pledges, hypothecates or otherwise disposes of one or more viatical settlement contracts, viaticated policies or interests therein. A viatical settlement provider does not include:
(1) a bank, savings bank, savings and loan association, credit union or other licensed lending institution which takes an assignment of a life insurance policy as collateral for a loan;
(2) the issuer of a life insurance policy providing accelerated benefits and pursuant to the contract;
(3) a natural person who enters into not more than one agreement in a calendar year for the transfer of life insurance policies for any value less than the expected death benefit;
(4) a family member or friend who is not in the business of providing or obtaining viatical settlements, who enters into a viatical settlement agreement for any value less than the expected death benefit; or
(5) a financing entity.
"Viatical settlement representative", a person who is an authorized agent of a duly licensed viatical settlement provider or viatical settlement broker, as applicable, and who acts or assists in any manner in the solicitation of a viatical settlement on behalf of such viatical settlement provider or viatical settlement broker. A viatical settlement representative shall not include:
(1) an attorney, accountant, investment or financial planner or any person exercising a power of attorney granted by a viator;
(2) a person who is retained to represent a viator and whose compensation is paid by or at the discretion of the viator regardless of whether the viatical settlement transaction is completed; or
(3) a credit union, trade union, not-for-profit entity or an employer or association that makes information about viatical settlements available to its employees or members, unless such information is distributed in exchange for financial consideration.
A viatical settlement representative is deemed to represent only the viatical settlement provider or viatical settlement broker, as applicable.
"Viaticated policy", a life insurance policy or certificate that has been the subject of a completed viatical settlement contract or viatical loan contract.
"Viator", the owner of a life insurance policy or a certificate holder under a group policy insuring the life of an individual with a catastrophic, life-threatening or chronic illness or condition who enters or seeks to enter into a viatical settlement contract.
Section 214. (a) No person may act as a viatical settlement or loan provider, or as a viatical settlement or loan broker, without first having obtained a license from the commissioner. A viatical settlement or loan representative may act under the authority of the license of the viatical settlement or loan provider or viatical settlement or loan broker which appoints said representative. The appointment of a viatical settlement or loan representative must be registered with the commissioner, on a form prescribed by the commissioner, by the appointing viatical settlement or loan provider or viatical settlement or loan broker. Application for a viatical settlement or loan provider license, or viatical settlement or loan broker license shall be made to the commissioner by the applicant on a form prescribed by the commissioner, and the application shall be accompanied by a fee in an amount equal to the fee prescribed for each license or renewal thereof to an insurance agent of any company under section 163, as determined annually by the commissioner of administration under the provision of section 3B of chapter 7. Licenses may be renewed from year to year, on the anniversary date, upon payment of the annual renewal fee in an amount equal to the fee for renewal of each license to an insurance agent of any company under section 163, as determined annually by the commissioner of administration under said section 3B. Failure to pay the fee within the terms prescribed shall result in the expiration of the license.
(b) The applicant shall provide such information as the commissioner may require on forms prescribed by the commissioner. The commissioner shall have authority, at any time, to require the applicant to fully disclose the identity of all stockholders, partners, members, officers and employees. The commissioner may, in the exercise of discretion, refuse to issue a license in the name of any firm, partnership or corporation if not satisfied that any officer, employee, stockholder, member, or partner thereof, who may materially influence the applicant's conduct, meets the standards of sections 212 to 223, inclusive.
(c) Applicants for licenses and licensees seeking renewal of a license shall be required to demonstrate that they have had sufficient education and training to be qualified to act as viatical settlement or loan providers or viatical settlement or loan brokers. The commissioner may promulgate regulations regarding the standards of education and training necessary to obtain and renew a license, and the procedure for meeting those standards.
(d) A license issued to a partnership, corporation, limited liability company or other entity authorizes all members, officers and designated employees to act as viatical settlement or loan providers, viatical settlement or loan brokers, or viatical settlement or loan representatives, as applicable, under the license, and all those persons must be named in the application and any supplements to the application.
(e) Upon the filing of an application and the payment of the license fee, the commissioner shall make an investigation of each applicant and may issue a license if the commissioner finds that the applicant:
(1) has provided a detailed plan of operation;
(2) is suitable, competent and trustworthy and intends to act in good faith in the capacity involved by the license applied for;
(3) has a good business reputation so as to be qualified in the business for which the license is applied for;
(4) has met the standards of education and training established by the commissioner pursuant to sections 212 to 223, inclusive; and
(5) if a legal entity, provides a certificate of good standing from its state of domicile.
The commissioner shall not issue any license to any nonresident applicant, unless a written designation of an agent for service of process is filed and maintained with the commissioner or the applicant has filed with the commissioner the applicant's written irrevocable consent that any action against the applicant may be commenced against the applicant by service of process on the commissioner.
Section 215. (a) The commissioner shall have the right to suspend, revoke or refuse to renew the license of any viatical settlement or loan provider or viatical settlement or loan broker if the commissioner finds that:
(1) there was any material misrepresentation in the application for the license;
(2) the holder of the license has been guilty of fraudulent or dishonest practices, is subject to a final administrative action or is otherwise shown to be untrustworthy or incompetent to act as a viatical settlement or loan provider or viatical settlement or loan broker;
(3) the viatical settlement or loan provider demonstrates a pattern of unreasonable payments to viators or borrowers; or
(4) the licensee has been found guilty of, or has pleaded guilty or nolo contendere to, a felony, or a misdemeanor involving fraud or moral turpitude;
(5) the viatical settlement or loan provider or viatical settlement or loan broker has entered into viatical settlement or loan contracts that have not been approved pursuant to sections 212 to 223, inclusive;
(6) the viatical settlement or loan provider or viatical settlement or loan broker has failed to honor contractual obligations set out in viatical settlement or loan contracts;
(7) the licensee no longer meets the requirements for initial licensure;
(8) the viatical settlement or loan provider has assigned or pledged a viaticated policy to a person other than to a duly licensed viatical settlement or loan provider or a financing entity; or
(9) the licensee has violated any of the provisions of sections 212 to 223, inclusive, of this chapter.
(b) Before the commissioner shall deny a license application or revoke or refuse to renew the license of a viatical settlement or loan provider or a viatical settlement or loan broker, the commissioner shall conduct a hearing in accordance with chapter 30A. The commissioner shall also have the right to suspend a license for up to 30 days following the issuance of a cease and desist order demanding the licensee show cause within said 30 days why such license should not be revoked or non-renewed.
Section 216. No person may use any viatical settlement or loan contract in this state or provide a viator or borrower a disclosure statement form unless it has been filed with and approved by the commissioner. Any viatical settlement or loan contract form or disclosure form filed with the commissioner shall be deemed approved if it has not been disapproved within 60 days of the filing. The commissioner shall disapprove a viatical settlement or loan contract form if, in the commissioner's opinion, the contract or provisions contained therein are unreasonable, contrary to the interests of the public, or otherwise misleading or unfair to the viator or borrower.
Section 217. Each viatical settlement or loan provider shall file with the commissioner on or before March 1 of each year an annual statement containing such information as the commissioner may prescribe by regulation.
Section 218. (a) The commissioner may, when the commissioner deems it reasonably necessary to protect the interests of the public, examine the business and affairs of any licensee or applicant for a license. The commissioner shall have the authority to order any licensee or applicant to produce any records, books, files or other information reasonably necessary to ascertain whether or not the licensee or applicant is acting or has acted in violation of the law or otherwise contrary to the interests of the public. The expenses incurred in conducting any examination shall be paid by the licensee or applicant.
(b) Names, individual identification data and descriptions of the particular catastrophic, life-threatening or chronic illnesses or conditions for all insureds shall be considered private and confidential information and shall not be disclosed by the commissioner, unless required by law.
(c) Records of all transactions of viatical settlement or loan contracts shall be maintained by the viatical settlement or loan provider and shall be available to the commissioner for inspection during reasonable business hours.
A viatical settlement or loan provider shall maintain records of each viatical settlement or loan until five years after the death of the insured.
Section 219. (a) A viatical settlement or loan provider, viatical settlement or loan broker, or viatical settlement or loan representative shall disclose in writing the following information to the viator or viatical loan borrower no later than the time of application:
(1) possible alternatives to viatical settlement or loan contracts for persons with catastrophic, life-threatening or chronic illnesses or conditions, including, but not limited to, any accelerated benefits offered under the viator's or borrower's life insurance policy;
(2) the fact that some or all of the proceeds of the viatical settlement may be taxable, and that assistance should be sought from a personal tax advisor;
(3) the fact that the viatical settlement or loan could be subject to the claims of creditors;
(4) the fact that receipt of a viatical settlement or loan may adversely affect the recipient's eligibility for Medicaid or other government benefits or entitlements, and that advice should be obtained from the appropriate agencies;
(5) the viator's or borrower's right to rescind a viatical settlement or loan contract within 15 days of the receipt of the viatical settlement or loan proceeds by the viator or borrower, as provided in section 220;
(6) the procedure for contacts with the insured for the purpose of determining the health status of the insured after the viatical settlement or loan has occurred, and the fact that health monitoring contacts will be limited to once every three months for insureds with a life expectancy of more than one year and to no more than one per month for insureds with a life expectancy of one year or less;
(7) for viatical settlements, that the funds will be sent to the viator within two business days after the viatical settlement provider has received the insurer's or group administrator's acknowledgment that ownership of the policy or interest in the certificate has been transferred and the beneficiary has been designated pursuant to the viatical settlement contract. For viatical loans, that the funds will be available to be drawn on at the borrower's request within two business days after the viatical loan provider has received the insurer's or group administrator's acknowledgment verifying that the absolute assignment and beneficiary of the policy or interest in the certificate have been changed pursuant to the viatical loan contract; and
(8) entering into a viatical settlement or loan contract may cause other rights or benefits, including, but not limited to, conversion rights and waiver of premium benefits which may exist under the policy or certificate, to be forfeited by the viator or viatical loan borrower, and assistance should be sought from a financial adviser.
(b) A viatical settlement provider or viatical loan provider shall disclose the following information to the viator or viatical loan borrower at least two business days prior to the date the viatical settlement or loan contract is signed by all parties:
(1) The affiliation, if any, between the viatical settlement or loan provider and the issuer of an insurance policy which is the subject of the viatical settlement or loan.
(2) If an insurance policy which may be the subject of the viatical settlement or loan has been issued as a joint policy or involves family riders or any coverage of a life other than the insured under the policy to be viaticated, the viator or viatical loan borrower must be informed of the possible loss of coverage on the other lives and be advised to consult with the company issuing the policy for advice.
(3) The dollar amount of the current death benefit payable under the policy or certificate. The viatical settlement or loan provider shall also disclose the availability of any additional guaranteed insurance benefits, and the viatical settlement or loan provider's interest in those benefits.
Section 220. (a) A viatical settlement or loan provider entering into a viatical settlement or loan contract with a viator or viatical loan borrower shall first obtain:
(1) if the viator or viatical loan borrower is the insured, a written statement from a licensed attending physician that the viator or borrower is of sound mind and under no constraint or undue influence to enter into the contract;
(2) a witnessed document in which the viator or viatical loan borrower consents to the viatical settlement or loan contract, acknowledges that the insured has a catastrophic, life-threatening or chronic illness or condition, represents that the viator or borrower has a full and complete understanding of the viatical settlement or loan contract, that the viator or borrower has a full and complete understanding of the benefits of the life insurance policy, and that the viator or borrower has entered the viatical settlement or loan contract freely and voluntarily; and
(3) a document in which the insured consents to the release of his or her medical records to a viatical settlement or loan provider or broker.
(b) All medical information solicited or obtained by any licensee or any financing entity shall be subject to the applicable provision of law relating to confidentiality of medical information. The insured shall be offered the choice of (1) requiring that the insured's written, informed consent be obtained in each instance of disclosure of patient identifying information, or (2) signing a general consent document for the release of medical records and patient identifying information, which would remain in effect for any subsequent transactions involving the policy. If the insured elects the option in clause (2), the insured shall receive notice by first class mail of any further disclosure of patient identifying information. It is the responsibility of the party divulging the patient identifying information to notify the insured of the disclosure. "Patient identifying information" means an insured's name, address, telephone number, facsimile number, electronic mail address, photograph or likeness, employer, employment status, social security number, or any other information which is likely to lead to the identification of the insured. Patient identifying information may be disclosed to purchasers of or investors in a policy after they have signed a contract or agreement to purchase a policy. Such purchasers or investors shall be bound by section 220.
(c) All viatical settlement and loan contracts entered into in the commonwealth shall provide the viator or viatical loan borrower with an unconditional right to rescind the contract for 15 days from the receipt of the viatical settlement or loan proceeds. If the insured dies during the recission period, the viatical settlement or loan contract shall be deemed to have been rescinded, subject to repayment to the viatical settlement or loan provider of any viatical settlement or loan proceeds, if repaid within 90 days from the date of death of the insured.
(d) Immediately upon receipt from the viator or viatical loan borrower of documents to effect the transfer or assignment of the insurance policy, the viatical settlement or loan provider shall pay the proceeds of the settlement or loan to an escrow or trust account in a state or federally chartered financial institution, pending acknowledgment of the transfer or assignment by the issuer of the policy. Immediately upon receipt of confirmation by the viatical settlement provider or viatical loan provider that the insurer has acknowledged the transfer or assignment of the policy, the trustee or escrow agent shall be required to transfer to the viator or viatical loan borrower: (1) all of the proceeds due if to be made in a lump sum payment; or (2) the first installment if proceeds due are to be made in installment payments pursuant to the viatical settlement or loan contract.
(e) Failure to tender consideration to the viator or viatical loan borrower for the viatical settlement or loan contract by the date disclosed pursuant to paragraph (7) of subsection (a) of section 219 renders the viatical settlement or loan contract voidable by the viator or borrower for lack of consideration until such time as consideration is tendered to and accepted by the viator or borrower.
(f) Contacts for the purpose of determining the health status of the insured by the viatical settlement or loan provider or viatical settlement or loan broker after the viatical settlement or loan has occurred shall be limited to once every three months for insureds with a life expectancy of more than one year, and to no more than one per month for insureds with a life expectancy of one year or less. The limitations set forth in this subsection shall not apply to any contacts with an insured under a viaticated policy for reasons other than determining the insured's health status.
(g) Viatical settlement or loan providers, viatical settlement or loan brokers, and viatical settlement or loan representatives are prohibited from paying any commission or finder's fee to any person that is providing or has previously provided care or services to the insured under an insurance policy which is to be viaticated, including, but not limited to, any medical or mental health provider, social services provider, attorney, accountant, financial adviser or planner, investment adviser or planner, or any other person who has a demonstrable conflict of interest in collecting a finder's fee.
Section 221. The commissioner shall have the authority to:
(a) promulgate regulations implementing sections 212 to 223, inclusive;
(b) establish standards for evaluating the reasonableness of payments under viatical settlement or loan contracts, including authority to regulate discount rates used to determine the amount paid in exchange for assignments, transfer, sale, devise, or bequest of a benefit under a life insurance policy;
(c) establish appropriate licensing requirements, fees, and standards for viatical settlement and loan providers, viatical settlement and loan brokers, and viatical settlement and loan representatives;
(d) require a bond or other mechanism for financial accountability of viatical settlement or loan providers and establish the amount thereof; and
(e) adopt rules governing the relationship and responsibilities of insurers and viatical settlement and loan providers and viatical settlement and loan brokers during the viatication of a life insurance policy or certificate.
Section 222. A violation of sections 212 to 223, inclusive, shall be considered an unfair trade practice under chapter 176D, subject to the penalties contained therein.
Section 223. Within the office of consumer affairs and business regulation, the director of consumer affairs and business regulation shall establish a procedure for consumers involved in the viatical settlement and loan process to report problems and complaints about viatical settlement or loan providers or viatical settlement or loan brokers. Upon inquiry, consumers shall also be able to obtain information as to whether a complaint has been lodged against a particular viatical settlement or loan provider or viatical settlement or loan broker. The director shall share information about consumer complaints with the commissioner in order for the commissioner to investigate possible misconduct by licensees and enforce sections 212 to 223, inclusive.
SECTION 2. Notwithstanding this act or any general or special law to the contrary, the securities division in the office of the state secretary shall have the authority to regulate viatical settlements as securities pursuant to chapter 110A of the General Laws.
SECTION 3. This act shall take effect on March 1, 2001.