Substitute House Bill No. 7028

Public Act No. 99-104

An Act Concerning Viatical Settlement Monitoring.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Subdivision (9) of section 38a-465 of the general statutes is repealed and the following is substituted in lieu thereof:

(9) "Viatical settlement contract" means a written agreement entered into between a viatical settlement provider and a viator [which establishes the terms and conditions of a viatical settlement.] that establishes 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 contract" includes a contract for a loan or other financial transaction secured primarily by an individual or group life insurance policy, other than a loan by a life insurance company pursuant to the terms of a life insurance contract, or a loan secured by the cash value of the policy.

Sec. 2. Subdivision (10) of section 38a-465 of the general statutes is repealed and the following is substituted in lieu thereof:

(10) "Viatical settlement provider" means a person, other than a viator, who (A) enters into one or more viatical settlement contracts or (B) obtains financing from a financing entity for the purchase, acquisition, transfer or other assignment of one or more viatical settlement contracts, viatical policies or interests therein, or otherwise sells, assigns, transfers, pledges, hypothecates or otherwise disposes of one or more viatical settlement contracts, viatical policies or interests therein. Viatical settlement provider shall not include: [(A)] (i) Any bank, as defined in section 36a-2, credit union as defined in said section, or other licensed lending institution which takes an assignment of a life insurance policy as collateral for a loan; [(B)] (ii) the issuer of a life insurance policy providing accelerated benefits pursuant to section 38a-457; [(C)] (iii) a viator's adult family member, including, but not limited to, a parent, child, spouse, brother, sister, grandfather, grandmother, uncle, aunt, cousin, mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law or daughter-in-law who has not entered into a viatical settlement contract during the period of twelve months immediately preceding the date of the viatical settlement contract in question. [; or (D) any financing entity.]

Sec. 3. Subsection (d) of section 38a-465a of the general statutes is repealed and the following is substituted in lieu thereof:

(d) The commissioner may, at any time, require the applicant to fully disclose the identity of all of its stockholders, partners, key management personnel, directors, officers, members and employees, and the commissioner may deny any application for a license if the commissioner determines that any partner, key manager, director, officer, employee [or majority] stockholder or member thereof who may materially influence the applicant's conduct fails to meet any of the [criteria set forth in subsection (f) of this section] standards set forth in sections 38a-465 to 38a-465m, inclusive, as amended by this act.

Sec. 4. Section 38a-465b of the general statutes is repealed and the following is substituted in lieu thereof:

(a) The commissioner may deny a license application, or suspend, revoke or refuse to renew the license of any viatical settlement provider or viatical settlement broker if the commissioner determines that:

(1) There was a material misrepresentation in the license application or in other information submitted to the commissioner;

(2) The licensee, or any partner, key manager, director, officer or majority stockholder of the licensee has been convicted of a felony, is subject to a final administrative action to suspend or revoke a license granted by the chief insurance regulatory official of another state, or is otherwise shown to be untrustworthy or incompetent to act as a viatical settlement provider or viatical settlement broker; [or]

(3) The licensee has wilfully violated any of the provisions of [subsection (a) of section 38a-11,] sections 38a-465 to 38a-465m, inclusive, as amended by this act; [, and subdivision (19) of section 38a-816.]

(4) The viatical settlement provider demonstrates a pattern of unreasonably low payments to viators;

(5) The licensee has been found guilty of or has pleaded guilty or nolo contendere to, any felony, or to a misdemeanor involving fraud or moral turpitude regardless of whether a judgment or conviction has been entered by the court;

(6) The viatical settlement provider has entered into any viatical settlement contract that has not been approved pursuant to sections 38a-465 to 38a-465m, inclusive, as amended by this act;

(7) The viatical settlement provider has failed to honor contractual obligations set out in a viatical settlement contract;

(8) The licensee no longer meets the requirements for initial licensure; or

(9) The viatical settlement provider has assigned, transferred or pledged a viatical policy to a person other than (A) a viatical settlement provider licensed in this state or (B) a financing entity.

(b) [Before] If the commissioner denies a license application, or suspends, revokes or refuses to renew the license of a viatical settlement provider or viatical settlement broker, the [commissioner shall hold a hearing] applicant or licensee aggrieved by such denial, suspension, revocation or refusal to renew a license may appeal such action in accordance with the provisions of chapter 54. Hearings may be held by the commissioner or by any person designated by the commissioner. Whenever a person other than the commissioner acts as the hearing officer, he shall submit to the commissioner a memorandum of his findings and recommendations upon which the commissioner may base his decision.

(c) In addition to denying a license application, or suspending, revoking or refusing to renew a license, the commissioner may assess a fine of up to one thousand dollars against a viatical settlement provider for each wilful violation by the viatical settlement provider of any provision of [subsection (a) of section 38a-11,] sections 38a-465 to 38a-465m, inclusive, as amended by this act, [and subdivision (19) of section 38a-816,] or regulations adopted pursuant to said sections.

(d) In addition to denying a license application, or suspending, revoking or refusing to renew a license, the commissioner may assess a fine of up to one thousand dollars against a viatical settlement broker if:

(1) Such viatical settlement broker has knowingly received a commission or other payment or benefit from a viatical settlement provider who is unlicensed in this state in connection with a viatical settlement contract entered into with a viator resident in this state;

(2) Such viatical settlement broker has defrauded, misled or mistreated viators; or

(3) Such viatical settlement broker has wilfully violated a provision of [subsection (a) of section 38a-11,] sections 38a-465 to 38a-465m, inclusive, as amended by this act, [and subdivision (19) of section 38a-816,] or regulations adopted pursuant to said sections.

Sec. 5. Section 38a-465e of the general statutes is repealed and the following is substituted in lieu thereof:

[(a) In response to a complaint concerning a license or in connection with the review of an application for a license pursuant to section 38a-465a,]

(a) When the commissioner deems it reasonably necessary to protect the interests of the public, the commissioner may examine the business and affairs of any licensee or applicant for a license.

(b) Licensees shall maintain records of each viatical settlement and, subject to the provisions of section 38a-465d, such records shall be available, during reasonable business hours, to the commissioner for inspection for the [three-year] five-year period following the insured's death. Subject to the provisions of said section, the commissioner shall also have the authority to order any licensee or applicant to produce any records, books, files or other information reasonably necessary to ascertain whether the licensee or applicant is acting or has acted in violation of any provision of [subsection (a) of section 38a-11,] sections 38a-465 to 38a-465m, inclusive, as amended by this act, [and subdivision (19) of section 38a-816,] or of any regulations adopted pursuant to said sections. The licensee or applicant shall pay all expenses incurred by the commissioner in conducting any inspection or examination.

Sec. 6. Section 38a-465f of the general statutes is repealed and the following is substituted in lieu thereof:

Each viatical settlement provider and viatical settlement broker shall disclose in writing the following information to each viator prior to the date all parties execute a viatical settlement contract:

(1) The possible alternatives to, or options that may be exercised in conjunction with, the viatical settlement contract, including, but not limited to, accelerated death benefits offered by the insurer of such viator's life insurance policy or group life insurance policy to which the viator's certificate relates;

(2) That some or all of the proceeds of the viatical settlement may be free from federal income tax or from state tax, and shall advise parties to seek assistance from a professional tax advisor;

(3) That receipt of the viatical settlement proceeds may adversely affect the viator's eligibility for Medicaid or other government benefits, and advice should be obtained from the appropriate governmental agencies or advisors;

(4) That the viatical settlement provider may assign or otherwise transfer its interests in the viaticated policy to a third party;

(5) That the viator may rescind the viatical settlement contract within fifteen days after the viator's receipt of the viatical settlement proceeds; [and]

(6) That the viatical settlement proceeds may be subject to the claims of creditors;

(7) That funds will be sent to the viator within two business days after the viatical settlement provider has received the insurer or group administrator's acknowledgment that ownership of the viatical policy or interest in the certificate has been transferred and the beneficiary has been designated pursuant to sections 38a-465 to 38a-465m, inclusive, as amended by this act; and

(8) That entering into the viatical settlement contract may cause other rights or benefits, including conversion rights, a waiver of premium benefits that may exist under the policy or certificate, to be forfeited by the viator and that assistance should be sought from a financial advisor.

Approved June 3, 1999

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