PRIOR PRINTER'S NO. 483 PRINTER'S NO. 1465
No. 462 Session of 2001
INTRODUCED BY MOWERY, COSTA, M. WHITE, EARLL, BELL, SCHWARTZ AND
WAGNER, FEBRUARY 15, 2001
SENATOR HOLL, BANKING AND INSURANCE, AS AMENDED,
OCTOBER 23, 2001
AN ACT
1 Providing for the regulation of viatical settlements and for
2 powers and duties of the Insurance Department.
3 TABLE OF CONTENTS
4 Section 1. Short title.
5 Section 2. Definitions.
6 Section 3. License requirements.
7 Section 4. License suspension, revocation and denial.
8 Section 5. Approval of viatical settlement contracts and
9 disclosure statements.
10 Section 6. Reporting requirements and confidentiality.
11 Section 7. Disclosure.
12 Section 8. General rules.
13 Section 9. Prohibited practices.
14 Section 10. Fraud prevention and control.
15 Section 11. Responsibility of department.
16 Section 12. Injunctions; civil remedies; cease and desist.
17 Section 13. Miscellaneous provisions. <--
1 Section 14. Unfair trade practices.
2 Section 15. Severability.
3 Section 16. Applicability of securities laws.
4 Section 17. Examination and investigation of books and
5 records.
6 Section 18. Transition provision.
7 Section 19. Effective date.
8 SECTION 13. VIOLATION OF ACT. <--
9 SECTION 14. SEVERABILITY.
10 SECTION 15. APPLICABILITY OF SECURITIES LAWS.
11 SECTION 16. EXAMINATION AND INVESTIGATION OF BOOKS AND
12 RECORDS.
13 SECTION 17. TRANSITION PROVISION.
14 SECTION 18. EFFECTIVE DATE.
15 The General Assembly of the Commonwealth of Pennsylvania
16 hereby enacts as follows:
17 Section 1. Short title.
18 This act shall be known and may be cited as the Viatical
19 Settlements Act.
20 Section 2. Definitions.
21 The following words and phrases when used in this act shall
22 have the meanings given to them in this section unless the
23 context clearly indicates otherwise:
24 "Advertising." Any written, electronic or printed
25 communication or any communication by means of recorded
26 telephone messages or transmitted on radio, television, the
27 Internet or similar communications media, including film strips,
28 motion pictures and videos, published, disseminated, circulated
29 or placed before the public, directly or indirectly, for the
30 purpose of creating an interest in or inducing a person to sell
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1 a life insurance policy pursuant to a viatical settlement
2 contract.
3 "Business of viatical settlements." An activity involved in,
4 but not limited to, the offering, solicitation, negotiation,
5 procurement, effectuation, purchasing, investing, financing,
6 monitoring, tracking, underwriting, selling, transferring,
7 assigning, pledging or hypothecating in any other manner of OR <--
8 PLEDGING viatical settlement contracts in this Commonwealth.
9 "Chronically ill." A condition which means a person:
10 (1) is unable to perform at least two activities of
11 daily living including, but not limited to, eating,
12 toileting, transferring, bathing, dressing or continence; OR <--
13 (2) requires substantial supervision to protect the
14 individual from threats to health and safety due to severe
15 cognitive impairment.; or <--
16 (3) has a level of disability similar to that described
17 in paragraph (1) as determined by the Secretary of Health and
18 Human Services.
19 "Commissioner." The Insurance Commissioner of the
20 Commonwealth.
21 "Department." The Insurance Department of the Commonwealth.
22 "Financing entity." An underwriter, placement agent, lender, <--
23 purchaser of securities, purchaser of a policy or certificate
24 from a viatical settlement provider, credit enhancer or any
25 entity that has a direct ownership in a policy or certificate
26 that is the subject of a viatical settlement contract, but:
27 (1) whose principal activity related to the transaction
28 is providing funds to effect the viatical settlement or
29 purchase of one or more viaticated policies;
30 (2) who has an agreement in writing with one or more
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1 licensed viatical settlement providers to finance the
2 acquisition of viatical settlement contracts; and
3 (3) who is not a nonaccredited investor or viatical
4 settlement purchaser.
5 "FINANCING ENTITY." AN ENTITY, OTHER THAN A NONACCREDITED <--
6 INVESTOR OR VIATICAL SETTLEMENT PURCHASER, THAT HAS A DIRECT
7 OWNERSHIP IN A POLICY OR CERTIFICATE THAT IS THE SUBJECT OF A
8 VIATICAL SETTLEMENT CONTRACT, AND:
9 (1) THE ENTITY'S PRINCIPAL ACTIVITY RELATED TO THE
10 TRANSACTION IS PROVIDING FUNDS TO EFFECT THE VIATICAL
11 SETTLEMENT OR PURCHASE OF ONE OR MORE VIATICATED POLICIES;
12 AND
13 (2) THE ENTITY HAS AN AGREEMENT IN WRITING WITH ONE OR
14 MORE LICENSED VIATICAL SETTLEMENT PROVIDERS TO FINANCE THE
15 ACQUISITION OF VIATICAL SETTLEMENT CONTRACTS.
16 "Fraudulent viatical settlement act." An act or omission
17 committed by any person who, knowingly or with intent to
18 defraud, for the purpose of depriving another of property or for
19 pecuniary gain, commits or permits its employees or its agents
20 to commit any of the following acts:
21 (1) Presenting, causing to be presented or preparing
22 with knowledge or belief that it will be presented to or by a
23 viatical settlement provider, viatical settlement broker,
24 viatical settlement purchaser, financing entity, insurer,
25 insurance broker, insurance agent or any other person false
26 material information or concealing material information as
27 part of, in support of or concerning a fact material to one
28 or more of the following:
29 (i) An application for the issuance of a viatical
30 settlement contract or insurance policy.
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1 (ii) The underwriting of a viatical settlement
2 contract or insurance policy.
3 (iii) A claim for payment or benefit pursuant to a
4 viatical settlement contract or insurance policy.
5 (iv) Premiums paid on an insurance policy.
6 (v) Payments and changes in ownership or beneficiary
7 made in accordance with the terms of a viatical
8 settlement contract or insurance policy.
9 (vi) The reinstatement or conversion of an insurance
10 policy.
11 (vii) The solicitation, offer, effectuation or sale
12 of a viatical settlement contract or insurance policy.
13 (viii) The issuance of written evidence of a
14 viatical settlement contract or insurance.
15 (ix) A financing transaction.
16 (2) In the furtherance of a fraud or to prevent the
17 detection of a fraud:
18 (i) removes, conceals, alters, destroys or <--
19 sequesters OR DESTROYS, from the Insurance Commissioner <--
20 or the Insurance Department, the assets or records of a <--
21 licensee or other person engaged in the business of
22 viatical settlements;
23 (ii) misrepresents or conceals the financial
24 condition of a licensee, insurer or other person OR <--
25 INSURER;
26 (iii) transacts the business of viatical settlements
27 in violation of laws requiring a license, certificate of
28 authority or other legal authority for the transaction of
29 the business of viatical settlements; or
30 (iv) files with the Insurance Commissioner, the
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1 Insurance Department or the chief insurance regulatory
2 official or agency of another jurisdiction a document
3 containing false information or otherwise conceals
4 information about a material fact.
5 (3) Presenting, causing to be presented or preparing
6 with knowledge or reason to believe that it will be presented
7 to or by a viatical settlement provider, viatical settlement
8 broker, insurer, insurance agent, financing entity, viatical
9 settlement purchaser or any other person, in connection with
10 a viatical settlement transaction or insurance transaction,
11 an insurance policy, knowing the policy was fraudulently
12 obtained by the insured, owner or any agent thereof.
13 (4) Embezzlement, theft, misappropriation or conversion
14 of moneys, funds, premiums, credits or other property of a
15 viatical settlement provider, insurer, insured, viator,
16 insurance policy owner or any other person engaged in the
17 business of viatical settlements or insurance.
18 (5) Attempting to commit, assisting, aiding or abetting
19 in the commission of or the conspiracy to commit the acts or
20 omissions specified in this subsection.
21 "INDEPENDENT ESCROW AGENT." A PERSON, DESIGNATED BY THE <--
22 VIATICAL SETTLEMENT PROVIDER AND RECOGNIZED BY THE INSURANCE
23 COMMISSIONER TO ACCEPT, TRANSMIT AND PAY THE PROCEEDS OF THE
24 VIATICAL SETTLEMENT.
25 "Insurer." Any PROPERLY LICENSED life insurance company, <--
26 association or exchange.
27 "Licensee." A viatical settlement provider or viatical
28 settlement broker.
29 "Person." A natural person or a legal entity, including, but <--
30 not limited to, an individual, joint stock company,
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1 unincorporated organization, partnership, limited liability
2 company, association, trust, corporation, or any other similar
3 legal entity or any of the foregoing acting in concert.
4 "Policy." An individual or group policy, group certificate,
5 contract or arrangement of life insurance affecting the rights
6 of a resident of this Commonwealth or bearing a reasonable <--
7 relation to this Commonwealth, regardless of whether delivered
8 or issued for delivery in this Commonwealth.
9 "Related provider trust." A titling trust or other trust
10 established by a licensed viatical settlement provider OR <--
11 FINANCING ENTITY for the sole purpose of holding the ownership
12 or beneficial interest in purchased policies in connection with
13 a financing transaction, which trust:
14 (1) has a written agreement with the licensed viatical
15 settlement provider under which the licensed viatical
16 settlement provider is responsible for ensuring compliance
17 with all statutory and regulatory requirements; and
18 (2) has a written agreement with the licensed viatical
19 settlement provider under which the trust agrees to make all
20 records and files related to viatical settlement transactions
21 available to the Insurance Department as if those records and
22 files were maintained directly by the licensed viatical
23 settlement provider.
24 "Special purpose entity." A corporation, partnership, trust,
25 limited liability company or other similar entity, other than a
26 natural person, formed solely to provide either directly or
27 indirectly access to institutional capital markets for a
28 financing entity or licensed viatical settlement provider.
29 "Terminally ill." Having an illness or sickness that can
30 reasonably be expected to result in death in 24 months or less.
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1 "Viatical settlement broker." A person that on behalf of a
2 viator and for a fee, commission or other valuable consideration
3 offers TO NEGOTIATE or attempts to negotiate viatical <--
4 settlements between a viator and one or more viatical settlement
5 provider PROVIDERS. The term does not include an attorney or, <--
6 certified public accountant OR CERTIFIED FINANCIAL PLANNER who <--
7 is retained to represent the viator and whose compensation is
8 not paid directly or indirectly by the viatical settlement
9 provider or purchaser. The term also does not include an
10 investment advisor registered under the Investment Advisers Act
11 of 1940 (15 U.S.C. § 80b-1 et seq.) or the act of December 5,
12 1972 (P.L.1280, No.284), known as the Pennsylvania Securities
13 Act of 1972, possessing a designation recognized by the
14 Pennsylvania Securities Commission for the purposes of waiving
15 any examination requirement under the Pennsylvania Securities
16 Act of 1972, who is retained to represent the viator and whose
17 compensation is not paid directly or indirectly by the viatical
18 settlement provider or purchaser.
19 "Viatical settlement contract." A written agreement ENTERED <--
20 INTO BETWEEN A VIATICAL SETTLEMENT PROVIDER AND A PERSON OWNING
21 A POLICY OR GROUP POLICY establishing the terms under which
22 compensation or anything of value will be paid, which
23 compensation or value is less than the expected death benefit of
24 the insurance policy or certificate, in return for the viator's
25 assignment, transfer, sale, devise or bequest of the death
26 benefit or ownership of any portion of the insurance policy or
27 certificate of insurance. The term also includes a contract for
28 a loan or other financing transaction secured primarily by an
29 individual or group life insurance policy, other than a loan by
30 a life insurance company pursuant to the terms of the life
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1 insurance contract, or a loan secured by the cash value of a
2 policy. A viatical settlement contract includes an agreement to
3 transfer ownership or change the beneficiary designation at a
4 later date regardless of the date that compensation is paid to
5 the viator.
6 "Viatical settlement provider." A person, other than a
7 viator, that enters into or effectuates a viatical settlement
8 contract. The term does not include:
9 (1) a bank, bank and trust, savings bank, savings and
10 loan association, credit union or other licensed lending
11 institution that takes an assignment of a life insurance
12 policy as collateral for a loan;
13 (2) the issuer of a life insurance policy providing
14 accelerated benefits pursuant to the contract;
15 (3) an authorized or eligible insurer that provides stop
16 loss coverage to a viatical settlement provider, purchaser,
17 financing entity, special purpose entity or related provider
18 trust;
19 (4) a natural person who enters into or effectuates no
20 more than one agreement in a calendar year for the transfer
21 of life insurance policies for any value less than the
22 expected death benefit;
23 (5) a financing entity;
24 (6) a special purpose entity;
25 (7) a related provider trust; or <--
26 (8) a viatical settlement purchaser; OR <--
27 (9) AN ACCREDITED INVESTOR, QUALIFIED INSTITUTIONAL
28 BUYER OR QUALIFIED PURCHASER, AS DEFINED RESPECTIVELY IN 17
29 CFR § 230.501 (RELATING TO DEFINITIONS AND TERMS USED IN
30 REGULATION D), 17 CFR § 230.144A (RELATING TO PRIVATE RESALES
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1 OF SECURITIES TO INSTITUTIONS), SECTION 18(B)(3) OF THE
2 SECURITIES ACT OF 1933 (48 STAT. 74, 15 U.S.C. § 77C ET
3 SEQ.), AND WHO PURCHASES A VIATICATED POLICY FROM A LICENSED
4 VIATICAL SETTLEMENT PROVIDER.
5 "Viatical settlement purchaser." A person who gives a sum of
6 money as consideration for a life insurance policy or an
7 interest in the death benefits of a life insurance policy or a
8 person who owns, acquires or is entitled to a beneficial
9 interest in a trust that owns a viatical settlement contract or
10 is the beneficiary of a life insurance policy, which has been or
11 will be the subject of a viatical settlement contract, for the
12 purpose of driving DERIVING an economic benefit. A viatical <--
13 settlement purchaser does not include:
14 (1) a licensee under this act;
15 (2) a accredited investor or qualified institutional <--
16 buyer, as defined respectively in State law or Regulation D,
17 Rule 501 or Rule 144A of the Federal Securities Act of 1933
18 (48 Stat. 74, 15 U.S.C. § 77c et seq.), as amended;
19 (2) AN ACCREDITED INVESTOR, QUALIFIED INSTITUTIONAL <--
20 BUYER OR QUALIFIED PURCHASER, AS DEFINED RESPECTIVELY IN 17
21 CFR § 230.501 (RELATING TO DEFINITIONS AND TERMS USED IN
22 REGULATION D), 17 CFR § 230.144A (RELATING TO PRIVATE RESALES
23 OF SECURITIES TO INSTITUTIONS) AND SECTION 18(B)(3) OF THE
24 SECURITIES ACT OF 1933 (48 STAT. 74, 15 U.S.C § 77C ET SEQ.),
25 AND WHO PURCHASES A VIATICATED POLICY FROM A VIATICAL
26 SETTLEMENT PROVIDER;
27 (3) a financing entity;
28 (4) a special purpose entity; or
29 (5) a related provider trust.
30 "Viaticated policy." A life insurance policy or certificate
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1 that has been acquired by a viatical settlement provider
2 pursuant to a viatical settlement contract.
3 "Viator." The owner of a life insurance policy or a
4 certificate holder under a group policy who enters or seeks to
5 enter into a viatical settlement contract. For the purposes of
6 this act, a viator shall not be limited to an owner of a life
7 insurance policy or a certificate holder under a group policy
8 insuring the life of an individual with a terminal or chronic
9 illness or condition except where specifically addressed in this
10 act. The term does not include:
11 (1) a licensee under this act;
12 (2) an accredited investor or qualified institutional
13 buyer, as defined respectively in Regulation D, Rule 501 or <--
14 Rule 144A of the Federal Securities Act of 1933 (48 Stat. 74,
15 15 U.S.C. § 77c et seq.), as amended; 17 CFR § 230.501 <--
16 (RELATING TO DEFINITIONS AND TERMS USED IN REGULATION D), 17
17 CFR § 230.144A (RELATING TO PRIVATE RESALES OF SECURITIES TO
18 INSTITUTIONS);
19 (3) a financing entity;
20 (4) a special purpose entity; or
21 (5) a related provider trust.
22 Section 3. License requirements.
23 (a) General rule.--No person shall engage in the business of
24 viatical settlements or otherwise operate as a viatical
25 settlement provider or viatical settlement broker in this
26 Commonwealth without first obtaining an appropriate license from
27 the department and being considered by the department to be
28 worthy of such licensure.
29 (b) Application.--Application for a viatical settlement
30 provider or viatical settlement broker license shall be made to
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1 the department by the applicant on a form required by the
2 department. An application for initial licensure as a viatical
3 settlement provider shall include the following information in
4 addition to any other information required by the department:
5 (1) an audited financial statement no more than one year
6 and 120 days OLD prepared under the generally accepted <--
7 accounting principles; and
8 (2) an unaudited financial statement as of the end of
9 the most recent quarter.
10 (c) Fees.--The following licensing fees shall be due at the
11 time of initial and renewal application:
12 (1) For licensure as a viatical settlement provider,
13 $300.
14 (2) For licensure as a viatical settlement broker, $100.
15 (3) Fees for initial and renewal licensure as a viatical
16 settlement provider and viatical settlement broker may be
17 adjusted no more than annually at the discretion of the
18 commissioner by publishing a notice in the Pennsylvania
19 Bulletin.
20 (d) Reciprocity.--
21 (1) The department shall not assess a greater fee for a
22 viatical settlement provider license or viatical settlement
23 broker license or related service to a person not residing in
24 this State based solely on the fact that the person does not
25 reside in this State.
26 (2) The department shall waive any license application
27 requirements for a nonresident license applicant with a valid
28 viatical settlement provider or viatical settlement broker
29 license from the applicant's home state, if:
30 (i) the viatical settlement provider or viatical
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1 settlement broker has submitted the proper request for
2 licensure and has paid the appropriate licensure fees;
3 (ii) the viatical settlement provider or viatical
4 settlement broker has submitted or transmitted to the
5 department the application for licensure that the person
6 submitted to his or her home state; and
7 (iii) the viatical settlement provider's or the
8 viatical settlement broker's home state awards
9 nonresident viatical settlement provider and viatical
10 settlement broker licenses to residents of this State on
11 the same basis.
12 (e) Renewal.--A license issued under this section shall
13 expire and may be renewed on the anniversary month of the
14 initial date of licensure upon payment of the appropriate
15 renewal fee and application with the department on a form
16 required by the department. Failure to pay the fee or submit the
17 renewal form within the terms required by the department shall
18 be deemed voluntary termination of the license. The issuance of
19 a renewal license to a viatical settlement provider shall be
20 subject to approval of the appropriate application and financial
21 information filed with the department.
22 (f) Bond.--In order to be eligible for licensure or renewal
23 as a viatical settlement provider, an applicant must be bonded
24 or otherwise provide for its financial accountability in an
25 amount required by the department.
26 (g) Full disclosure.--The applicant shall provide
27 information on forms required by the department. The department
28 may, at any time, require the applicant to fully disclose the
29 identity of all stockholders, partners, officers, members and
30 employees, and the EMPLOYEES. THE department may, in its <--
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1 discretion, refuse to issue a license in the name of a legal
2 entity if not satisfied that any officer, employee, stockholder,
3 partner or member thereof who may materially influence the
4 applicant's conduct meets the standards set forth in this act.
5 (h) Authorization.--A viatical settlement provider license
6 issued to a legal entity authorizes all partners, officers,
7 members and designated employees to act as a viatical settlement
8 provider under the legal entity's viatical settlement provider
9 license, and all such persons AND ANY PERSON HAVING MATERIAL <--
10 INFLUENCE OVER THE ENTITY shall be named in the application and
11 any supplements to the application. A viatical settlement broker
12 license issued to a legal entity authorizes only that entity to
13 act as a viatical settlement broker and such license does not
14 authorize partners, officers, members and designated employees
15 of the legal entity to act as viatical settlement brokers under
16 the legal entity's license.
17 (i) Investigation.--Upon the filing of an application and
18 the payment of the license PROCESSING fee, the department shall <--
19 make an investigation of each applicant and issue a license if
20 the department finds that the applicant:
21 (1) if a viatical settlement provider, has provided a
22 detailed plan of operation;
23 (2) is competent and trustworthy and intends to act in
24 good faith in the capacity involved by the license applied
25 for;
26 (3) has a good business reputation and has had
27 experience, training or education so as to be qualified in
28 the business for which the license is applied for;
29 (4) if a legal entity, provides a certificate of good
30 standing from the state of its domicile; and <--
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1 (5) has provided an antifraud plan that meets the
2 requirements of section 10(g); AND <--
3 (6) HAS PROVIDED THE NAME OF A DESIGNATED AGENT FOR OUT-
4 OF-STATE COMPANIES.
5 (j) Report.--A viatical settlement provider or viatical
6 settlement broker shall provide to the department new or revised
7 information about officers, 10% or more stockholders, partners,
8 directors, members or designated employees within 30 days of the
9 change.
10 (K) APPROVAL.--AN APPLICATION FOR LICENSE FOR A VIATICAL <--
11 SETTLEMENT PROVIDER OR VIATICAL SETTLEMENT BROKER SHALL BE
12 APPROVED OR DISAPPROVED BY THE DEPARTMENT WITHIN 90 DAYS OF
13 RECEIPT OF A COMPLETED APPLICATION UNLESS THE APPLICANT WAIVES
14 THE TIME PERIOD.
15 Section 4. License suspension, revocation and denial.
16 (a) Suspension, revocation and denial.--The commissioner may
17 refuse to issue, suspend, revoke or refuse to renew the license
18 of a viatical settlement provider or viatical settlement broker
19 if the commissioner finds that:
20 (1) there was any material misrepresentation in the <--
21 application for the license;
22 (2) the licensee or any officer, partner, member or key
23 management personnel has been convicted ADJUDGED GUILTY of <--
24 fraudulent or dishonest practices, is subject to a final
25 administrative action or is shown to be untrustworthy,
26 incompetent or otherwise unworthy of licensure by the
27 department;
28 (3) the viatical settlement provider demonstrates a
29 pattern of unreasonable payments to viators;
30 (4) the licensee has been found guilty of or has pleaded
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1 guilty or nolo contendere to any felony or to a misdemeanor
2 involving fraud or moral turpitude, regardless of whether a
3 judgment of conviction has been entered by the court;
4 (5) the viatical settlement provider has entered into
5 any viatical settlement contract that THE FORM OF WHICH has <--
6 not been approved pursuant to this act;
7 (6) the viatical settlement provider has failed to honor
8 contractual obligations set out in a viatical settlement
9 contract;
10 (7) the licensee no longer meets the requirements for
11 initial licensure;
12 (8) the viatical settlement provider has assigned,
13 transferred or pledged a viaticated policy to a person other
14 than a viatical settlement provider or purchaser licensed in <--
15 this Commonwealth or a financing entity, special purpose
16 entity, STOP-LOSS PROVIDER, VIATICAL SETTLEMENT PURCHASER or <--
17 related provider trust;
18 (9) the licensee has effectuated the viatication of a
19 life insurance policy that the licensee knew or reasonably
20 should have known was procured through fraudulent means;
21 (10) the licensee has violated any provision of this act
22 or any regulations promulgated by the department; or
23 (11) the licensee's viatical settlement provider,
24 viatical settlement broker or other license related to the
25 sale or effectuation of viatical settlement policies,
26 insurance or securities has been revoked or suspended in this
27 or another state.
28 (b) Hearing.--An applicant who disputes the department's
29 determination concerning licensure may seek a formal
30 administrative hearing before the commissioner under 2 Pa.C.S.
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1 Ch. 5 Subch. A (relating to practice and procedure of
2 Commonwealth agencies).
3 Section 5. Approval of viatical settlement contracts and
4 disclosure statements.
5 (a) General rule.--A person shall not use a viatical
6 settlement contract or provide to a viator a disclosure
7 statement form in this Commonwealth unless the contract or form
8 is filed with and approved by the department. The department
9 shall disapprove a viatical settlement contract form or viatical
10 settlement disclosure statement form if, in the department's
11 opinion, the contract or statement or provisions contained
12 therein are unreasonable, contrary to the interests of the
13 public or, otherwise misleading or unfair to the viator. At the <--
14 department's discretion, the department may also require the
15 submission of advertising material.
16 (b) Deemed effective.--Unless disapproved within 45 days of
17 receipt by the department, a filing of a viatical settlement
18 contract or viatical settlement disclosure form shall be
19 effective for use.
20 (c) Disapproval after use.--Any viatical settlement contract
21 or viatical settlement disclosure form approved or effective for
22 use in accordance with subsections (a) and (b) may be
23 subsequently disapproved by the department. The department shall
24 notify the appropriate person in writing and provide the
25 opportunity for a hearing as provided in 2 Pa.C.S. Ch. 5 Subch.
26 A (relating to practice and procedure of Commonwealth agencies)
27 and Ch. 7 Subch. A (relating to judicial review of Commonwealth
28 agency action).
29 (d) Discontinuance of contract.--If following a hearing the
30 commissioner finds that a viatical settlement contract or
20010S0462B1465 - 17 -
1 viatical settlement disclosure statement form should be
2 disapproved, the commissioner shall order the use of the
3 contract or disclosure form to be discontinued after a date
4 specified in the order.
5 Section 6. Reporting requirements and confidentiality.
6 (a) General rule.--With each renewal application on the
7 anniversary month of initial licensure by the department, each
8 licensee shall file an annual statement containing such
9 information as required by the department, and if DEPARTMENT. IF <--
10 THE LICENSEE IS a viatical settlement provider, such information
11 shall include:
12 (1) an audited financial statement no more than one year
13 and 120 days old prepared under the generally accepted
14 accounting principles; and
15 (2) an unaudited financial statement as of the end of
16 the most recent quarter.
17 (b) Confidentiality.--Except as otherwise allowed or
18 required by law, a viatical settlement provider, viatical
19 settlement broker, insurance company, insurance agent, insurance
20 broker, information bureau, rating agency or company or any
21 other person with actual knowledge of an insured's identity,
22 health information or financial information may not disclose
23 that information as an insured to any other person unless the
24 disclosure is:
25 (1) necessary to effect a viatical settlement between
26 the viator and a viatical settlement provider and the viator
27 and insured have provided prior written consent to the
28 disclosure;
29 (2) necessary to effect a viatical settlement purchase
30 agreement between the viatical settlement purchaser and a
20010S0462B1465 - 18 -
1 viatical settlement provider and the viator and insured have
2 provided prior written consent to the disclosure;
3 (3) provided in response to an investigation or
4 examination by the department or any other governmental
5 officer or agency or pursuant to the requirements of section <--
6 12(c); OFFICER OR AGENCY; <--
7 (4) a term of or condition to the transfer of a policy
8 by one viatical settlement provider to another viatical
9 settlement provider and the viator and insured have provided
10 prior written consent to the disclosure;
11 (5) necessary to permit a financing entity, related
12 provider trust or special purpose entity to finance the
13 purchase of policies by a viatical settlement provider, and
14 the parties to the transaction agree to maintain the
15 confidentiality of such information and the viator and
16 insured have provided written consent to the disclosure;
17 (6) made by an insurance company in the course of its
18 business, including, without being limited to, activities
19 such as reinsurance transactions, sales or mergers of the
20 insurance company or one or more of its books of business,
21 handling and investigation of claims and conduct of all legal
22 proceedings connected with them, underwriting, litigation and
23 market conduct investigations and the viator and insured have
24 provided prior written consent to the disclosure;
25 (7) necessary to allow the viatical settlement provider
26 or viatical settlement broker or their authorized
27 representatives to make contacts for the purpose of
28 determining health status and the viator and insured have
29 provided prior written consent to the disclosure; or
30 (8) required to purchase stop loss coverage and the
20010S0462B1465 - 19 -
1 viator and insured have provided prior written consent to the
2 disclosure.
3 Section 7. Disclosure.
4 (a) General rule.--With each application for a viatical
5 settlement, a viatical settlement provider or viatical
6 settlement broker shall provide the viator with at least the
7 following disclosures no later than the time the application for
8 the viatical settlement contract is signed by all parties. The
9 disclosures shall be provided in a separate document that is
10 signed by the viator and the viatical settlement provider or
11 viatical settlement broker and shall provide the following
12 information:
13 (1) there are possible alternatives to viatical <--
14 settlement contracts, including any accelerated death
15 benefits or policy loans offered under the viator's life
16 insurance policy;
17 (2) some or all of the proceeds of the viatical
18 settlement may be taxable under Federal income tax and State
19 franchise and income taxes, and assistance should be sought
20 from a professional tax advisor;
21 (3) proceeds of the viatical settlement could be subject
22 to the claims of creditors;
23 (4) receipt of the proceeds of a viatical settlement may
24 adversely affect the viator's eligibility for Medicaid or
25 other government benefits or entitlements, and advice should
26 be obtained from the appropriate government agencies;
27 (5) the viator has the right to rescind a viatical
28 settlement contract for 15 calendar days from the receipt of
29 the viatical settlement proceeds by the viator, as provided
30 in section 8(g). If the insured dies during the recession <--
20010S0462B1465 - 20 -
1 RESCISSION period, the settlement contract shall be deemed to <--
2 have been rescinded, subject to repayment of all viatical
3 settlement proceeds to the viatical settlement company; <--
4 PROCEEDS AND OTHER PAYMENTS MADE BY THE VIATICAL SETTLEMENT <--
5 PROVIDER ON BEHALF OF THE VIATOR OR INSURED, TO THE VIATICAL
6 SETTLEMENT PROVIDER;
7 (6) funds will be sent to the viator within three
8 business days after the viatical settlement provider has
9 received the insurer or group administrator's acknowledgment
10 that ownership of the policy or interest in the certificate
11 has been transferred and the beneficiary has been designated;
12 (7) entering into a viatical settlement contract may
13 cause other rights or benefits, including conversion rights
14 and waiver of premium benefits that may exist under the
15 policy or certificate, to be forfeited by the viator, and
16 that assistance should be sought from a financial adviser;
17 and <--
18 (8) all medical, financial or personal information
19 solicited or obtained by a viatical settlement provider or
20 viatical settlement broker about an insured, including the
21 insured's identity or the identity of family members, a
22 spouse or a significant other may be disclosed as necessary
23 to effect the viatical settlement between the viator and the
24 viatical settlement provider and/or financing entities. If a
25 viator is asked to provide this information, the viator must
26 consent to the disclosure, and failure to consent may affect
27 the viator's ability to viaticate a life insurance policy.
28 The information may be provided to viatical settlement
29 purchasers, financing entities, special purpose entities or
30 related provider trusts. RELATED PROVIDER TRUSTS; AND <--
20010S0462B1465 - 21 -
1 (9) ALL INFORMATION PROVIDED BY A VIATOR OR INSURED TO A
2 VIATICAL SETTLEMENT PROVIDER OR VIATICAL SETTLEMENT BROKER
3 WILL BE SHARED WITH THE INSURER THAT ISSUED THE LIFE
4 INSURANCE POLICY THAT IS THE SUBJECT OF THE VIATICAL
5 TRANSACTION.
6 (b) Viatical settlements brochure.--Prior to the time the
7 application for a viatical settlement contract is signed by all
8 parties, a viatical settlement provider or viatical settlement
9 broker shall provide the viator with a brochure describing the
10 process of viatical settlements. The form for the brochure shall <--
11 be the National Association of Insurance Commissioners' (NAIC)
12 brochure entitled "Selling Your Life Insurance Policy:
13 Understanding Viatical Settlements" unless one is developed by
14 the department. THE DEPARTMENT SHALL DEVELOP THIS BROCHURE TO <--
15 EDUCATE CONSUMERS IN THE SELLING OF THEIR LIFE INSURANCE
16 POLICIES.
17 (c) Disclosures by viatical settlement provider.--A viatical
18 settlement provider shall provide the viator with at least the
19 following disclosures no later than the date the viatical
20 settlement contract is signed by all parties. The disclosures
21 shall be conspicuously displayed in the viatical settlement
22 contract or in a separate document signed by the viator and the
23 viatical settlement provider or viatical settlement broker, and
24 provide the following information:
25 (1) The affiliation, if any, between the viatical
26 settlement provider and the issuer of the insurance policy to
27 be viaticated.
28 (2) The name, address and telephone number of the
29 viatical settlement provider.
30 (3) A viatical settlement broker shall disclose the <--
20010S0462B1465 - 22 -
1 amount and method of calculating the broker's compensation.
2 The term "compensation" includes anything of value paid or
3 given to a viatical settlement broker for the placement of a
4 policy.
5 (4) (3) If an insurance policy to be viaticated has been <--
6 issued as a joint policy or involves family riders or any
7 coverage of a life other than the insured under the policy to
8 be viaticated, the possible loss of coverage on the other
9 lives under the policy and shall be advised to consult with
10 his or her insurance producer or the insurer issuing the
11 policy for advice on the proposed viatical settlement.
12 (5) (4) The dollar amount of the current death benefit <--
13 payable to the viatical settlement provider under the policy
14 or certificate, and, if known, the availability of any
15 additional guaranteed insurance benefits, the dollar amount
16 of any accidental death and dismemberment benefits under the
17 policy or certificate and the viatical settlement provider's
18 interest in those benefits.
19 (6) (5) The name, business address and telephone number <--
20 of the independent third party escrow agent, and the fact
21 that the viator or owner may inspect or receive copies of the
22 relevant escrow or trust agreements or documents.
23 (D) DISCLOSURE BY A VIATICAL SETTLEMENT BROKER.--IN ADDITION <--
24 TO ANY OTHER DISCLOSURES, A VIATICAL SETTLEMENT BROKER SHALL
25 PROVIDE A PROSPECTIVE VIATOR WITH AT LEAST THE FOLLOWING
26 DISCLOSURES PRIOR TO THE DATE THE VIATICAL SETTLEMENT CONTRACT
27 IS SIGNED BY ALL PARTIES. THE DISCLOSURES SHALL BE CONSPICUOUSLY
28 DISPLAYED IN A DOCUMENT SIGNED BY THE VIATOR AND THE VIATICAL
29 SETTLEMENT BROKER AND SHALL PROVIDE THE FOLLOWING INFORMATION:
30 (1) ANY AND ALL OFFERS RECEIVED BY THE VIATICAL
20010S0462B1465 - 23 -
1 SETTLEMENT BROKER FROM VIATICAL SETTLEMENT PROVIDERS FOR THE
2 VIATICATION OF THE VIATOR'S POLICY.
3 (2) THE AMOUNT AND METHOD OF CALCULATING THE VIATICAL
4 SETTLEMENT BROKER'S POTENTIAL COMPENSATION FOR ANY AND ALL
5 SUCH OFFERS. THE TERM "COMPENSATION" INCLUDES ANYTHING OF
6 VALUE PAID OR GIVEN TO A VIATICAL SETTLEMENT BROKER FOR THE
7 PLACEMENT OF A POLICY.
8 (d) (E) Disclosure of ownership transfer or beneficiary <--
9 change.--If the viatical settlement provider transfers ownership
10 or changes the beneficiary of the insurance policy, the provider
11 shall communicate the change in ownership or beneficiary to the
12 insured within 20 days after the change.
13 Section 8. General rules.
14 (a) General rules.--A viatical settlement provider entering
15 into a viatical settlement contract shall first obtain:
16 (1) Prior to or at the time of execution of the viatical
17 settlement contract, a witnessed document:
18 (i) in which the viator consents to the viatical
19 settlement contract;
20 (ii) represents that the viator has a full and
21 complete understanding of the viatical settlement
22 contract, that he or she has a full and complete
23 understanding of the benefits of the life insurance
24 policy;
25 (iii) acknowledges that he or she has entered into
26 the viatical settlement contract freely and voluntarily;
27 and <--
28 (iv) if applicable for the purposes of determining
29 payments for persons who are terminally ill or
30 chronically ill, acknowledges that the insured is
20010S0462B1465 - 24 -
1 terminally ill or chronically ill and that the terminal
2 or chronic illness or condition was diagnosed after the
3 life insurance policy was issued; AND <--
4 (V) ACKNOWLEDGES THAT HE OR SHE IS OF SOUND MIND,
5 UNDER NO CONSTRAINT OR UNDUE INFLUENCE.
6 (2) A document in which the insured consents to the
7 release of his or her medical records to a viatical
8 settlement provider, viatical settlement broker and the
9 insurance company that issued the life insurance policy
10 covering the life of the insured. ALL RECORDS SHALL REMAIN <--
11 CONFIDENTIAL.
12 (3) Within 20 days after a viator executes documents
13 necessary to transfer any rights under an insurance policy or
14 within 20 days of entering any agreement, option, promise or
15 any other form of understanding, expressed or implied, to
16 viaticate the policy, the viatical settlement provider shall
17 give written notice to the insurer that issued that insurance
18 policy that the policy has or will become a viaticated
19 policy. The notice must be accompanied by the document
20 required by subsection (a)(1).
21 (b) Multiple viators.--If there is more than one viator on a
22 single policy and the viators are residents of different states,
23 the viatical settlement shall be governed by the law of the
24 state in which the viator having the largest percentage
25 ownership resides or, if the viators hold equal ownership, the
26 state of residence of one viator agreed upon in writing by all
27 viators.
28 (c) Fiduciary responsibility of viatical settlement
29 broker.--Notwithstanding the manner in which the viatical
30 settlement broker is compensated, a viatical settlement broker
20010S0462B1465 - 25 -
1 is deemed to represent only the viator and owes a fiduciary duty
2 to the viator to act according to the viator's instructions and
3 in the best interest of the viator.
4 (d) Verification of coverage.--
5 (1) A viatical settlement provider or viatical
6 settlement broker shall deliver a copy of the medical release
7 required by subsection (a)(2), a copy of the viator's
8 application for the viatical settlement contract, a copy of
9 the notice required by subsection (a)(3) and a request for
10 verification of coverage to the insurer that issued the life
11 insurance policy that is the subject of the viatical
12 SETTLEMENT transaction. The NAIC's form for verification <--
13 shall be used unless another form is developed by the
14 department.
15 (2) The insurer shall respond to a request for
16 verification of coverage submitted on an approved form within
17 A REASONABLE TIME FRAME, NOT TO EXCEED 30 calendar days of <--
18 the date the request is received and shall indicate whether,
19 based on the medical evidence and documents provided, the
20 insurer intends to pursue an investigation at that time
21 regarding the validity of the insurance contract.
22 (3) Nothing in this section shall prohibit an insurer
23 from exercising its right to contest the validity of any
24 policy on the grounds of fraud.
25 (e) Viatical settlement broker's performance acceptable.--If
26 a viatical settlement broker performs any of these activities <--
27 THE PROVISIONS ENUMERATED IN THIS SECTION on behalf of a <--
28 viatical settlement provider, the viatical settlement provider
29 is deemed to have fulfilled the requirements of this section.
30 (f) Health and financial information.--All health or
20010S0462B1465 - 26 -
1 financial information solicited or obtained by any licensee
2 shall be subject to the applicable provision of Federal and
3 State law relating to confidentiality and disclosure of such
4 information.
5 (g) Recession RESCISSION.--All viatical settlement contracts <--
6 entered into in this State shall provide the viator with an
7 unconditional right to rescind the contract for 30 DAYS FROM THE <--
8 DATE OF CONTRACT AND at least 15 calendar days from the receipt
9 of the viatical settlement proceeds by the viator. If the
10 insured dies during the rescission period, the viatical
11 settlement contract shall be deemed to have been rescinded,
12 subject to repayment to the viatical settlement provider of all
13 viatical settlement proceeds.
14 (h) Transfer of proceeds.--The viatical settlement provider
15 shall instruct the viator to send the executed documents
16 required to effect the change in ownership, assignment or change
17 in beneficiary directly to the independent escrow agent. Within
18 three business days after the date the escrow agent receives the
19 document, or from the date the viatical settlement provider <--
20 receives the documents if the viator erroneously provides the
21 documents directly to the provider, the provider shall pay or
22 transfer the proceeds of the viatical settlement SHALL BE PLACED <--
23 into an escrow or trust account maintained in a federally or
24 State-chartered financial institution whose deposits are insured
25 by the Federal Deposit Insurance Corporation (FDIC). Upon
26 payment of the settlement proceeds into the escrow account, the
27 escrow agent shall deliver the original change in ownership,
28 assignment or change in beneficiary forms to the viatical
29 settlement provider or related provider trust. Upon the licensed
30 provider's receipt of the properly completed acknowledgment of
20010S0462B1465 - 27 -
1 the transfer of ownership, assignment or designation of
2 beneficiary from the insurance company, the licensed provider
3 shall instruct the escrow agent to pay the settlement proceeds
4 to the viator. Payment shall be made within three business days
5 of the date the provider received the acknowledged forms from
6 the insurance company.
7 (i) Deadline.--Failure to tender consideration to the viator
8 for the viatical settlement contract within the time disclosed
9 pursuant to section 7(a) OR AT ALL renders the viatical <--
10 settlement contract voidable by the viator for lack of <--
11 consideration until the time consideration is tendered to and
12 accepted by the viator. NULL AND VOID. <--
13 (j) Health status.--
14 (1) Contacts with the insured for the purpose of
15 determining the health status of the insured by the viatical
16 settlement provider or viatical settlement broker after the
17 viatical settlement has occurred shall only be made by the
18 viatical settlement provider or broker licensed in this
19 Commonwealth or its authorized representative and shall be
20 limited to once every three months for insureds with a life
21 expectancy of more than one year and to no more than once per
22 month for insureds with a life expectancy of one year or
23 less.
24 (2) The viatical settlement provider or viatical
25 settlement broker shall explain the procedure for these
26 contacts at the time the viatical settlement contract is
27 entered into.
28 (3) The limitations set forth in this subsection shall
29 not apply to any contacts with an insured for reasons other
30 than determining the insured's health status.
20010S0462B1465 - 28 -
1 (4) Viatical settlement providers and viatical <--
2 settlement brokers shall be responsible for the actions of
3 their authorized representatives.
4 (k) Commission.--No viatical settlement broker or viatical <--
5 settlement representative shall receive from a viatical
6 settlement provider a fee, commission or other valuable
7 consideration for services rendered to or in connection with
8 viators residing in this Commonwealth unless the viatical
9 settlement provider is licensed in this Commonwealth.
10 (l) Prohibition.--No person who invests in a viaticated
11 policy OR BROKER OR PROVIDER, including, but not limited to, a <--
12 participant in a financing transaction, may SHALL influence the <--
13 treatment of the insured's illness.
14 Section 9. Prohibited practices.
15 It is a violation of this act for any person to:
16 (1) Knowingly enter into a viatical settlement contract
17 the subject of which is a life insurance policy that was
18 obtained by means of a false, deceptive or misleading
19 application for the life insurance policy.
20 (2) Enter into a viatical settlement contract within a
21 two-year period commencing with the date of issuance of the
22 insurance policy or certificate unless the viator certifies
23 to the viatical settlement provider that one or more of the <--
24 following conditions have HAS been met within the two-year <--
25 period:
26 (i) The policy was issued upon the owner's exercise
27 of conversion rights arising out of a group OR INDIVIDUAL <--
28 policy, provided the total of the time covered under the
29 conversion policy plus the time covered under the group
30 policy is at least 24 months. The time covered under the
20010S0462B1465 - 29 -
1 group OR INDIVIDUAL policy shall be calculated without <--
2 regard to any change in insurance carriers, provided the
3 coverage has been continuous and under the same group
4 sponsorship.
5 (ii) The viator is a charitable organization exempt
6 from taxation under the Internal Revenue Code of 1986
7 (Public Law 99-514, 26 U.S.C. § 501(c)(3)).
8 (iii) The viator is not a natural person (e.g., the
9 viator is a corporation, limited liability company,
10 partnership, etc.).
11 (iv) Independent evidence is submitted as follows: <--
12 (A) The viator submits independent evidence to
13 the viatical settlement provider that one or more of
14 the following conditions have been met within the
15 two-year period:
16 (I) The viator or insured is terminally or
17 chronically ill.
18 (II) The viator's or insured's spouse dies.
19 (III) The viator or insured divorces his or
20 her spouse.
21 (IV) The viator or insured retires from
22 full-time employment.
23 (V) The viator or insured becomes physically
24 or mentally disabled and a physician determines
25 that the disability prevents the viator or
26 insured from maintaining full-time employment.
27 (VI) The viator was the insured's employer
28 at the time the policy or certificate was issued
29 and the employment relationship has terminated.
30 (VII) A final order, judgment or decree is
20010S0462B1465 - 30 -
1 entered by a court of competent jurisdiction, on
2 the application of a creditor of the viator or
3 insured, adjudicating the viator or insured
4 bankrupt or insolvent, or approving a petition
5 seeking reorganization of the viator or insured
6 or appointing a receiver, trustee or liquidator
7 to all or a substantial part of the viator's or
8 insured's assets.
9 (VIII) The viator experiences a significant
10 decrease in income that is unexpected and that
11 impairs the viator's reasonable ability to pay
12 the policy premium.
13 (IX) The viator or insured disposes of his
14 or her ownership interests in a closely held
15 corporation.
16 (B) The independent evidence shall be submitted
17 (IV) A SWORN STATEMENT BY THE VIATOR AND INSURED IS <--
18 SUBMITTED TO THE VIATICAL SETTLEMENT PROVIDER, CERTIFYING
19 THAT ONE OR MORE OF THE FOLLOWING CONDITIONS HAVE BEEN
20 MET WITHIN THE TWO-YEAR PERIOD:
21 (A) THE VIATOR OR INSURED IS TERMINALLY OR
22 CHRONICALLY ILL.
23 (B) THE VIATOR'S OR INSURED'S SPOUSE DIES.
24 (C) THE VIATOR OR INSURED DIVORCES HIS OR HER
25 SPOUSE.
26 (D) THE VIATOR WAS THE INSURED'S EMPLOYER AT THE
27 TIME THE POLICY OR CERTIFICATE WAS ISSUED AND THE
28 EMPLOYMENT RELATIONSHIP HAS TERMINATED.
29 (E) THE VIATOR EXPERIENCES A SIGNIFICANT
30 DECREASE IN INCOME THAT IMPAIRS THE VIATOR'S
20010S0462B1465 - 31 -
1 REASONABLE ABILITY TO PAY THE POLICY PREMIUM.
2 (F) THE VIATOR OR INSURED DISPOSES OF HIS OR HER
3 OWNERSHIP INTERESTS IN A CLOSELY HELD CORPORATION.
4 THE SWORN STATEMENT SHALL BE SUBMITTED BY THE VIATOR OR
5 INSURED to the insurer when the viatical settlement
6 provider submits a request to the insurer for
7 verification of coverage pursuant to section 8(d). The
8 copies DOCUMENTS shall be accompanied by a letter of <--
9 attestation from the viatical settlement provider that
10 the copies are true and correct copies of the documents <--
11 received by the viatical settlement provider.
12 (v) If the THE viatical settlement provider submits <--
13 to the insurer a copy of the owner or insured's
14 certification described in paragraph (2)(iv) SUBPARAGRAPH <--
15 (IV), when the provider submits a request to the insurer
16 to effect the transfer of the policy or certificate to
17 the viatical settlement provider, the copy shall be <--
18 deemed to SETTLEMENT PROVIDER. THE CERTIFICATION SHALL BE <--
19 DEEMED TO conclusively establish that the viatical
20 settlement contract satisfies the requirements of this
21 section and the insurer shall timely respond to the
22 request.
23 (vi) If a financing entity, is a party to a viatical <--
24 (VI) A FINANCING ENTITY IS A PARTY TO A VIATICAL <--
25 settlement contract to which a licensed viatical
26 settlement provider is not a party or to a viatical
27 settlement purchase agreement.
28 (vii) If a special purpose entity, enter into a <--
29 (VII) A SPECIAL PURPOSE ENTITY ENTERS INTO A <--
30 viatical settlement contract.
20010S0462B1465 - 32 -
1 Section 10. Fraud prevention and control.
2 (a) Fraudulent viatical settlement acts, interference and
3 participation of convicted felons prohibited.--
4 (1) A person shall not commit a fraudulent viatical
5 settlement act.
6 (2) A person shall not knowingly or intentionally
7 interfere with the enforcement of the provisions of this act
8 or investigations of suspected or actual violations of this
9 act.
10 (3) A person in the business of viatical settlements
11 shall not knowingly or intentionally permit any person
12 convicted of a felony involving dishonesty or breach of trust <--
13 to participate in the business of viatical settlements. TO <--
14 EFFECTUATE A VIATICAL SETTLEMENT.
15 (b) Fraud warning required.--
16 (1) Viatical settlements contracts and applications for
17 viatical settlements, regardless of the form of transmission,
18 shall contain the following statement or a substantially <--
19 similar statement:
20 "Any person who knowingly presents false information
21 in an application for insurance or viatical
22 settlement contract commits a crime and may be
23 subject to fines and confinement in prison."
24 STATEMENT: <--
25 ANY PERSON WHO KNOWINGLY AND WITH THE INTENT TO DEFRAUD
26 ANY INSURER, PRESENTS OR CAUSES TO BE PRESENTED TO ANY
27 INSURER OR SELF-INSURED ANY STATEMENT FORMING A PART OF,
28 OR IN SUPPORT OF, AN APPLICATION FOR INSURANCE OR
29 VIATICAL SETTLEMENT CONTRACT ANY FALSE, INCOMPLETE OR
30 MISLEADING INFORMATION CONCERNING ANY FACT OR THING
20010S0462B1465 - 33 -
1 MATERIAL TO THE CLAIM SHALL BE GUILTY OF FRAUD.
2 (2) The lack of a statement as required in paragraph (1)
3 does not constitute a defense in any prosecution for a
4 fraudulent viatical settlement act.
5 (c) Mandatory reporting.--
6 (1) Any person engaged in the business of viatical
7 settlements having knowledge or a reasonable belief that a
8 fraudulent viatical settlement act is being, will be or has
9 been committed shall provide to the commissioner the
10 information required by and in a manner prescribed by the
11 commissioner.
12 (2) Any other person having knowledge or a reasonable
13 belief that a fraudulent viatical settlement act is being,
14 will be or has been committed may provide to the commissioner
15 the information required by and in a manner prescribed by the
16 commissioner.
17 (d) Immunity from liability.--
18 (1) No civil liability shall be imposed on and no cause
19 of action shall arise from a person's furnishing information
20 concerning suspected, anticipated or completed fraudulent
21 viatical settlement acts or suspected or completed fraudulent
22 insurance acts if the information is provided to or received
23 from:
24 (i) the commissioner or the commissioner's
25 employees, agents or representatives;
26 (ii) Federal, State or local law enforcement or
27 regulatory officials or their employees, agents or
28 representatives;
29 (iii) a person involved in the prevention and
30 detection of fraudulent viatical settlement acts or that
20010S0462B1465 - 34 -
1 person's agents, employees or representatives;
2 (iv) the National Association of Insurance
3 Commissioners (NAIC), National Association of Securities
4 Dealers (NASD), the North American Securities
5 Administrators Association (NASAA) OR THE UNITED STATES <--
6 SECURITIES AND EXCHANGE COMMISSION or their employees,
7 agents or representatives, or other regulatory body
8 overseeing life insurance, viatical settlements,
9 securities or investment fraud; or
10 (v) the life insurer that issued the life insurance
11 policy covering the life of the insured.
12 (2) Paragraph (1) shall not apply to statements made
13 with actual malice. In an action brought against a person for <--
14 filing a report or furnishing other information concerning a
15 fraudulent viatical settlement act or a fraudulent insurance
16 act, the party bringing the action shall plead specifically
17 any allegation that paragraph (1) does not apply because the
18 person filing the report or furnishing the information did so
19 with actual malice.
20 (3) A person identified in paragraph (1) shall be
21 entitled to an award of attorney fees and costs if he or she
22 is the prevailing party in a civil cause of action for libel,
23 slander or any other relevant tort arising out of activities
24 in carrying out the provisions of this act and the party
25 bringing the action was not substantially justified in doing
26 so. For the purpose of this section, a proceeding is
27 "substantially justified" if it had a reasonable basis in law
28 or fact at the time that it was initiated.
29 (4) This section does not abrogate or modify common law
30 or statutory privileges or immunities enjoyed by a person
20010S0462B1465 - 35 -
1 described in paragraph (1).
2 (e) Confidentiality.--
3 (1) The documents and evidence provided pursuant to
4 subsection (d) (C) or obtained by the commissioner in an <--
5 investigation of suspected or actual fraudulent viatical
6 settlement acts shall be privileged and confidential and
7 shall not be a public record and shall not be subject to
8 discovery or subpoena in a civil or criminal action. <--
9 (2) Paragraph (1) does not prohibit release by the
10 commissioner of documents and evidence obtained in an
11 investigation of suspected or actual fraudulent viatical
12 settlement acts:
13 (i) in administrative or judicial proceedings to
14 enforce laws administered by the commissioner;
15 (ii) to Federal, State or local law enforcement or
16 regulatory agencies, to an organization established for
17 the purpose of detecting and preventing fraudulent
18 viatical settlement acts or to the NAIC;
19 (iii) at the discretion of the commissioner, to a
20 person in the business of viatical settlement that is
21 aggrieved by a fraudulent viatical settlement act.
22 (3) Release of documents and evidence under paragraph
23 (2) does not abrogate or modify the privilege granted in
24 paragraph (1).
25 (f) Other law enforcement or regulatory authority.--This act
26 shall not:
27 (1) preempt the authority or relieve the duty of other
28 law enforcement or regulatory agencies to investigate,
29 examine and prosecute suspected violations of law;
30 (2) prevent or prohibit a person from voluntarily
20010S0462B1465 - 36 -
1 disclosing information concerning viatical settlement fraud
2 to a law enforcement or regulatory agency other than the
3 insurance department; or
4 (3) limit the powers granted elsewhere by the laws of
5 this Commonwealth to the commissioner, the department or an
6 insurance fraud unit to investigate and examine possible
7 violations of law and to take appropriate action against
8 wrongdoers.
9 (g) Viatical settlement antifraud initiatives.--Viatical
10 settlement providers and viatical settlement brokers shall have
11 in place antifraud initiatives reasonably calculated to detect,
12 prosecute and prevent fraudulent viatical settlement acts. At
13 the discretion of the commissioner, the commissioner may order
14 or a licensee may request and the commissioner may grant such
15 modifications of the required initiatives as necessary to ensure
16 an effective antifraud program. The modifications may be more or
17 less restrictive than the required initiatives so long as the
18 modifications may reasonably be expected to accomplish the
19 purpose of this section. Antifraud initiatives shall include:
20 (1) Fraud HIRING OF FRAUD investigators who may be <--
21 viatical settlement provider or viatical settlement broker
22 employees or independent contractors.
23 (2) An antifraud plan submitted SUBMITTING AN ANTIFRAUD <--
24 PLAN to the department. The antifraud plan shall include, but
25 not be limited to, the following:
26 (i) A description of the procedures for detecting
27 and investigating possible fraudulent viatical settlement
28 acts and procedures for resolving material
29 inconsistencies between medical records and insurance
30 applications.
20010S0462B1465 - 37 -
1 (ii) A description of the procedures for reporting
2 possible fraudulent viatical settlement acts to the
3 department.
4 (iii) A description of the plan for antifraud
5 education and training of underwriters and other
6 personnel.
7 (iv) A description or chart outlining the
8 organizational arrangement of the antifraud personnel who
9 are responsible for the investigation and reporting of
10 possible fraudulent viatical settlement acts and
11 investigating unresolved material inconsistencies between
12 medical records and insurance applications.
13 (h) Antifraud plan confidential.--Antifraud plans submitted
14 to the department shall be privileged and confidential and shall
15 not be a public record and shall not be subject to discovery or
16 subpoena in a civil or criminal action.
17 Section 11. Responsibility of department.
18 The commissioner may:
19 (1) Promulgate regulations pursuant to this act.
20 (2) Establish standards for evaluating reasonableness of
21 payments under viatical settlement contracts entered into by <--
22 persons with a terminal or chronic illness or condition. The
23 standards shall include, but not be limited to, regulation of
24 DISCOUNT RATES USED TO DETERMINE the amount paid in exchange <--
25 for assignment, transfer, sale, devise or bequest of a
26 benefit under a life insurance policy.
27 (3) Establish appropriate licensing requirements and
28 standards for continued licensure for viatical settlement
29 providers and brokers.
30 (4) Adopt rules governing the relationship DUTIES and <--
20010S0462B1465 - 38 -
1 responsibilities of both insurers and INSURERS, viatical <--
2 settlement providers and brokers during the viatication of a
3 life insurance policy or certificate.
4 (5) Adopt rules governing advertising by viatical
5 settlement providers and viatical settlement brokers.
6 Section 12. Injunctions; civil remedies; cease and desist.
7 (a) Injunctions.--In addition to the penalties and other
8 enforcement provisions of this act, if any person violates this
9 act or any regulation implementing this act, the commissioner
10 may seek an injunction in a court of competent jurisdiction and
11 may apply for temporary and permanent orders that the
12 commissioner determines are necessary to restrain the person
13 from committing the violation.
14 (b) Civil action.--Any person damaged by the acts of a
15 person in violation of this act may bring a civil action against
16 the person committing the violation in a court of competent
17 jurisdiction.
18 (c) Cease and desist order.--The commissioner may issue a
19 cease and desist order upon a person that violates any provision
20 of this act, any regulation or order adopted by the commissioner
21 or any written agreement or consent order entered into with the
22 commissioner.
23 (d) Emergency cease and desist order.--When the commissioner
24 finds that an activity in violation of this act presents an
25 immediate danger to the public that requires an immediate final
26 order, the commissioner may issue an emergency cease and desist
27 order reciting with particularity the facts underlying the
28 findings. The emergency cease and desist order is effective
29 immediately upon service of a copy of the order on the
30 respondent and remains effective for 90 days. If the
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1 commissioner begins nonemergency cease and desist proceedings,
2 the emergency cease and desist order remains effective, absent
3 an order by a court of competent jurisdiction.
4 (e) Civil penalties.--In addition to the penalties and other
5 enforcement provisions of this act, any person who violates this
6 act is subject to civil penalties of up to $5,000 per violation.
7 Imposition of civil penalties shall be pursuant to an order of
8 the commissioner., which THE order may require a person found to <--
9 be in violation of this act to make restitution to persons
10 aggrieved by violations of this act.
11 (f) Restitution.--A person convicted of a violation of this <--
12 act shall be ordered to pay restitution to persons aggrieved by
13 the violation of this act. Restitution shall be ordered in
14 addition to a fine or imprisonment, but not in lieu of a fine or
15 imprisonment.
16 (g) Criminal penalties.--
17 (1) A person convicted of a violation of this act by a
18 court of competent jurisdiction may be sentenced in
19 accordance with subclause (A), (B), (C) or (D) based on the
20 greater of:
21 (i) the value of property, services or other benefit
22 wrongfully obtained or attempted to obtain; or
23 (ii) the aggregate economic loss suffered by any
24 person as a result of the violation.
25 A person convicted of a fraudulent viatical settlement act
26 must be ordered to pay restitution to persons aggrieved by
27 the fraudulent viatical settlement act. Restitution must be
28 ordered in addition to a fine or imprisonment but not in lieu
29 of a fine or imprisonment.
30 (A) Imprisonment for not more than 20 years or
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1 to payment of a fine of not more than $100,000, or
2 both, if the value of viatical settlement contract is
3 more than $35,000.
4 (B) Imprisonment for not more than ten years or
5 to payment of a fine of not more than $20,000, or
6 both, if the value of viatical settlement contract is
7 more than $2,500, but not more than $35,000.
8 (C) Imprisonment for not more than five years or
9 to payment of a fine of not more than $10,000, or
10 both, if the value of viatical settlement contract is
11 more than $500 but not more than $2,5000.
12 (D) Imprisonment for not more than one year or
13 to payment of a fine of not more than $3,000, or
14 both, if the value of viatical settlement contract is
15 $500 or less.
16 (2) In any prosecution under this section under
17 paragraph (1) the value of the viatical settlement contracts
18 within any six-month period may be aggregated and the
19 defendant charged accordingly in applying the provisions of
20 this section, provided that when two or more offenses are
21 committed by the same person in two or more counties, the
22 accused may be prosecuted in any county in which one of the
23 offenses was committed for all of the offenses aggregated
24 under this section.
25 (3) The applicable statute of limitations shall not
26 (F) STATUTE OF LIMITATIONS.--THE APPLICABLE STATUTE OF <--
27 LIMITATIONS SHALL NOT begin to run until the insurance company
28 or law enforcement agency is aware of the fraud, but in no event
29 may the prosecution be commenced later than seven years after
30 the action has occurred.
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1 Section 13. Miscellaneous provisions. <--
2 (a) State aid.--A person may not be required as a condition
3 of eligibility for State aid to exercise a viatical settlement
4 or be denied or suffer a reduction in aid as a result of not
5 entering into a viatical settlement.
6 (b) Available resource.--Aid agencies or programs may not
7 consider insurance benefits provided to persons who are
8 terminally ill or chronically ill as an available resource in
9 determining eligibility for public assistance.
10 Section 14. Unfair trade practices.
11 A violation of this act shall be considered an unfair trade
12 practice and shall be subject to all Commonwealth statutes which
13 address unfair trade practices, including the act of July 22,
14 1974 (P.L.589, No.205), known as the Unfair Insurance Practices
15 Act.
16 SECTION 13. VIOLATION OF ACT. <--
17 A VIOLATION OF THIS ACT SHALL BE CONSIDERED A VIOLATION OF
18 THE ACT OF JULY 22, 1974 (P.L.589, NO.205), KNOWN AS THE UNFAIR
19 INSURANCE PRACTICES ACT.
20 Section 15 14. Severability. <--
21 If any portion of this act or any amendments thereto or its
22 applicability to any person or circumstance is held invalid by a
23 court, the remainder of this act or its applicability to other
24 persons or circumstances shall not be affected.
25 Section 16 15. Applicability of securities laws. <--
26 Nothing in this act shall preempt or otherwise limit the
27 provisions of the act of December 5, 1972 (P.L.1280, No.284),
28 known as the Pennsylvania Securities Act of 1972, or any
29 regulations, notices, bulletins or other interpretations issued
30 by the Pennsylvania Securities Commission. Compliance with the
20010S0462B1465 - 42 -
1 provisions of this act shall not constitute compliance with any
2 applicable provision of the Pennsylvania Securities Act of 1972
3 AND ANY AMENDMENTS THERETO or any regulations, notices, <--
4 bulletins or other interpretations issued by the Pennsylvania
5 Securities Commission.
6 Section 17 16. Examination and investigation of books and <--
7 records.
8 (a) Examination and investigation.--A viatical settlement
9 provider, PERSON SELLING VIATICAL PRODUCTS OR EFFECTUATING <--
10 VIATICAL SETTLEMENTS and viatical settlement broker shall be
11 subject to examination and investigation by the department.
12 (b) Maintenance and books and records.--Every viatical
13 settlement provider and viatical settlement broker shall
14 maintain and make available all books, records, accounts and
15 other files relating to its engaging in the business of viatical
16 settlements, and such records shall be made available for
17 examination and inspection by the department in a form usable by
18 the department FOR SEVEN YEARS. <--
19 (c) Costs of examination.--All the expenses incurred in and
20 about the examination of any viatical settlement provider or
21 viatical settlement broker, including compensation of department
22 employees assisting in said examination and any other
23 professionals or specialists retained in said examination, shall
24 be charged to and paid by the viatical settlement provider or
25 viatical settlement broker.
26 Section 18 17. Transition provision. <--
27 A viatical settlement provider or viatical settlement broker
28 transacting business in this Commonwealth ON OR BEFORE THE <--
29 EFFECTIVE DATE OF THIS ACT may continue to do so pending
30 approval or disapproval of the provider or broker's application
20010S0462B1465 - 43 -
1 for a license as long as the application is filed with the
2 department 90 days before the effective date of this act. WITHIN <--
3 30 DAYS AFTER THE APPLICATION FORM IS PUBLISHED IN THE
4 PENNSYLVANIA BULLETIN.
5 Section 19 18. Effective date. <--
6 This act shall take effect in 180 days.
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