May 16, 2006, Introduced by Reps. Hune, Gaffney and Hildenbrand and referred to the Committee on Insurance.
A bill to amend 1996 PA 386, entitled
"An act to regulate the sale and purchase of viatical settlement
contracts; to prescribe the powers and duties of certain state
agencies and officials; and to prescribe penalties,"
by amending the title and sections 1, 2, 3, 4, 5, 6, 7, and 8 (MCL
550.521, 550.522, 550.523, 550.524, 550.525, 550.526, 550.527, and
550.528), section 8 as amended by 1997 PA 189, and by adding
sections 1a, 1b, 1c, 1d, 1e, 2a, 3a, 9, 10, 11, 12, and 13.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
TITLE
An
act to regulate the sale and purchase of viatical life
settlement contracts; to provide for licensing of life settlement
providers; to prescribe certain records, statements, forms, and
reports; to prescribe the powers and duties of certain state
agencies and officials; and to prescribe penalties.
Sec. 1. As used in this act:
(a) "Advertising" means any written, electronic, or printed
communication, including recorded telephone messages or
communication transmitted on radio, television, the internet, or
similar communications media, that is published, disseminated,
circulated, or placed directly before the public in this state, for
the purpose of creating an interest in or inducing a person to
sell, assign, devise, bequest, or transfer the death benefit or
ownership of a policy pursuant to a life settlement contract.
(b) "Business of life settlements" means an activity involving
a life settlement contract, including, but not limited to, the
offering, solicitation, negotiation, procurement, effectuation,
purchasing, investing, financing, monitoring, tracking,
underwriting, selling, transferring, assigning, pledging, or
hypothecating of life settlement contracts.
(c) "Chronically ill" means either of the following:
(i) Being unable to perform at least 2 activities of daily
living, including, but not limited to, eating, toileting,
transferring, bathing, dressing, or continence.
(ii) Requiring substantial supervision to protect the
individual from threats to health and safety due to severe
cognitive impairment.
(d) (a)
"Commissioner" means the commissioner of insurance
the office of financial and insurance services.
(e) "Escrow agent" means an attorney, certified public
accountant, financial institution, or other person providing escrow
services under the authority of a state or federal regulatory body.
Escrow agent does not include any person associated, affiliated, or
under common control with a life settlement provider.
(f) "Financing entity" means an underwriter, placement agent,
lender, purchaser of securities, purchaser of a policy or
certificate from a life settlement provider, credit enhancer, or an
entity that has a direct ownership in a policy that is the subject
of a life settlement contract, but whose principal activity related
to the transaction is providing funds to effect the life settlement
or purchase of 1 or more purchased policies and who has an
agreement in writing with 1 or more licensed life settlement
providers to finance the acquisition of life settlement contracts
or to provide stop loss insurance. Financing entity does not
include a nonaccredited investor.
(g) "Fraudulent life settlement act" includes all of the
following:
(i) Acts or omissions committed by a person who, knowingly or
with intent to defraud, for the purpose of depriving another of
property or for pecuniary gain, commits or permits its employees or
its agents to engage in acts including:
(A) Presenting, causing to be presented, or preparing, with
knowledge or belief that it will be presented to or by a life
settlement provider, financing entity, insurer, insurance producer,
or another person, false material information, or concealing
material information, as part of, in support of, or concerning a
fact material to 1 or more of the following:
(I) An application for the issuance of a life settlement
contract or policy.
(II) The underwriting of a life settlement contract or policy.
(III) A claim for payment or benefit pursuant to a life
settlement contract or policy.
(IV) Premiums paid on a policy.
(V) Payments and changes in ownership or beneficiary made in
accordance with the terms of a life settlement contract or policy.
(VI) The reinstatement or conversion of a policy.
(VII) In the solicitation, offer, negotiation, or sale of a
life settlement contract or policy.
(VIII) The issuance of written evidence of a life settlement
contract or insurance.
(IX) A financing transaction.
(B) Employing any device, scheme, or artifice to defraud
related to purchased policies.
(ii) In the furtherance of a fraud or to prevent the detection
of a fraud, a person commits or permits its employees or its agents
to do any of the following:
(A) Remove, conceal, alter, destroy, or sequester from the
commissioner the assets or records of a life settlement provider or
other person engaged in the business of life settlements.
(B) Misrepresent or conceal the financial condition of a life
settlement provider, financing entity, insurer, or other person.
(C) Transact the business of life settlements in violation of
laws requiring a license, certificate of authority, or other legal
authority for the transaction of the business of life settlements.
(D) File with the commissioner or the chief insurance
regulatory official of another jurisdiction a document containing
false information or otherwise conceals information about a
material fact from the commissioner.
(iii) Embezzlement, theft, misappropriation, or conversion of
money, funds, premiums, credits, or other property of a life
settlement provider, life insurance producer, insurer, insured,
seller, policyowner, or another person engaged in the business of
life settlements or insurance.
(iv) Recklessly entering into, negotiating, or otherwise
dealing in a life settlement contract, the subject of which is a
policy that was obtained by presenting false information concerning
a fact material to the policy, or by concealing, for the purpose of
misleading another, information concerning a fact material to the
policy, where the person intended to defraud the insurance company
that issued the policy. As used in this subparagraph, "recklessly"
means engaging in the conduct in conscious and clearly
unjustifiable disregard of a substantial likelihood of the
existence of the relevant facts or risks, which disregard involves
a gross deviation from acceptable standards of conduct.
(v) Attempting to commit, assist, aid, or abet in the
commission of, or conspiracy to commit, the acts or omissions
specified in this subdivision.
(vi) Facilitating, directly or indirectly, the change of
ownership of a policy or the state of residency of a seller in
order to avoid the provisions of this act.
(vii) Facilitating, directly or indirectly, the issuance of a
policy on an insured who is a resident of this state such that the
policy is owned in another state in order to avoid the provisions
of this act.
(h) (b)
"Life insurance" means that term as
defined in
section
602 of the insurance code of 1956,
Act No. 218 of the
Public
Acts of 1956, being section 500.602 of the Michigan Compiled
Laws
1956 PA 218, MCL 500.602.
(i) "Life insurance producer" means a person licensed as a
resident or nonresident insurance producer for life insurance or a
life line of coverage under the insurance code of 1956, 1956 PA
218, MCL 500.100 to 500.8302.
(j) "Life settlement contract" or "contract" means a written
agreement between a seller and a life settlement provider
establishing the terms under which compensation or anything of
value is paid, which compensation or value is less than the
expected death benefit of the policy, in return for the seller's
assignment, transfer, sale, devise, or bequest of the death benefit
or ownership of any portion of the policy. A life settlement
contract also includes a contract for a loan or other financing
transaction with a seller secured primarily by an individual or
group life insurance policy, other than a loan by a life insurance
company pursuant to the terms of the policy, or a loan secured by
the cash value of a policy. A life settlement contract includes an
agreement with a seller to transfer ownership or change the
beneficiary designation at a later date regardless of the date that
compensation is paid to the seller. A life settlement contract does
not include a written agreement entered into between a seller and a
person having an insurable interest in the insured's life.
(k) "Life settlement provider" means a person, other than a
seller, who enters into or negotiates a life settlement contract in
this state, from this state, or with a resident of this state. Life
settlement provider does not include any of the following:
(i) A bank, savings bank, savings and loan association, credit
union, or other licensed lending institution that takes an
assignment of a policy as collateral for a loan.
(ii) The issuer of a policy providing accelerated benefits
under section 602 of the insurance code of 1956, 1956 PA 218, MCL
500.602.
(iii) An individual who enters into or negotiates no more than 1
agreement in a calendar year for the transfer of policies for any
value less than the expected death benefit.
(iv) An authorized or eligible insurer that provides stop loss
coverage to a life settlement provider, financing entity, special
purpose entity, or related provider trust.
(v) A financing entity.
(vi) A special purpose entity.
(vii) A related provider trust.
(viii) An accredited investor as defined in Regulation D, Rule
501 or a qualified institutional buyer as defined in Rule 144A of
the federal securities act of 1933, and who purchases a purchased
policy from a life settlement provider.
(l) "Negotiate" means that term as defined in section 1201 of
the insurance code of 1956, 1956 PA 218, MCL 500.1201.
(m) Nonaccredited investor" means a person who is not an
accredited investor as defined in 17 CFR 230.501.
(n) "Person" means an individual or a legal entity, including,
but not limited to, an individual, partnership, limited liability
company, association, trust, or corporation.
(o) (c)
"Physician" means a person licensed in
this or
another state to practice medicine or osteopathic medicine.
(p) (d)
"Policy" means an individual or group life
insurance
policy, or
a certificate under a group life insurance policy
certificate, or contract arrangement of life insurance affecting
the rights of a resident of this state or bearing a reasonable
relation to this state, regardless of whether delivered or issued
for delivery in this state.
(e)
"Provider" means a person who enters into a viatical
settlement
contract with a viator. Provider does not mean any of
the
following:
(i) A financial lending institution that takes a
policy as
collateral
for a loan.
(ii) The issuer of a policy providing accelerated
benefits
under
section 602 of Act No. 218 of the Public Acts of 1956.
(iii) An individual who enters into no more than 1
viatical
settlement
contract in a calendar year for the transfer of a policy
for
any value less than the expected death benefit.
(f)
"Viatical settlement contract" or "contract" means a
written
agreement entered into between a provider and a viator in
which
the provider will pay consideration that is less than the
expected
death benefit of the viator's policy in return for the
viator's
assignment, transfer, sale, devise, or bequest of the
death
benefit or ownership of the policy to the provider.
(g)
"Viator" means the owner or holder of a policy who has a
terminal
illness or condition and who enters into a viatical
settlement
contract.
(q) "Purchased policy" means a policy that has been acquired
by a life settlement provider pursuant to a life settlement
contract.
(r) "Related provider trust" means a titling trust or other
trust established by a licensed life settlement provider or a
financing entity for the sole purpose of holding the ownership or
beneficial interest in purchased policies in connection with a
financing transaction. The trust shall have a written agreement
with the licensed life settlement provider under which the licensed
life settlement provider is responsible for ensuring compliance
with all statutory and regulatory requirements and under which the
trust agrees to make all records and files related to life
settlement transactions available to the commissioner as if those
records and files were maintained directly by the licensed life
settlement provider.
(s) "Seller" means the owner of a policy who enters or seeks
to enter into a life settlement contract. For the purposes of this
act, a seller is not limited to an owner of a policy insuring the
life of an individual with a terminal illness or chronic illness or
condition except where specifically addressed. If there is more
than 1 owner on a single policy and the owners are residents of
different states, the transaction shall be governed by the law of
the state in which the owner having the largest percentage
ownership resides or, if the owners hold equal ownership, the state
of residence of 1 owner agreed upon in writing by all owners.
Seller does not include any of the following:
(i) A life settlement provider or a life insurance producer.
(ii) A qualified institutional buyer as defined in 17 CFR
230.144a.
(iii) A financing entity.
(iv) A special purpose entity.
(v) A related provider trust.
(t) "Special purpose entity" means a corporation, partnership,
trust, limited liability company, or other similar entity formed
only to provide, directly or indirectly, access to institutional
capital markets for either a financing entity or a licensed life
settlement provider.
(u) "Terminally ill" means having an illness or sickness that
reasonably is expected to result in death in 24 months or less.
Sec. 1a. (1) Except as otherwise provided in subsection (2),
only a life insurance producer who has been licensed in this state
or his or her home state as a life insurance producer for 1 or more
years may negotiate a life settlement contract on behalf of a
seller with 1 or more life settlement providers.
(2) Notwithstanding subsection (1), a licensed attorney,
certified public accountant, or financial planner accredited by a
nationally recognized accreditation agency who meets all of the
following may negotiate a life settlement contract on behalf of a
seller with 1 or more life settlement providers:
(a) Is retained to represent the seller.
(b) Is not compensated directly or indirectly by the life
settlement provider.
(3) Not later than 30 days from the first day of negotiating a
life settlement on behalf of a seller, the life insurance producer,
licensed attorney, certified public accountant, or accredited
financial planner shall notify the commissioner of the negotiation
on a form prescribed by the commissioner and shall pay any
applicable fees prescribed by the commissioner. The form prescribed
by the commissioner shall include an acknowledgment that the life
insurance producer, licensed attorney, certified public accountant,
or accredited financial planner is acting in accordance with this
act.
(4) A life insurance producer, licensed attorney, certified
public accountant, or accredited financial planner represents only
the seller and owes a fiduciary duty to the seller to act according
to the seller's instructions and in the seller's best interests.
Sec. 1b. (1) Except as otherwise provided in this subsection,
a person shall not operate as a life settlement provider without
first obtaining a life settlement provider license under this
section. All of the following apply to a person transacting the
business of life settlements in this state on the effective date of
the amendatory act that added this section:
(a) By December 31, 2006, the commissioner by administrative
bulletin, order, or rule shall establish an application process and
an application timeline that includes a deadline for submitting a
complete application for a life settlement provider license.
(b) If the person intends to continue to operate as a life
settlement provider, it shall submit its complete application for a
life settlement provider license with the commissioner by the
application deadline established under subdivision (a).
(c) The person may continue to operate as a life settlement
provider in this state on and after the effective date of the
amendatory act that added this section and without a license until
1 of the following occurs:
(i) The person fails to meet the application deadline
established under subdivision (a).
(ii) The commissioner acts on the person's complete
application.
(2) A person applying for a life settlement provider license
shall file with the commissioner an application as required by the
commissioner. The application shall require the filing of a
detailed plan of operation.
(3) Upon the filing of an application and the payment of the
fee under subsection (7), the commissioner shall issue a life
settlement provider license if the commissioner finds all of the
following:
(a) The applicant is competent and trustworthy and intends to
act in good faith.
(b) The applicant has a good business reputation and has the
necessary experience, training, and education to be qualified as a
life settlement provider.
(c) If a legal entity, the applicant provides a certificate of
good standing from its state of domicile.
(d) The applicant provides an antifraud plan that satisfies
the requirements of this act.
(4) The commissioner may at any time require an applicant for
a life settlement provider license or a licensed life settlement
provider to fully disclose the identity of all stockholders with a
10% or greater share and the identity of all partners, officers,
members, and employees. A life settlement provider shall provide to
the commissioner new or revised information about stockholders with
a 10% or greater share and new or revised information about all
partners, officers, members, and designated employees within 30
days of the change.
(5) A life settlement provider license shall be issued for not
more than 1 year. A life settlement provider may apply for a
renewal of his or her license in the manner prescribed by the
commissioner.
(6) The commissioner shall not issue a life settlement
provider license to a nonresident applicant unless the applicant
does 1 of the following:
(a) Files with the commissioner the name and address of a
resident agent upon which any local process affecting the applicant
may be served. Service upon the resident agent designated under
this subdivision is service on the applicant. This designation
shall remain in force as long as any liability remains within this
state.
(b) Files with the commissioner an irrevocable written
stipulation agreeing that any legal process affecting the applicant
that is served on the commissioner or his or her designee has the
same effect as if personally served on the applicant. Service upon
the commissioner is service on the applicant. This appointment
remains in force as long as any liability remains within this
state.
(7) The commissioner shall annually establish a schedule of
life settlement provider license fees based upon each licensee's
business volume, number of locations, and any other business
factors considered reasonable by the commissioner in order to
generate funds sufficient to pay, but not to exceed, the reasonably
anticipated costs of administering this act. A life settlement
provider licensee shall pay the actual travel, lodging, and meal
expenses incurred by office of financial and insurance services
employees who travel out of state to examine the records of or
investigate the life settlement provider licensee.
Sec. 1c. Each life settlement provider shall file by March 1
of each year with the commissioner an annual statement, as
prescribed by the commissioner, which shall contain information in
the aggregate only and shall not include individual transaction
data concerning the business of life settlements or information
that identifies personal, financial, or medical information of the
seller or insured.
Sec. 1d. Except as otherwise required by law, a life
settlement provider, life insurance producer, information bureau,
rating agency or company, or any other person with actual knowledge
of a seller's or insured's identity shall not disclose the seller's
or insured's identity or his or her personal, financial, or medical
information to another person unless the disclosure meets 1 of the
following:
(a) Is necessary to affect a life settlement contract between
the seller and a life settlement provider and the seller or insured
has provided prior written consent to the disclosure.
(b) Is provided in response to an examination or investigation
by the commissioner or another governmental officer or agency.
(c) Is a term of or condition to the transfer of a policy by 1
life settlement provider to another life settlement provider.
(d) Is necessary to permit a financing entity, related
provider trust, or special purpose entity to finance the purchase
of policies by a life settlement provider and the seller or insured
has provided prior written consent to the disclosure.
(e) Is necessary to allow the life settlement provider or his
or her authorized representative to make contacts to determine
health status.
(f) Is required to purchase stop loss coverage.
Sec. 1e. (1) The commissioner may examine, or may cause to be
examined, at any time, the affairs of and any or all of the books,
records, documents, and papers of any life settlement provider. The
commissioner may accept an examination report on the life
settlement provider as prepared by the life settlement provider's
state insurance regulator for the life settlement provider's state
of domicile or point-of-entry state. In conducting an examination
under this section, the commissioner shall proceed in the same
manner and with the same authority as provided in section 222 of
the insurance code of 1956, 1956 PA 218, MCL 500.222, as if the
life settlement provider is an insurer as that term is used in that
section.
(2) A life settlement provider shall maintain for 5 years
copies of all of the following:
(a) Proposed, offered, or executed contracts, underwriting
documents, policy forms, and applications.
(b) Checks, drafts, or other evidence and documentation
related to the payment, transfer, deposit, or release of funds.
(c) All other records and documents related to the
requirements of this act.
(3) This section does not relieve a life settlement provider
of the obligation to produce documents to the commissioner after
the retention period under subsection (2) has expired if the life
settlement provider has retained those documents.
(4) Every life settlement provider or person from whom
information is sought, its officers, directors, and agents shall
provide to examiners under this section timely, convenient, and
free access during reasonable business hours at its offices to all
books, records, accounts, papers, documents, assets, and computer
or other recordings relating to the property, assets, business, and
affairs of the life settlement provider. The officers, directors,
employees, and agents of the life settlement provider or person
shall facilitate the examination and aid in the examination so far
as possible. The refusal of a life settlement provider, or its
officers, directors, employees, or agents, to submit to examination
or to comply with any reasonable written request of the
commissioner is grounds for suspension or refusal of, or nonrenewal
of, any license or authority held by the life settlement provider
to engage in the business of life settlements or other business
subject to the commissioner's jurisdiction. Any proceedings for
suspension, revocation, or refusal of any license or authority
shall be conducted pursuant to chapter 4 of the administrative
procedures act of 1969, 1969 PA 306, MCL 24.271 to 24.287.
Sec. 2. (1) The commissioner may order a provider to produce
records, books, files, or other information that is necessary to
determine the qualifications of the provider or whether the
provider is or has acted in violation of this act.
(2) The provider shall maintain records of all transactions of
contracts and make the records available to the commissioner for
inspection during reasonable business hours.
(3) The life settlement provider shall pay the expenses
incurred
in conducting an examination under this
section act.
Sec. 2a. (1) No cause of action shall arise nor shall any
liability be imposed against the commissioner, the commissioner's
authorized representatives, or any examiner appointed by the
commissioner for any statements made or conduct performed in good
faith while carrying out the provisions of this act.
(2) No cause of action shall arise nor shall any liability be
imposed against any person for the act of communicating or
delivering information or data to the commissioner, the
commissioner's authorized representative, or any examiner appointed
by the commissioner pursuant to an examination made under this act,
if the act of communication or delivery was performed in good faith
and without fraudulent intent or the intent to deceive. This
subsection does not abrogate or modify in any way any common law or
statutory privilege or immunity previously enjoyed by any person
identified in subsection (1).
(3) A person identified in subsections (1) and (2) is entitled
to an award of attorney fees and costs if he or she is the
prevailing party in a civil cause of action for libel, slander, or
any other relevant tort arising out of activities in carrying out
the provisions of this act and the party bringing the action was
not substantially justified in doing so. For purposes of this
section, a proceeding is "substantially justified" if it had a
reasonable basis in law or fact at the time that it was initiated.
(4) The commissioner may investigate suspected fraudulent life
settlement acts and person engaged in the business of life
settlements.
Sec.
3. A provider shall disclose all of the following
information
to the viator no later than the date the contract is
signed
by the viator:
(1) (a)
Options other than the contract for a person with a
terminal
illness or condition, A
disclosure statement form
required by this section and a life settlement contract form shall
be filed with and approved by the commissioner. A disclosure
statement form and a life settlement contract form filed with the
commissioner shall be considered approved if not disapproved within
60 days after the filing. The commissioner shall disapprove a
disclosure statement form and a life settlement contract form if
the commissioner finds that any provisions are unreasonable,
contrary to public interest, or otherwise unfair or misleading to
the seller.
(2) A life settlement provider or life insurance producer
shall provide a disclosure statement to an applicant for a life
settlement contract by no later than the time the application for a
life settlement contract is signed by all parties. The disclosure
statement shall be a separate document signed by the seller and the
life settlement provider or life insurance producer and shall
contain all of the following:
(a) That there exist possible alternatives to a life
settlement contract, including any accelerated death benefits or
policy
loans offered by
the issuer of the under the seller's
life
insurance policy.
(b) That the life insurance producer negotiating a life
settlement contract represents only the seller and owes a fiduciary
duty to the seller to act according to the seller's instructions
and in the seller's best interests.
(c) (b)
That some or all of the proceeds of the life
settlement
contract consideration may
be taxable under federal
and
state law, and that assistance should
may be sought from a
personal
professional tax advisor.
(d) (c)
That proceeds
of the life settlement contract
consideration
could may be subject to the claims of creditors.
(e) (d)
That receipt of the proceeds of the life settlement
contract consideration
may adversely affect the viator's
seller's eligibility for medicaid or other government benefits or
entitlements and advice may be obtained from the appropriate
government agencies.
(f) (e)
The viator's That the seller
has the right to
rescind the
a life settlement contract
within before the
earlier of 30 calendar days after the date the life settlement
contract
is executed by all parties or within for
15 calendar
days
after the receipt of the contract consideration life
settlement
proceeds by the viator,
whichever is less seller.
Rescission, if exercised by the seller, is effective only if both
notice of the rescission is given and repayment of all proceeds and
any premiums, loans, and loan interest to the life settlement
provider is made within the rescission period. If the insured dies
during the rescission period, the life settlement contract is
deemed to have been rescinded, subject to repayment being made to
the life settlement provider within the rescission period of all
life settlement proceeds and any premiums, loans, and loan
interest.
(g) (f)
The date by which the contract consideration will be
available
to the viator and the source of the consideration. That
funds shall be sent to the seller within 3 business days after the
life settlement provider has received the insurer or group
administrator's acknowledgment that ownership of the purchased
policy has been transferred and the beneficiary has been
designated.
(h) That entering into a life settlement contract may cause
other rights or benefits, including conversion rights and waiver of
premium benefits that may exist under the policy, to be forfeited
by the seller and that assistance may be sought from a financial
advisor.
(i) The following language: "All medical, financial, or
personal information solicited or obtained by a life settlement
provider or a life insurance producer about an insured, including
the insured's identity or the identity of family members, a spouse,
or a significant other may be disclosed as necessary to effect the
life settlement contract between the seller and the life settlement
provider. If you are asked to provide this information, you will be
asked to consent to the disclosure. The information may be provided
to someone who buys the policy or provides funds for the purchase.
You may be asked to renew your permission to share information
every 2 years.".
(j) That the insured may be contacted by either the life
settlement provider or its authorized representative for the
purpose of determining the insured's health status. This contact is
limited to once every 3 months if the insured has a life expectancy
of more than 1 year, and no more than once each month if the
insured has a life expectancy of 1 year or less.
(3) A disclosure provided under subsection (2) shall be
accompanied by a brochure, approved by the commissioner, describing
the process of life settlements.
(4) A life settlement provider shall provide the seller with
all of the following disclosures by no later than the date the life
settlement contract is signed by all parties, which disclosures
shall be displayed conspicuously in the life settlement contract or
in a separate document signed by the seller and the life settlement
provider:
(a) The affiliation, if any, between the life settlement
provider and the issuer of the insurance policy to be acquired
pursuant to a life settlement contract.
(b) The name, address, and telephone number of the life
settlement provider.
(c) If a policy to be acquired pursuant to a life settlement
contract has been issued as a joint policy or involves family
riders or any coverage of a life other than the insured, the
possible loss of coverage on the other lives under the policy and
that consultation with his or her insurance producer or the insurer
issuing the policy should be made for advice on the proposed life
settlement contract.
(d) The dollar amount of the current death benefit payable to
the life settlement provider under the policy. If known, the life
settlement provider also shall disclose the availability of
additional guaranteed insurance benefits, the dollar amount of
accidental death and dismemberment benefits under the policy or
certificate, and the life settlement provider's interest in those
benefits.
(e) The name, business address, and telephone number of the
escrow agent, and the fact that the seller may inspect or receive
copies of the relevant escrow or trust agreements or documents.
Sec. 3a. (1) If the life settlement provider transfers
ownership or changes the beneficiary of the policy, the life
settlement provider shall communicate the change in ownership or
beneficiary to the insured within 20 days after the change.
(2) For a policy issued by an insurance company, the insurance
company shall send written notice to the owner of a policy, where
the insured person under such policy is age 60 or older or is known
to be terminally ill or chronically ill, that a life settlement
contract is an available alternative transaction at the time of
each of the following:
(a) When an insurance company receives a request to surrender,
in whole or in part, a policy.
(b) When an insurance company receives a request to receive an
accelerated death benefit under a policy.
(c) When an insurance company receives a request collaterally
to assign a policy as security for a loan.
(d) When an insurance company sends a notice of lapse of a
policy.
(e) At any other time that the commissioner may require by
rule or regulation.
Sec.
4. (1) A provider entering into a contract with a
viator
shall
obtain both of the following:
(a)
A written statement from a physician that the viator is of
sound
mind and under no constraint or undue influence.
(b)
A signed document by the viator stating:
(i) Consent to the contract.
(ii) Acknowledgment of the terminal illness or
condition.
(iii) Representation that the viator has a full and
complete
understanding
of the contract.
(iv) Representation that the viator has a full and
complete
understanding
of the benefits of the policy.
(v) A release of the medical records and
acknowledgment that
the
contract has been entered into freely and voluntarily. The
provider
shall keep all medical records received under this
subparagraph
confidential.
(2)
A viatical settlement contract entered into in this state
shall
contain a provision giving the viator the right to void the
contract
for at least 30 days after the date the contract is
signed,
or 15 days after the receipt of the viatical settlement
contract
consideration, whichever is less. The provider shall
notify
the insurer of the policy of a rescission within 30 days of
the
date that a contract is rescinded under this subsection.
(1) Before a life settlement provider enters into a life
settlement contract, the provider shall obtain both of the
following:
(a) A written statement from an attending physician, if the
seller is the insured, that the seller is of sound mind and under
no constraint or undue influence to enter into a life settlement
contract.
(b) A document in which the insured consents to the release of
his or her medical records to a life settlement provider or life
insurance producer and, if the policy was issued less than 2 years
from the date of application for a life settlement contract, to the
insurance company that issued the policy.
(2) The insurer shall respond to a request for verification of
coverage submitted by a life settlement provider or life insurance
producer by not later than 10 business days after the date the
request is received. The request for verification of coverage shall
be made on a form prescribed by the commissioner or a form approved
for use by a life settlement provider or life insurance producer by
the commissioner. The insurer shall accept an original or copy of a
request and any accompanying authorization. The insurer shall
complete and issue the verification of coverage or indicate in
which respects it is unable to respond. In its response, the
insurer shall indicate whether, based on the medical evidence and
documents provided, the insurer intends to pursue an investigation
at this time concerning the validity of the insurance contract or
concerning possible fraud and shall provide sufficient detail of
all reasons for the investigation to the life settlement provider
or life insurance producer.
(3) Before or at the time of execution of the life settlement
contract, the life settlement provider shall obtain a witnessed
document in which the seller consents to the life settlement
contract; for persons with a terminal illness or who are
chronically ill, acknowledges that the insured has a terminal
illness or is chronically ill and that the terminal illness or
chronic illness was diagnosed after the policy was issued;
represents that the seller has a full and complete understanding of
the life settlement contract; represents that the seller has a full
and complete understanding of the benefits of the policy; and
acknowledges that the seller is entering into the life settlement
contract freely and voluntarily.
(4) If a life insurance producer performs any activities
required in this section of the life settlement provider, the life
settlement provider shall be considered to have fulfilled the
requirements of this section.
(5) Medical information solicited or obtained by a life
settlement provider is subject to the applicable provisions of
state law relating to confidentiality of medical or protected
health information.
(6) A life settlement contract entered into in this state
shall provide the seller with an unconditional right to rescind the
contract before the earlier of 30 calendar days after the date upon
which the life settlement contract is executed by all parties, or
15 calendar days after the receipt of the life settlement proceeds
by the seller. Rescission, if exercised by the seller, is effective
only if both notice of the rescission is given and repayment of all
proceeds and any premiums, loans, and loan interest to the life
settlement provider is made within the rescission period. If the
insured dies during the rescission period, the life settlement
contract shall be considered rescinded, subject to repayment of all
life settlement proceeds and provided any premiums, loans, and loan
interest to the life settlement provider is made within the
rescission period.
Sec.
5. (1) Upon receipt from the viator of the documents
to
effect
the transfer of the policy, the provider shall deposit the
contract
consideration in an escrow or trust account managed by a
state
or federal chartered financial institution, pending
acknowledgment
of the transfer by the issuer of the policy. The
financial
institution shall transfer the contract consideration to
the
viator immediately upon receipt of acknowledgment of the
transfer
from the insurer.
(2)
Failure by the provider to tender the contract
consideration
as required by this act renders the contract void.
(1) The life settlement provider shall instruct the seller to
send the documents executed to effect the change in ownership or
assignment or the change in beneficiary directly to the independent
escrow agent. Within 3 business days after the date the escrow
agent receives the documents, or from the date the life settlement
provider receives the documents, if the seller erroneously provides
the documents directly to the life settlement provider, the life
settlement provider shall pay or transfer the proceeds of the life
settlement contract into an escrow or trust account maintained in a
state or federally chartered financial institution whose deposits
are insured by a federal deposit insurance program. Upon payment of
the life settlement proceeds into the escrow account, the escrow
agent shall deliver the original change in ownership or assignment
or the change in beneficiary forms to the life settlement provider
or related provider trust. Upon the escrow agent's receipt of the
acknowledgment of the properly completed transfer of ownership,
assignment, or designation of beneficiary from the insurance
company, the escrow agent shall pay the life settlement proceeds to
the seller.
(2) Failure to tender consideration to the seller for the life
settlement contract within the time disclosed renders the life
settlement contract voidable by the seller for lack of
consideration until the time consideration is tendered to or
accepted by the seller.
(3) A contact with the insured, for the purpose of determining
the health status of the insured by the life settlement provider
after the life settlement contract has been executed, only may be
made by the licensed life settlement provider or its authorized
representatives and is limited to once every 3 months for insureds
with a life expectancy of more than 1 year, and not more than once
each month for insureds with a life expectancy of 1 year or less.
The life settlement provider shall explain the procedure for these
contacts at the time the life settlement contract is entered into.
The limitations provided for in this subsection do not apply to a
contact with an insured for reasons other than determining the
insured's health status. A life settlement provider is responsible
for the actions of his or her authorized representatives in
contacting the insured.
Sec. 6.
(1) If a policy provides for double
or additional
indemnity
in case of accidental death and accidental death occurs,
the
provider shall be entitled only to the face amount of the
policy.
Any amounts payable under the policy that exceed the face
amount
shall be paid to the beneficiary designated by the viator
or,
if no beneficiary has been designated, to the viator's estate.
A person shall not enter into a life settlement contract at any
time prior to the issuance of the policy that is the subject of the
life settlement contract. A person shall not enter into a life
settlement contract for 2 years after the date of issuance of the
policy unless the seller certifies to the life settlement provider
that 1 or more of the following conditions have been met within the
2-year period:
(a) The policy was issued upon the seller's exercise of
conversion rights arising out of a group or individual policy,
provided the total of the time covered under the conversion policy
plus the time covered under the prior policy is at least 24 months.
The time covered under a group policy shall be calculated without
regard to a change in insurance carriers, provided the coverage has
been continuous and under the same group sponsorship.
(b) The seller submits independent evidence to the life
settlement provider that 1 or more of the following conditions have
been met within the 2-year period:
(i) The seller or insured is terminally ill or chronically ill.
(ii) The seller or insured disposes of his or her ownership
interests in a closely held corporation, pursuant to the terms of a
buyout or other similar agreement in effect at the time the
insurance policy was initially issued.
(iii) A final order, judgment, or decree is entered by a court
of competent jurisdiction of a creditor of the seller adjudicating
the seller bankrupt or insolvent, approving a petition seeking
reorganization of the seller, or appointing a receiver, trustee, or
liquidator to all or a substantial portion of the seller's assets.
(2) Copies of the independent evidence described in subsection
(1)(b) and documents required shall be submitted to the insurer
when the life settlement provider submits a request to the insurer
for verification of coverage. The copies shall be accompanied by a
letter of attestation from the life settlement provider that the
copies are true and correct copies of the documents received by the
life settlement provider. If the life settlement provider submits
to the insurer a copy of independent evidence described in
subsection (1)(b) when the life settlement provider submits a
request to the insurer to affect the transfer of the policy to the
life settlement provider, this section is satisfied and the insurer
shall respond timely to the request.
Sec.
7. An offer to purchase a life insurance policy or
certificate
from the viator shall be transmitted to the insurer
providing
the life insurance policy, who may advise the viator of
other
alternatives which may be available under the policy. The
notice
required by this section shall be transmitted by the
provider
of the viatical settlement contract.
(1) This section applies to an advertising of a life
settlement contract or a related product or service intended for
dissemination in this state, including internet advertising viewed
by a person located in this state. If disclosure requirements are
established pursuant to federal law, rule, or regulation, this
section shall be interpreted so as to minimize or eliminate
conflict with federal law, rule, or regulation wherever possible.
(2) Each life settlement provider shall establish and at all
times maintain a system of control over the content, form, and
method of dissemination of an advertisement of its contracts,
products, and services. An advertisement, regardless of by whom
written, created, designed, or presented, is the responsibility of
the life settlement provider, as well as the individual who created
or presented the advertisement. A system of control by the life
settlement provider shall include regular routine notification, at
least once a year, to agents and others authorized to disseminate
advertisements, of the requirements and procedures for approval
before the use of an advertisement not furnished by the life
settlement provider.
(3) An advertisement shall be truthful and not misleading in
fact or by implication. The form and content of an advertisement of
a life settlement contract shall be sufficiently complete and clear
so as to avoid deception and shall not have the capacity or
tendency to mislead or deceive. Whether an advertisement has the
capacity or tendency to mislead or deceive shall be determined by
the commissioner from the overall impression that the advertisement
may be reasonably expected to create upon a person of average
education or intelligence within the segment of the public to which
it is directed.
(4) The information required to be disclosed pursuant to this
section shall not be minimized, rendered obscure, or presented in
an ambiguous fashion or intermingled with the text of the
advertisement so as to be confusing or misleading.
(5) An advertisement shall not omit material information or
use words, phrases, statements, references, or illustrations if the
omission or use has the capacity, tendency, or effect of misleading
or deceiving the public as to the nature or extent of any benefit,
loss covered, or state or federal tax consequence. The fact that
the life settlement contract offered is made available for
inspection before consummation of the sale, or an offer is made to
refund the payment if the seller is not satisfied, or that the life
settlement contract includes a "free look" period that satisfies or
exceeds legal requirements, does not remedy misleading statements.
(6) An advertisement shall not use the name or title of a life
insurance company or a life insurance policy unless the
advertisement has been approved by the insurer.
(7) An advertisement shall not state or imply that interest
charged on an accelerated death benefit or a policy loan is unfair,
inequitable, or in any manner an incorrect or improper practice.
(8) The words "free", "no cost", "without cost", "no
additional cost", "at no extra cost", or words of similar import
shall not be used with respect to a benefit or service unless true.
An advertisement may specify the charge for a benefit or service or
may state that a charge is included in the payment or use other
appropriate language.
(9) Any testimonial, appraisal, or analysis used in an
advertisement shall be genuine, represent the current opinion of
the author, be applicable to the life settlement contract, product,
or service advertised, if any, and be accurately reproduced with
sufficient completeness to avoid misleading or deceiving
prospective sellers as to the nature or scope of any testimonial,
appraisal, analysis, or endorsement.
(10) In using any testimonial, appraisal, or analysis, the
life settlement provider makes as its own all the statements
contained in them, and the statements are subject to all the
provisions of this section. If the individual making a testimonial,
appraisal, analysis, or an endorsement has a financial interest in
the life settlement provider or related entity as a stockholder,
director, officer, employee, or otherwise, or receives a benefit,
directly or indirectly, other than required union scale wages, that
fact shall be disclosed prominently in the advertisement.
(11) An advertisement may not state or imply that a life
settlement contract, benefit, or service has been approved or
endorsed by a group of individuals, society, association, or other
organization, unless that is the fact and unless any relationship
between an organization and the life settlement provider is
disclosed. If the entity making the endorsement or testimonial is
owned, controlled, or managed by the life settlement provider or
receives payment or other consideration from the life settlement
provider for making an endorsement or testimonial, that fact shall
be disclosed in the advertisement.
(12) If an endorsement refers to benefits received under a
life settlement contract, all pertinent information shall be
retained for a period of 5 years after its use.
(13) An advertisement shall not contain statistical
information unless it accurately reflects recent and relevant
facts. The source of all statistics used in an advertisement shall
be identified.
(14) An advertisement shall not disparage insurers, life
settlement providers, insurance producers, policies, services, or
methods of marketing.
(15) The name of the life settlement provider shall be
identified clearly in all advertisements about the life settlement
provider or its life settlement contract, products, or services,
and if any specific life settlement contract is advertised, the
life settlement contract shall be identified either by form number
or some other appropriate description. If an application is part of
the advertisement, the name of the life settlement provider shall
be shown on the application.
(16) An advertisement shall not use a trade name, group
designation, name of the parent company of a life settlement
provider, name of a particular division of the life settlement
provider, service mark, slogan, symbol, or other device or
reference without disclosing the name of the life settlement
provider, if the advertisement has the capacity or tendency to
mislead or deceive as to the true identity of the life settlement
provider, or to create the impression that a company other than the
life settlement provider has any responsibility for the financial
obligation under a life settlement contract.
(17) An advertisement shall not use any combination of words,
symbols, or physical materials that by their content, phraseology,
shape, color, or other characteristics are so similar to a
combination of words, symbols, or physical materials used by a
government program or agency or otherwise appear to be of such a
nature that they tend to mislead prospective sellers into believing
that the solicitation is in some manner connected with a government
program or agency.
(18) An advertisement may state that a life settlement
provider is licensed in the state where the advertisement appears,
provided it does not exaggerate that fact or suggest or imply that
a competing life settlement provider may not be so licensed. The
advertisement may ask the audience to consult the life settlement
provider's website or contact that state's office of financial and
insurance services or department of insurance to find out if that
state requires licensing and, if so, whether the life settlement
provider or any other company is licensed.
(19) An advertisement may not create the impression that the
life settlement provider, its financial condition or status, the
payment of its claims, or the merits, desirability, or advisability
of its life settlement contracts are recommended or endorsed by any
government entity.
(20) The name of the actual life settlement provider shall be
stated in all of its advertisements. An advertisement shall not use
a trade name, any group designation, name of any affiliate or
controlling entity of the life settlement provider, service mark,
slogan, symbol, or other device in a manner that has the capacity
or tendency to mislead or deceive as to the true identity of the
actual life settlement provider or create the false impression that
an affiliate or controlling entity has any responsibility for the
financial obligation of the life settlement provider.
(21) An advertisement shall not, directly or indirectly,
create the impression that any division or agency of the state or
of the United States government endorses, approves, or favors a
life settlement provider or its business practices or methods of
operation, any life settlement contract, or any policy or life
insurance company or promotes the merits, desirability, or
advisability of a life settlement contract.
(22) If the advertiser emphasizes the speed with which the
life settlement contract occurs, the advertising shall disclose the
average time frame from completed application to the date of offer
and from acceptance of the offer to receipt of the funds by the
seller.
(23) If the advertising emphasizes the dollar amounts
available to sellers, the advertising shall disclose the average
purchase price as a percent of face value obtained by sellers
contracting with the life settlement provider during the past 6
months.
Sec.
8. (1) The commissioner may issue an order prohibiting
the
provider from entering into a viatical settlement contract in
this
state if the commissioner finds any of the following:
(a)
The provider has been fraudulent or engaged in dishonest
practices.
(b)
The provider demonstrates a pattern of unreasonable
payments
to policy owners.
(c)
The provider has been convicted of a felony or any
misdemeanor
that involved criminal fraud.
(d)
The provider has violated a provision of this act.
(1) The commissioner may refuse to issue or renew or may
suspend or revoke the license of a life settlement provider if the
commissioner finds any of the following:
(a) The life settlement provider or any officer, partner,
member, or key management employee has been convicted of fraudulent
or dishonest practices, is subject to a final administrative
action, or is otherwise shown to be untrustworthy or incompetent.
(b) The life settlement provider demonstrates a pattern of
unreasonable payments to sellers.
(c) The life settlement provider or any officer, partner,
member, or key management employee 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.
(d) The life settlement provider or any officer, partner,
member, or key management employee or any life insurance producer
has violated a provision of this act.
(e) There was any material misrepresentation in the
application for the license.
(f) The life settlement provider has used a life settlement
contract form that has not been approved pursuant to this act.
(g) The life settlement provider has failed to honor
contractual obligations set out in a life settlement contract.
(h) The life settlement provider no longer meets the
requirements for initial licensure.
(i) The life settlement provider has assigned, transferred, or
pledged a purchased policy to a person other than a life settlement
provider licensed in this state, an accredited investor as defined
in 17 CFR 230.501, or a qualified institutional buyer as defined in
17 CFR 230.144a, a financing entity, a special purpose entity, or a
related provider trust.
(2) If the commissioner denies a license application or
suspends, revokes, or refuses to renew the license of a life
settlement provider, the commissioner shall conduct a hearing in
accordance with the administrative procedures act of 1969, 1969 PA
306, MCL 24.201 to 24.328.
(3) The commissioner may suspend, revoke, or refuse to renew
the license of a life insurance producer if the commissioner finds
that the life insurance producer has done any of the following:
(a) Violated the provisions of this act.
(b) Has dealt in bad faith with sellers.
(c) Received a fee, commission, or other valuable
consideration for his or her services with respect to a life
settlement transaction that involves unlicensed life settlement
providers or life insurance producers negotiating life settlement
contracts that have not complied with section 1a.
(4)
(2) In
addition to the order under subsection (1)
subsections (1) and (3), the commissioner may order any of the
following:
(a) Payment of a civil fine of not more than $500.00 for each
violation.
(b) If the life settlement provider knew or reasonably should
have known that the life settlement provider was in violation of
this act, the repayment of all consideration paid by or on behalf
of
a viator seller
for a viatical life settlement
contract
affected by the violation and a civil fine of not more than
$2,500.00 for each violation.
(c) A cease and desist order.
Sec. 9. (1) A person shall not commit a fraudulent life
settlement act.
(2) A person shall not knowingly or intentionally interfere
with the enforcement of the provisions of this act or
investigations of suspected or actual violations of this act.
(3) A person in the business of life settlements shall not
knowingly or intentionally permit a person convicted of a felony
involving dishonesty or breach of trust to participate in the
business of life settlements.
(4) A life settlement contract and an application for a life
settlement contract, regardless of the form of transmission, shall
contain the following statement or a substantially similar
statement: "Any person who knowingly presents false information in
an application for insurance or life settlement contract is guilty
of a crime and, upon conviction, may be subject to fines or
confinement in prison, or both.".
(5) The lack of a statement as required under subsection (4)
is not a defense in any prosecution for a fraudulent life
settlement act.
(6) A person engaged in the business of life settlements
having knowledge or a reasonable belief that a fraudulent life
settlement act is being, has been, or may be committed shall
provide to the commissioner, in a manner prescribed by the
commissioner, that information.
(7) Except as otherwise provided in subsection (8), a civil
liability is not imposed and a cause of action does not arise from
a person's furnishing information concerning suspected,
anticipated, or completed fraudulent life settlement acts, or
suspected or completed fraudulent insurance acts, if the
information is provided to or received from any of the following:
(a) The commissioner or the commissioner's employees, agents,
or representatives.
(b) Federal, state, or local law enforcement or regulatory
officials or their employees, agents, or representatives.
(c) A person involved in the prevention and detection of
fraudulent life settlement acts or that person's agents, employees,
or representatives.
(d) The national association of insurance commissioners,
national association of securities dealers, the North American
securities administrators association, or their employees, agents,
or representatives, or other regulatory body overseeing life
insurance or life settlement contracts.
(e) The insurer that issued the policy covering the life of
the insured.
(8) The protections afforded in subsection (7) do not apply to
a statement made with actual malice. In an action brought against a
person for filing a report or furnishing other information
concerning a fraudulent life settlement act or a fraudulent
insurance act, the party bringing the action shall plead
specifically any allegation that the protections afforded in
subsection (7) do not apply because the person filing the report or
furnishing the information did so with actual malice.
(9) A person is entitled to an award of attorney fees and
costs if he or she is the prevailing party as defined in section
2421b of the revised judicature act of 1961, 1961 PA 236, MCL
600.2421b, in a civil cause of action for libel, slander, or
another relevant tort arising out of activities in carrying out the
provisions of this act and the party bringing the action was not
substantially justified in doing so. For purposes of this section,
a proceeding is "substantially justified" if it had a reasonable
basis in law or fact at the time that it was initiated.
(10) This section does not abrogate or modify common law or
statutory privileges or immunities.
(11) The protections afforded in subsection (7) do not apply
to a person's furnishing of information concerning his or her own
suspected, anticipated, or completed fraudulent life settlement
acts or suspected, anticipated, or completed fraudulent insurance
acts.
(12) The documents and evidence provided pursuant to
subsection (7) or obtained by the commissioner in an investigation
of suspected or actual fraudulent life settlement acts are
privileged and confidential, are not a public record, and are not
subject to discovery or subpoena in a civil or criminal action.
This subsection does not prohibit release by the commissioner of
documents and evidence obtained in an investigation of suspected or
actual fraudulent life settlement acts as follows:
(a) In administrative or judicial proceedings to enforce laws
administered by the commissioner.
(b) To federal, state, or local law enforcement or regulatory
agencies, to an organization established for the purpose of
detecting and preventing fraudulent life settlement acts, or to the
national association of insurance commissioners.
(c) At the discretion of the commissioner, to a person in the
business of life settlements that is aggrieved by a fraudulent life
settlement act.
(13) Release of documents and evidence provided by subsection
(12) does not abrogate or modify the privilege granted in
subsection (7).
(14) This act does not do any of the following:
(a) Preempt the authority or prevent other law enforcement or
regulatory agencies from investigating, examining, and prosecuting
suspected violations of law.
(b) Prevent or prohibit a person from disclosing voluntarily
information concerning fraudulent life settlement acts to a law
enforcement or regulatory agency other than the office of financial
and insurance services.
(c) Limit the powers granted elsewhere by the laws of this
state to the commissioner to investigate possible violations of
law.
(15) A life settlement provider shall adopt initiatives
reasonably calculated to detect, assist in the prosecution of, and
prevent fraudulent life settlement acts. Initiatives may include
all of the following:
(a) Fraud investigators, who may be a life settlement provider
or employees or independent contractors of a life settlement
provider.
(b) An antifraud plan that is submitted to the commissioner.
The antifraud plan shall include, but is not limited to, a
description of all of the following:
(i) Procedures for detecting and investigating possible
fraudulent life settlement acts.
(ii) Procedures for resolving material inconsistencies between
medical records and insurance applications.
(iii) Procedures for reporting possible fraudulent life
settlement acts to the commissioner.
(iv) A plan for antifraud education and training of
underwriters and other personnel.
(v) A chart or description outlining the organizational
arrangement of the antifraud personnel who are responsible for the
investigation and reporting of possible fraudulent life settlement
acts and investigating unresolved material inconsistencies between
medical records and insurance applications.
(16) An antifraud plan submitted to the commissioner is
privileged and confidential, is not subject to discovery or
subpoena in a civil or criminal action, and is exempt from
disclosure under the freedom of information act, 1976 PA 442, MCL
15.231 to 15.246.
Sec. 10. (1) In addition to the penalties and other
enforcement provisions of this act, if a person violates this act
or any rule or regulation adopted under this act, the commissioner
may seek injunctive relief from a court of competent jurisdiction.
(2) A person damaged by the acts of a person in violation of
this act may bring a civil action against the person committing the
violation in a court of competent jurisdiction.
(3) The commissioner may issue a cease and desist order upon a
person that violates any provision of this act, or any rule or
regulation adopted by or order issued by the commissioner under
this act, or any written agreement entered into with the
commissioner.
(4) If the commissioner finds that an activity in violation of
this act presents an immediate danger to the public, the
commissioner may issue an emergency cease and desist order reciting
with particularity the facts underlying the findings. The emergency
cease and desist order is effective immediately upon service of a
copy of the order on the respondent and remains effective for 90
days. If the commissioner begins nonemergency cease and desist
proceedings, the emergency cease and desist order remains
effective, absent an order by a court of competent jurisdiction
pursuant to the administrative procedures act of 1969, 1969 PA 306,
MCL 24.201 to 24.328.
(5) In addition to the penalties and other enforcement
provisions of this act, a person who violates this act is subject
to civil penalties of up to $10,000.00 for each violation.
Imposition of civil penalties is pursuant to an order of the
commissioner. The commissioner's order may require a person found
to be in violation of this act to make restitution to a person
aggrieved by violations of this act.
(6) A person who is found to have violated a provision of this
act shall be ordered to pay restitution to a person aggrieved by
the violation of this act. Restitution shall be ordered in addition
to a fine or imprisonment and not in lieu of a fine or
imprisonment. A person who violates a provision of this act, upon
conviction, shall be sentenced based on the greater of the value of
property, services, or other benefits wrongfully obtained or
attempted to be obtained, or the aggregate economic loss suffered
by any person as a result of the violation and subject to all of
the following:
(a) If the value of the life settlement contract is more than
$35,000.00, the person is guilty of a felony punishable by
imprisonment for not more than 20 years or a fine of not more than
$100,000.00, or both.
(b) If the value of the life settlement contract is more than
$2,500.00 but not more than $35,000.00, the person is guilty of a
felony punishable by imprisonment for not more than 10 years or a
fine of not more than $20,000.00, or both.
(c) If the value of the life settlement contract is more than
$500.00 but not more than $2,500.00, the person is guilty of a
felony punishable by imprisonment for not more than 5 years or a
fine of not more than $10,000.00, or both.
(d) If the value of the life settlement contract is $500.00 or
less, the person is guilty of a misdemeanor punishable by
imprisonment for not more than 1 year or a fine of not more than
$3,000.00, or both.
(7) The value of a life settlement contract within a 6-month
period may be aggregated and the defendant charged accordingly in
applying the penalty provisions of this section. If 2 or more
offenses are committed by the same person in 2 or more counties,
the accused may be prosecuted in a county in which 1 of the
offenses was committed for all of the offenses aggregated as
provided by this section. The statute of limitations does not begin
to run until the insurance company or law enforcement agency is
aware of the fraud, but the prosecution may not be commenced later
than 7 years after the act has occurred.
Sec. 11. (1) A life settlement provider or other person
subject to this act or any person licensed under or subject to the
insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302, shall
not prohibit, restrict, limit, or impair a licensed life insurance
producer from aiding and assisting the owner of a policy with a
settlement, or from otherwise participating in a settlement
transaction, or from engaging in any transaction, act, practice, or
course of business or dealing restricting, limiting, or impairing
in any way the lawful transfer of ownership, change of beneficiary,
or assignment of a policy to effectuate a settlement contract.
(2) A violation of this act is considered an unfair trade
practice pursuant to chapter 20 of the insurance code of 1956, 1956
PA 218, MCL 500.2001 to 500.2093, and subject to the penalties
contained in that chapter.
Sec. 12. The commissioner may do any of the following:
(a) Promulgate rules pursuant to the administrative procedures
act of 1969, 1969 PA 306, MCL 24.201 to 24.328, and regulations
implementing this act.
(b) Establish standards for evaluating reasonableness of
payments under a life settlement contract where the insured under
the policy that is the subject of a life settlement contract is
terminally ill or chronically ill. This includes, but is not
limited to, regulation of discount rates used to determine the
amount paid in exchange for assignment, transfer, sale, devise, or
bequest of a benefit under a policy. A life settlement provider,
where the seller or insured is not terminally ill or chronically
ill, shall pay an amount greater than the cash surrender value or
accelerated death benefit then available.
(c) Establish appropriate licensing requirements, fees, and
standards for continued licensure for a life settlement provider
and a fee for life insurance producers.
(d) Require a bond or other mechanism for financial
accountability for a life settlement provider.
(e) Promulgate rules pursuant to the administrative procedures
act of 1969, 1969 PA 306, MCL 24.201 to 24.328, governing the
relationship and responsibilities of an insurer and a life
settlement provider, life insurance producer, and others in the
business of life settlements during the period of consideration or
effectuation of a life settlement contract.
Sec. 13. This act does not preempt or otherwise limit the
provisions of the uniform securities act, 1964 PA 265, MCL 451.501
to 451.818, or any regulations, orders, policy statements, notices,
bulletins, or other interpretations issued by or through the
commissioner or his or her designee acting pursuant to that act.
Compliance with this act does not constitute compliance with any
applicable provision of the uniform securities act, 1964 PA 265,
MCL 451.501 to 451.818.