June 17, 2009, Introduced by Senators SANBORN, RICHARDVILLE, GILBERT, ALLEN, GLEASON, PATTERSON and VAN WOERKOM and referred to the Committee on Economic Development and Regulatory Reform.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
(MCL 500.100 to 500.8302) by amending the title, as amended by 2002
PA 304, and by adding chapter 43; and to repeal acts and parts of
acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
TITLE
An act to revise, consolidate, and classify the laws relating
to the insurance and surety business; to regulate the incorporation
or formation of domestic insurance and surety companies and
associations and the admission of foreign and alien companies and
associations; to provide their rights, powers, and immunities and
to prescribe the conditions on which companies and associations
organized, existing, or authorized under this act may exercise
their powers; to provide the rights, powers, and immunities and to
prescribe the conditions on which other persons, firms,
corporations, associations, risk retention groups, and purchasing
groups engaged in an insurance or surety business may exercise
their powers; to provide for the imposition of a privilege fee on
domestic insurance companies and associations and the state
accident fund; to provide for the imposition of a tax on the
business of foreign and alien companies and associations; to
provide for the imposition of a tax on risk retention groups and
purchasing groups; to provide for the imposition of a tax on the
business of surplus line agents; to provide for the imposition of
regulatory fees on certain insurers; to provide for assessment fees
on certain health maintenance organizations; to modify tort
liability arising out of certain accidents; to provide for limited
actions with respect to that modified tort liability and to
prescribe certain procedures for maintaining those actions; to
require security for losses arising out of certain accidents; to
provide for the continued availability and affordability of
automobile insurance and homeowners insurance in this state and to
facilitate the purchase of that insurance by all residents of this
state at fair and reasonable rates; to provide for certain
reporting with respect to insurance and with respect to certain
claims against uninsured or self-insured persons; to prescribe
duties for certain state departments and officers with respect to
that reporting; to provide for certain assessments; to establish
and continue certain state insurance funds; to modify and clarify
the status, rights, powers, duties, and operations of the nonprofit
malpractice insurance fund; to provide for the departmental
supervision and regulation of the insurance and surety business
within this state; to provide for regulation over worker's
compensation self-insurers; to provide for the conservation,
rehabilitation, or liquidation of unsound or insolvent insurers; to
provide for the protection of policyholders, claimants, and
creditors of unsound or insolvent insurers; to provide for
associations of insurers to protect policyholders and claimants in
the event of insurer insolvencies; to prescribe educational
requirements for insurance agents and solicitors; to provide for
the regulation of multiple employer welfare arrangements; to
provide for the regulation of life settlement contracts; to create
an automobile theft prevention authority to reduce the number of
automobile thefts in this state; to prescribe the powers and duties
of the automobile theft prevention authority; to provide certain
powers and duties upon certain officials, departments, and
authorities of this state; to provide for an appropriation; to
repeal acts and parts of acts; and to provide penalties for the
violation of this act.
CHAPTER 43
LIFE SETTLEMENTS AND STRANGER-ORIGINATED LIFE INSURANCE
Sec. 4301. As used in this chapter:
(a) "Administrative procedures act of 1969" means the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328.
(b) "Advertisement" means any written, electronic, or printed
communication or any communication by means of recorded telephone
messages or transmitted on radio, television, the internet, or
similar communications media, including film strips, motion
pictures, and videos, published, disseminated, circulated, or
placed before the public, directly or indirectly, for the purpose
of creating an interest in or inducing a person to purchase or
sell, assign, devise, bequest, or transfer the death benefit or
ownership of a policy or an interest in a policy pursuant to a life
settlement contract.
(c) "Broker" means a person who, on behalf of an owner, and
for a fee, commission, or other valuable consideration, offers or
attempts to negotiate life settlement contracts between an owner
and providers. A broker represents only the owner and owes a
fiduciary duty to the owner to act according to the owner's
instructions, and in the best interest of the owner,
notwithstanding the manner in which the broker is compensated. A
broker does not include an attorney, certified public accountant,
or financial planner retained in the type of practice customarily
performed in his or her professional capacity to represent the
owner whose compensation is not paid directly or indirectly by the
provider or any other person, except the owner.
(d) "Business of life settlements" means an activity involved
in, but not limited to, offering to enter into, soliciting,
negotiating, procuring, effectuating, monitoring, or tracking of
life settlement contracts.
(e) "Chronically ill" means any 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.
(f) "Financing entity" means an underwriter, placement agent,
lender, purchaser of securities, purchaser of a policy from a
provider, credit enhancer, or any other person, other than a
nonaccredited investor or purchaser, that has a direct ownership
interest in a policy that is the subject of a life settlement
contract and to which both of the following apply:
(i) Its principal activity related to the transaction is
providing funds to effect the business of life settlement contracts
or the purchase of 1 or more policies.
(ii) It has an agreement in writing with 1 or more licensed
providers to finance the acquisition of life settlement contracts.
(g) "Financing transaction" means a transaction in which a
licensed provider obtains financing from a financing entity,
including, without limitation, any secured or unsecured financing,
any securitization transaction, or any securities offering that is
either registered or exempt from registration under federal and
state securities law.
(h) "Fraudulent life settlement act" includes all of the
following:
(i) Acts or omissions committed by any person who knowingly and
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, but not limited to, all of
the following:
(A) Presenting, causing to be presented, or preparing with
knowledge and belief that it will be presented to or by a provider,
premium finance lender, broker, insurer, insurance producer, or any
other 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 insurance policy.
(II) The underwriting of a life settlement contract or
insurance policy.
(III) A claim for payment or benefit pursuant to a life
settlement contract or insurance policy.
(IV) Premiums paid on an insurance policy.
(V) Payments and changes in ownership or beneficiary made in
accordance with the terms of a life settlement contract or
insurance policy.
(VI) The reinstatement or conversion of an insurance policy.
(VII) The solicitation of, offer to enter into, or
effectuation of a life settlement contract or insurance policy.
(VIII) The issuance of written evidence of life settlement
contracts or insurance.
(IX) Any application for, or the existence of or any payments
related to, a loan secured directly or indirectly by any interest
in a life insurance policy.
(X) Enter into any practice or plan that involves STOLI.
(B) If asked by the insurer, failing to disclose to the
insurer that the prospective insured has undergone a life
expectancy evaluation by any person or entity other than the
insurer or its authorized representatives in connection with the
issuance of the policy.
(C) Employing any device, scheme, or artifice to defraud in
the business of life settlements.
(D) In the solicitation, application, or issuance of a life
insurance policy, employing any device, scheme, or artifice in
violation of state insurable interest laws.
(ii) Any of the following that any person does, or permits his
or her employees or agents to do, in the furtherance of a fraud or
to prevent the detection of a fraud:
(A) Remove, conceal, alter, destroy, or sequester from the
commissioner the assets or records of a licensee or other person
engaged in the business of life settlements.
(B) Misrepresent or conceal the financial condition of a
licensee, 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 concealing information about a
material fact from the commissioner.
(E) Engage in embezzlement, theft, misappropriation, or
conversion of money, funds, premiums, credits, or other property of
a provider, insurer, insured, owner, insurance policyowner, or any
other person engaged in the business of life settlements or
insurance.
(F) Knowingly and with intent to defraud, enter into, broker,
or otherwise deal in a life settlement contract, the subject of
which is a life insurance policy that was obtained by presenting
false information concerning any fact material to the policy or by
concealing, for the purpose of misleading another, information
concerning any fact material to the policy, where the owner or the
owner's agent intended to defraud the policy's issuer.
(G) Attempt to commit, assist, aid, or abet in the commission
of, or conspiracy to commit the acts or omissions specified in this
subdivision.
(H) Misrepresent the state of residence of an owner to be a
state or jurisdiction that does not have a law substantially
similar to this chapter for the purpose of evading or avoiding the
provisions of this chapter.
(i) "Freedom of information act" means the freedom of
information act, 1976 PA 442, MCL 15.231 to 15.246.
(j) "Insured" means the person covered under the policy being
considered for sale in a life settlement contract.
(k) "Life expectancy" means the arithmetic mean of the number
of months the insured under the policy to be settled can be
expected to live as determined by a life expectancy company
considering medical records and appropriate experiential data.
(l) "Life insurance producer" or "producer" means any person
licensed in this state as a resident or nonresident life or limited
life insurance producer pursuant to chapter 12.
(m) "Life settlement contract", subject to section 4303, means
a written agreement entered into between a provider and an owner,
establishing the terms under which compensation or anything of
value will be paid, which compensation or thing of value is less
than the expected death benefit of the policy, in return for the
owner's assignment, transfer, sale, devise, or bequest of the death
benefit or any portion of the policy for compensation; provided,
however, that the minimum value for a life settlement contract
shall be greater than a cash surrender value or accelerated death
benefit available at the time of an application for a life
settlement contract. Life settlement contract also includes the
transfer for compensation or value of ownership or beneficial
interest in a trust or other entity that owns such policy if the
trust or other entity was formed or availed of for the principal
purpose of acquiring 1 or more life insurance contracts, which life
insurance contract insures the life of a person residing in this
state. A life settlement contract also includes either of the
following:
(i) A written agreement for a loan or other lending
transaction, secured primarily by an individual or group life
insurance policy.
(ii) A premium finance loan made for a policy on or before the
date of issuance of the policy where 1 of the following applies:
(A) The loan proceeds are not used solely to pay premiums for
the policy and any costs or expenses incurred by the lender or the
borrower in connection with the financing.
(B) The owner receives on the date of the premium finance loan
a guarantee of the future life settlement value of the policy.
(C) The owner agrees on the date of the premium finance loan
to sell the policy or any portion of its death benefit on any date
following the issuance of the policy.
(n) "Owner" means the owner of a policy or a certificate
holder under a group policy, with or without a terminal illness,
who enters or seeks to enter into a life settlement contract. An
owner is not limited to an owner of a policy or a certificate
holder under a group policy that insures the life of an individual
with a terminal or chronic illness or condition except where
specifically addressed. Owner does not include any of the
following:
(i) Any provider or other licensee under this act.
(ii) A qualified institutional buyer as defined in rule 144A
promulgated under the federal securities act of 1933, 17 CFR
230.144A.
(iii) A financing entity.
(iv) A special purpose entity.
(v) A related provider trust.
(o) "Policy" means an individual or group policy, group
certificate, contract, or arrangement of life insurance owned by a
resident of this state, regardless of whether delivered or issued
for delivery in this state.
(p) "Premium finance loan" is a loan made primarily for the
purpose of making premium payments on a policy, which loan is
secured by an interest in the policy.
(q) "Provider" means a person, other than an owner, who enters
into or effectuates a life settlement contract with an owner. A
provider does not include any of the following:
(i) Any bank, savings bank, savings and loan association, or
credit union.
(ii) A licensed lending institution or creditor or secured
party pursuant to a premium finance loan agreement that takes an
assignment of a policy as collateral for a loan.
(iii) The insurer of a policy or rider to the extent of
providing accelerated death benefits or riders or cash surrender
value.
(iv) Any natural person who enters into or effectuates no more
than 1 agreement in a calendar year for the transfer of a policy,
for compensation or anything of value less than the expected death
benefit payable under the policy.
(v) A purchaser.
(vi) Any authorized or eligible insurer that provides stop loss
coverage to a provider, purchaser, financing entity, special
purpose entity, or related provider trust.
(vii) A financing entity.
(viii) A special purpose entity.
(ix) A related provider trust.
(x) A broker.
(xi) An accredited investor or qualified institutional buyer as
defined respectively in regulation D, rule 501 or rule 144A
promulgated under the securities act of 1933, 17 CFR 230.501 to
230.508 and 17 CFR 230.144A, who purchases a life settlement policy
from a provider.
(r) "Purchased policy" means a policy that has been acquired
by a provider pursuant to a life settlement contract.
(s) "Purchaser" means a person who pays compensation or
anything of value as consideration for a beneficial interest in a
trust that is vested with, or for the assignment, transfer, or sale
of, an ownership or other interest in a policy that has been the
subject of a life settlement contract.
(t) "Related provider trust" means a titling trust or other
trust established by a licensed 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. To
qualify as a related provider trust, the trust shall have a written
agreement with the licensed provider under which the licensed
provider is responsible for ensuring compliance with all statutory
and regulatory requirements and under which the trust agrees to
make all records and files relating to life settlement transactions
available to the office of financial and insurance regulation as if
those records and files were maintained directly by the licensed
provider.
(u) "Settled policy" means a policy that has been acquired by
a provider pursuant to a life settlement contract.
(v) "Special purpose entity" means a corporation, partnership,
trust, limited liability company, or other legal entity formed
solely to provide either directly or indirectly access to
institutional capital markets for a financing entity or provider or
in connection with a transaction in which the securities in the
special purpose entity are acquired by the owner or by a "qualified
institutional buyer" as defined in rule 144 promulgated under the
federal securities act of 1933, 17 CFR 230.144, or the securities
pay a fixed rate of return commensurate with established asset-
backed institutional capital markets.
(w) "Stranger-originated life insurance" or "STOLI" is a
practice or plan to initiate a policy for the benefit of a third-
party investor who, at the time of policy origination, has no
insurable interest in the life of the insured. STOLI practices
include, but are not limited to, cases in which life insurance is
purchased with resources or guarantees from or through a person or
entity, that, at the time of policy inception, could not lawfully
initiate the policy himself, herself, or itself, and where, at the
time of inception, there is an arrangement or agreement, whether
verbal or in writing, to directly or indirectly transfer the
ownership of the policy or the policy benefits to a third party.
Trusts that are created to give the appearance of insurable
interest and that are used to initiate policies for investors
violate insurable interest laws and the prohibition against
wagering on life. STOLI arrangements do not include those practices
set forth under section 4303.
(x) "Terminally ill" means having an illness or sickness that
can reasonably be expected to result in death in 24 months or less.
Sec. 4303. A life settlement contract does not include any of
the following:
(a) A policy loan by a life insurance company pursuant to the
terms of the policy or accelerated death provisions contained in
the policy, whether issued with the original policy or as a rider.
(b) A premium finance loan or any loan made by a bank or other
licensed financial institution, provided that neither default on
such loan nor the transfer of the policy in connection with such
default is pursuant to an agreement or understanding with any other
person for the purpose of evading regulation under this chapter.
(c) A collateral assignment of a policy by an owner.
(d) A loan made by a lender that does not violate this act and
is not otherwise within the definition of life settlement contract.
(e) An agreement where all of the parties satisfy 1 of the
following conditions:
(i) They are closely related to the insured by blood or law.
(ii) They have a lawful substantial economic interest in the
continued life, health, and bodily safety of the person insured or
are trusts established primarily for the benefit of those parties.
(f) Any designation, consent, or agreement by an insured who
is an employee of an employer in connection with the purchase by
the employer, or trust established by the employer, of life
insurance on the life of the employee.
(g) A bona fide business succession planning arrangement as
follows:
(i) Between 1 or more shareholders in a corporation or between
a corporation and 1 or more of its shareholders or 1 or more trusts
established by its shareholders.
(ii) Between 1 or more partners in a partnership or between a
partnership and 1 or more of its partners or 1 or more trusts
established by its partners.
(iii) Between 1 or more members in a limited liability company
or between a limited liability company and 1 or more of its members
or 1 or more trusts established by its members.
(h) An agreement entered into by a service recipient, or a
trust established by the service recipient, and a service provider,
or a trust established by the service provider, who performs
significant services for the service recipient's trade or business.
(i) Any other contract, transaction, or arrangement from the
definition of "life settlement contract" that the commissioner by
rule promulgated pursuant to the administrative procedures act of
1969 determines is not of the type intended to be regulated by this
chapter.
Sec. 4305. (1) A person shall not operate in this state as a
provider or broker without first having obtained a license from the
commissioner. This subsection takes effect 90 days after the
effective date of this chapter.
(2) Application for a provider or broker license shall be made
to the commissioner by the applicant on a form prescribed by the
commissioner, and the application shall be accompanied by a fee in
an amount established by the commissioner, provided, however, that
the license and renewal fees for a provider license shall be
reasonable and that the license and renewal fees for a broker
license shall not exceed those established for an insurance
producer.
(3) A life insurance producer who has been duly licensed as a
resident insurance producer with a life line of authority in this
state or his or her home state for at least 1 year and is licensed
as a nonresident producer in this state meets the licensing
requirements of this section and may operate as a broker without
the license required under this chapter.
(4) Not later than 30 days from the first day of operating as
a broker, the life insurance producer shall notify the commissioner
that he or she is acting as a broker on a form prescribed by the
commissioner and shall pay any applicable fee to be determined by
the commissioner. Notification shall include an acknowledgement by
the life insurance producer that he or she will operate as a broker
in accordance with this chapter.
(5) The insurer that issued the policy that is the subject of
a life settlement contract is not responsible for any act or
omission of a broker or provider or purchaser arising out of or in
connection with the life settlement transaction, unless the insurer
receives compensation for the placement of a life settlement
contract from the provider or purchaser or broker in connection
with the life settlement contract.
(6) A person licensed as an attorney, certified public
accountant, or financial planner accredited by a nationally
recognized accreditation agency, who is retained to represent the
owner, and whose compensation is not paid directly or indirectly by
the provider or purchaser, may negotiate a life settlement contract
on behalf of the owner without having to obtain a license as a
broker.
(7) The term of a provider license shall be equal to that of a
domestic stock life insurance company under this act and the term
of a broker license shall be equal to that of an insurance producer
license under this act.
(8) Licenses shall be renewed biennially upon payment of a
periodic renewal fee. Failure to pay the fee results in the
automatic revocation of the license.
(9) The applicant shall provide information as the
commissioner may require on forms prepared by the commissioner. The
commissioner may, at any time, require the applicant to fully
disclose the identity of its stockholders, except for stockholders
owning fewer than 10% of the shares of an applicant whose shares
are publicly traded, partners, officers, and employees. The
commissioner may refuse to issue a license in the name of any
person if not satisfied that any officer, employee, stockholder, or
partner who may materially influence the applicant's conduct meets
the standards of this chapter.
(10) A license issued to a partnership, corporation, or other
entity authorizes all members, officers, and designated employees
to act as a licensee under the license, if those persons are named
in the application and any supplements to the application.
(11) Upon the filing of an application under this section and
the payment of the license fee, the commissioner shall make an
investigation of the applicant and may issue to the applicant a
license if the commissioner finds that all of the following apply
to the applicant:
(a) Regarding an application for a license as a provider, the
applicant provides a detailed plan of operation.
(b) The applicant is competent and trustworthy and intends to
transact its business in good faith.
(c) The applicant has a good business reputation and has had
experience, training, or education so as to be qualified to act in
the capacity of a provider or broker, as applicable.
(d) If the applicant is a person other than an individual, is
formed or organized pursuant to the laws of this state or is a
foreign legal entity authorized to transact business in this state
or provides a certificate of good standing from the state of its
organization.
(e) The applicant provides an antifraud plan that meets the
requirements of section 4339.
(12) The commissioner shall not issue a license to any
nonresident applicant, unless a written designation of an agent for
service of process is filed and maintained with the commissioner or
unless the applicant has filed with the commissioner the
applicant's written irrevocable consent that any action against the
applicant may be commenced against the applicant by service of
process on the commissioner.
(13) Each licensee shall file with the commissioner on or
before the first day of March of each year an annual statement
containing such information as the commissioner may prescribe by
rule promulgated pursuant to the administrative procedures act of
1969.
(14) A provider shall not use any person to perform the
functions of a broker unless the person holds a current, valid
license as a broker or is otherwise authorized to act as a broker
under this chapter.
(15) A broker shall not use any person to perform the
functions of a provider unless such person holds a current, valid
license as a provider.
(16) A provider or broker shall provide to the commissioner
new or revised information about officers, 10% or more
stockholders, partners, directors, members, or designated employees
within 30 days of the change.
(17) An individual licensed as a broker shall complete on a
biennial basis 15 hours of training related to life settlements and
life settlement transactions, as required by the commissioner. This
subsection does not apply to a life insurance producer who is
operating as a broker under this section.
Sec. 4307. (1) The commissioner may suspend, revoke, or refuse
to renew the license of any licensee if the commissioner finds any
of the following:
(a) There was any material misrepresentation in the
application for the license.
(b) The licensee or any officer, partner, member, or director
has been guilty of fraudulent or dishonest practices, is subject to
a final administrative action, or is otherwise shown to be
untrustworthy or incompetent to act as a licensee.
(c) The provider demonstrates a pattern of unreasonably
withholding payments to policyowners.
(d) The licensee no longer meets the requirements for initial
licensure.
(e) The licensee or any officer, partner, member, or director
has been convicted of a felony, or of any misdemeanor of which
criminal fraud is an element; or the licensee has pleaded guilty or
no contest to any felony or any misdemeanor of which criminal fraud
or moral turpitude is an element, regardless of whether a judgment
of conviction has been entered by the court.
(f) The provider has entered into any life settlement contract
that has not been approved pursuant to this chapter.
(g) The provider has failed to honor contractual obligations
set out in a life settlement contract.
(h) The provider has assigned, transferred, or pledged a
settled policy to a person other than a provider licensed in this
state, a purchaser, an accredited investor, or qualified
institutional buyer as defined respectively in regulation D, rule
501 or rule 144A as promulgated under the securities act of 1933,
17 CFR 230.501 to 230.508 and 17 CFR 230.144A, financing entity,
special purpose entity, or related provider trust.
(i) The licensee or any officer, partner, member, or key
management personnel has violated any of the provisions of this
chapter.
(2) Before the commissioner denies a license application or
suspends, revokes, or refuses to renew the license of any licensee
under this chapter, the commissioner shall conduct a hearing in
accordance with the administrative procedures act of 1969.
Sec. 4309. (1) A person shall not use a life settlement
contract form or provide a disclosure statement form in this state
unless the life settlement contract form or the disclosure
statement form is filed with and approved by the commissioner in a
manner that conforms with the filing procedures and time
restrictions, if any, for life insurance forms, policies, and
contracts.
(2) An insurer shall not, as a condition of responding to a
request for verification of coverage or in connection with the
transfer of a policy pursuant to a life settlement contract,
require that the owner, insured, provider, or broker sign any form,
disclosure, consent, waiver, or acknowledgment that has not been
expressly approved by the commissioner for use in connection with
life settlement contracts in this state.
(3) The commissioner shall disapprove a life settlement
contract form or disclosure statement form if, in the
commissioner's opinion, the contract or provisions contained in the
form fail to meet the requirements of this chapter or are
unreasonable, contrary to the interests of the public, or otherwise
misleading or unfair to the owner. At the commissioner's
discretion, the commissioner may require the submission of
advertising material for the commissioner's review and approval.
Sec. 4311. (1) For any policy settled within 5 years of policy
issuance, each provider shall file with the commissioner on or
before March 1 of each year an annual statement containing such
information as the commissioner may prescribe by order. In addition
to any other requirements, the annual statement shall specify the
total number, aggregate face amount, and life settlement proceeds
of policies settled during the immediately preceding calendar year,
together with a breakdown of the information by policy issue year.
The annual statement shall also include the names of the insurers
whose policies have been settled and the brokers that have settled
the policies. The information shall be limited to only those
transactions where the insured is a resident of this state and
shall not include individual transaction data regarding the
business of life settlements or information that there is a
reasonable basis to believe could be used to identify the owner or
the insured. Every provider that willfully fails to file an annual
statement as required in this section, or willfully fails to reply
within 30 days to a written inquiry by the commissioner concerning
the annual statement, is subject, in addition to other penalties
provided by this chapter, to a penalty of up to $250.00 per day of
delay, not to exceed $25,000.00 for each such failure.
(2) Except as otherwise allowed or required by law, a
provider, broker, insurer, producer, information bureau, rating
agency or company, or any other person with actual knowledge of an
insured's identity shall not disclose the identity of an insured or
information that there is a reasonable basis to believe could be
used to identify the insured or the insured's financial or medical
information to any other person unless any 1 or more of the
following apply:
(a) The disclosure is necessary to effect a life settlement
contract between the owner and a provider and the owner and insured
have provided prior written consent to the disclosure.
(b) The disclosure is necessary to effectuate the sale of life
settlement contracts, or interests therein, as investments, and
both of the following apply:
(i) The sale is conducted in accordance with applicable state
and federal securities law.
(ii) The owner and the insured have both provided prior written
consent to the disclosure.
(c) The disclosure is provided in response to an investigation
or examination under this chapter by the commissioner or any other
governmental officer or agency.
(d) The disclosure is a term or condition to the transfer of a
policy by 1 provider to another provider, in which case the
receiving provider shall be required to comply with the
confidentiality requirements of this subsection.
(e) The disclosure is necessary to allow the provider or
broker or their authorized representatives to make contacts for the
purpose of determining health status. For the purposes of this
section, the term "authorized representative" does not include any
person who has or may have any financial interest in the settlement
contract other than a provider, licensed broker, financing entity,
related provider trust, or special purpose entity. In addition, a
provider or broker shall require its authorized representative to
agree in writing to adhere to the privacy provisions of this
chapter.
(f) The disclosure is required to purchase stop-loss coverage.
(3) Nonpublic personal information solicited or obtained in
connection with a proposed or actual life settlement contract is
subject to the provisions applicable to financial institutions
under the federal Gramm Leach Bliley act, Public Law 106-102
(1999), and all other state and federal laws relating to
confidentiality of nonpublic personal information.
Sec. 4313. (1) The commissioner may, when the commissioner
considers it reasonably necessary to protect the interests of the
public, examine the business and affairs of any licensee or
applicant for a license under this chapter. The commissioner may
order any licensee or applicant to produce any records, books,
files, or other information reasonably necessary to ascertain
whether the licensee or applicant is acting or has acted in
violation of the law or otherwise contrary to the interests of the
public. The expenses incurred in conducting any examination shall
be paid by the licensee or applicant.
(2) Instead of an examination under this chapter of any
foreign or alien licensee licensed in this state, the commissioner
may accept an examination report on the licensee as prepared by the
commissioner for the licensee's state of domicile or port-of-entry
state.
(3) Names of and individual identification data for all owners
and insureds are private and confidential information and shall not
be disclosed by the commissioner unless required by law.
(4) Records of all consummated transactions and life
settlement contracts shall be maintained by the provider for 3
years after the death of the insured and shall be available to the
commissioner for inspection during reasonable business hours.
(5) Upon determining that an examination should be conducted,
the commissioner shall appoint 1 or more examiners to perform the
examination and instruct them as to the scope of the examination.
In conducting the examination, the examiner shall use methods
common to the examination of any life settlement licensee.
(6) Every licensee, or person from whom information is sought,
and all officers, directors, employees, and agents of any licensee,
or person from whom information is sought, shall provide to the
examiners timely, convenient, and free access at all reasonable
hours at the licensee's or person's offices to all books, records,
accounts, papers, documents, assets, and computer or other
recordings relating to the property, assets, business, and affairs
of the licensee being examined. The officers, directors, employees,
and agents of the licensee or person shall facilitate the
examination and aid in the examination so far as it is in their
power to do so. The refusal of a licensee, by its officers,
directors, employees, or agents, to submit to examination or to
comply with any reasonable written request of the commissioner
shall be grounds for suspension, revocation, denial of issuance, or
nonrenewal of any license held by the licensee to engage in the
business of life settlements or other business subject to the
commissioner's jurisdiction. Any proceedings for suspension,
revocation, denial, or refusal to renew any license or authority
are subject to this act.
(7) The commissioner has the power to issue subpoenas, to
administer oaths, and to examine under oath any person as to any
matter pertinent to the examination. Upon the failure or refusal of
a person to obey a subpoena, the commissioner may petition a court
of competent jurisdiction, and, upon proper showing, the court may
enter an order compelling the witness to appear and testify or
produce documentary evidence.
(8) When making an examination under this chapter, the
commissioner may retain attorneys, appraisers, independent
actuaries, independent certified public accountants, or other
professionals and specialists as examiners, and the licensee that
is the subject of the examination shall bear the cost of those
examiners as provided in this section.
(9) Nothing in this chapter limits the commissioner's
authority to terminate or suspend an examination in order to pursue
other legal or regulatory action pursuant to the insurance laws of
this state. Findings of fact and conclusions made pursuant to any
examination shall be prima facie evidence in any legal or
regulatory action.
(10) Nothing in this chapter limits the commissioner's
authority to use and, if appropriate, to make public any final or
preliminary examination report, any examiner or licensee working
papers or other documents, or any other information discovered or
developed during the course of any examination in the furtherance
of any legal or regulatory action that the commissioner considers
appropriate.
Sec. 4315. (1) Examination reports shall be composed of only
facts appearing upon the books, from the testimony of its officers,
agents, or other persons examined concerning its affairs, and the
conclusions and recommendations that the examiners find reasonably
warranted from the facts.
(2) No later than 60 days following completion of the
examination, the examiner in charge shall file with the
commissioner a verified written report of examination. Upon receipt
of the verified report, the commissioner shall transmit the report
to the licensee examined, together with a notice that shall afford
the licensee examined a reasonable opportunity of not more than 30
days from receipt of the report to make a written submission or
rebuttal with respect to any matters contained in the examination
report and which shall become part of the report or to request a
hearing on any matter in dispute.
(3) If the commissioner determines that regulatory action is
appropriate as a result of an examination, the commissioner may
initiate any proceedings or actions provided by law.
(4) Names and individual identification data for all owners,
purchasers, and insureds shall be considered private and
confidential information and shall not be disclosed by the
commissioner, unless required by law.
(5) Except as otherwise provided in this chapter, all
examination reports, working papers, recorded information,
documents, and copies of those reports, papers, information,
documents, and copies produced by, obtained by, or disclosed to the
commissioner or to any other person in the course of an examination
made under this chapter, or in the course of the commissioner's
analysis or investigation of the financial condition or market
conduct of a licensee are confidential by law and privileged, are
not subject to the disclosure requirements of the freedom of
information act, are not subject to subpoena, and are not subject
to discovery or admissible in evidence in any private civil action.
The commissioner may use the documents, materials, or other
information in the furtherance of any regulatory or legal action
brought as part of the commissioner's official duties. The licensee
being examined shall have access to all documents used to make the
report.
(6) The commissioner shall not appoint an examiner if the
examiner, either directly or indirectly, has a conflict of interest
or is affiliated with the management of, or owns a pecuniary
interest in, any person subject to examination under this chapter.
This does not automatically preclude an owner, an insured in a life
settlement policy, or a beneficiary in a policy that is proposed
for a life settlement contract from being an examiner.
(7) Notwithstanding subsection (6), the commissioner may
retain from time to time, on an individual basis, qualified
actuaries, certified public accountants, or other similar
individuals who are independently practicing their professions,
even though these persons may from time to time be similarly
employed or retained by persons subject to examination under this
chapter.
Sec. 4317. (1) No cause of action shall arise nor shall any
liability be imposed against the commissioner, any authorized
representative of the commissioner, or any examiner appointed by
the commissioner for any statements made or conduct performed in
good faith while carrying out the provisions of this chapter.
(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, any authorized
representative of the commissioner, or any examiner appointed by
the commissioner pursuant to an examination made under this
chapter, if the act of communication or delivery was performed in
good faith and without fraudulent intent or the intent to deceive.
This section does not abrogate or modify in any way any common law
or statutory privilege or immunity previously enjoyed by any person
described in subsection (1).
(3) A person described in subsection (1) or (2) is entitled to
an award of attorney fees and costs if the person is the prevailing
party in a civil action for libel, slander, or any other relevant
tort arising out of activities in carrying out the provisions of
this chapter and the party bringing the action was not
substantially justified in bringing the action. For purposes of
this section, an action is "substantially justified" if it had a
reasonable basis in law or fact at the time that it was initiated.
Sec. 4319. The commissioner may investigate suspected
fraudulent life settlement acts and persons engaged in the business
of life settlements.
Sec. 4321. (1) A broker and provider licensed pursuant to this
chapter may conduct or participate in advertisements within this
state. The advertisements shall comply with all state advertising
and marketing laws or rules and rules promulgated by the
commissioner pursuant to the administrative procedures act of 1969,
that are applicable to life insurers or to brokers and providers
licensed pursuant to this chapter.
(2) Advertisements shall be accurate, truthful, and not
misleading in fact or by implication.
(3) A person or trust shall not directly or indirectly,
market, advertise, solicit, or otherwise promote the purchase of a
policy for the sole purpose of or with an emphasis on settling the
policy, or use the words "free", "no cost", or words of similar
import in the marketing, advertising, soliciting, or otherwise
promoting of the purchase of a policy.
Sec. 4323. (1) The provider shall provide in writing, in a
separate document that is signed by the owner and provider, all of
the following information to the owner no later than the date the
life settlement contract is signed by all parties:
(a) That there are possible alternatives to life settlement
contracts, including, but not limited to, any accelerated death
benefits offered by the issuer of the policy.
(b) That some or all of the proceeds of the life settlement
contract may be subject to federal income taxation and state
taxation, and that assistance should be sought from a professional
tax advisor.
(c) That the proceeds of the life settlement contract could be
subject to the claims of creditors.
(d) That receipt of the proceeds of the life settlement
contract may adversely affect the recipient's eligibility for
medical assistance or other government benefits or entitlements,
and that advice should be obtained from the appropriate government
agencies.
(e) That the owner has a right to rescind the life settlement
contract for at least 15 calendar days after the date it is
executed by all parties and the owner has received the disclosures
contained in this section. Rescission, if exercised by the owner,
is effective only if both notice of the rescission is given and the
owner repays all proceeds and any premiums, loans, and loan
interest paid on account of the provider 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 to the life settlement
company.
(f) That funds will be sent to the owner within 3 business
days after the provider has received written acknowledgment from
the insurer or group administrator that ownership of the policy or
interest in the certificate has been transferred and that the
beneficiary has been designated pursuant to the life settlement
contract.
(g) 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 owner and that assistance should be sought from a financial
advisor.
(h) The amount and method of calculating the compensation paid
or to be paid to the broker, or any other person acting for the
owner in connection with the transaction. As used in this
subdivision "compensation" means anything of value paid or given.
(i) The date by which the funds will be available to the owner
and the transmitter of the funds.
(2) The disclosure document under subsection (1) shall contain
the following language:
"All medical, financial, or personal information solicited or
obtained by a provider or broker 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 owner and the 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.".
(3) The provider shall provide to an owner during the
solicitation process a buyer's guide or similar consumer advisory
brochure describing the process of life settlements.
(4) The commissioner shall require providers and brokers to
print separate signed fraud warnings on their applications and on
their life settlement contracts that read as follows:
"Any person who knowingly presents false information in an
application for insurance or life settlement contract is guilty of
a crime and may be subject to fines and confinement in prison.".
(5) The insured may be contacted by either the provider or
broker or its authorized representative for the purpose of
determining the insured's health status or to verify the insured's
address. 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 per month if the insured has a life expectancy of 1 year or
less.
(6) A provider shall disclose at least the following to an
owner prior to the date the life settlement contract is signed by
all the necessary parties:
(a) The affiliation, if any, between the provider and the
issuer of the policy to be settled.
(b) The name, business address, and telephone number of the
life settlement provider.
(c) That a broker represents exclusively the owner, and not
the insurer or the provider or any other person, and owes a
fiduciary duty to the owner, including a duty to act according to
the owner's instructions and in the best interest of the owner.
(d) The name, business address, and telephone number of the
independent third-party escrow agent, and the fact that the owner
may inspect or receive copies of the relevant escrow or trust
agreements or documents.
(e) The fact that a change of ownership could in the future
limit the insured's ability to purchase future insurance on the
insured's life because there is a limit to how much coverage
insurers will issue on 1 life.
(7) The written disclosures under subsection (6) shall be
conspicuously displayed in any life settlement contract furnished
to the owner by a provider including any affiliations or
contractual arrangements between the provider and the broker.
(8) The broker shall disclose at least the following to an
owner prior to the execution of the life settlement contract and
the disclosures shall be conspicuously displayed in the contract or
in a separate document signed by the owner:
(a) The name, business address, and telephone number of the
broker.
(b) A full, complete, and accurate description of all offers,
counteroffers, acceptances, and rejections relating to the proposed
life settlement contract.
(c) Any affiliations or contractual agreements between the
broker and any person making an offer in connection with the
proposed life settlement contract.
(d) The amount of each broker's compensation, which
compensation includes anything of value paid or given to the broker
in connection with the life settlement contract.
(e) A complete reconciliation of the gross offer or bid by the
provider to the net amount of proceeds or value to be received by
the owner. For the purpose of this section, "gross offer or bid"
means the total amount or value offered by the provider for the
purchase of 1 or more policies, inclusive of commissions and fees.
Sec. 4325. (1) Without limiting the ability of an insurer from
assessing the insurability of a policy applicant and determining
whether or not to issue the policy, and in addition to other
questions an insurer may lawfully pose to a life insurance
applicant, insurers may inquire in the application for insurance
whether the proposed owner intends to pay premiums with the
assistance of financing from a lender that will use the policy as
collateral to support the financing.
(2) If the loan provides funds that can be used for a purpose
other than paying for the premiums, costs, and expenses associated
with obtaining and maintaining the policy and loan, the application
shall be rejected as a violation of section 4331.
(3) If the financing does not violate section 4331, the
insurance carrier may do both of the following:
(a) Make disclosures, including, but not limited to, the
following, to the applicant and the insured, either on the
application or on an amendment to the application to be completed
no later than the delivery of the policy:
"If you have entered into a loan arrangement where the policy
is used as collateral, and the policy does change ownership at some
point in the future in satisfaction of the loan, all of the
following may be true:
(i) A change of ownership could lead to a stranger owning an
interest in the insured's life.
(ii) A change of ownership could in the future limit your
ability to purchase future insurance on the insured's life because
there is a limit to how much coverage insurers will issue on 1
life.
(iii) Should there be a change of ownership and you wish to
obtain more insurance coverage on the insured's life in the future,
the insured's higher issue age, a change in health status, or other
factors may reduce the ability to obtain coverage or may result in
significantly higher premiums.
(iv) You should consult a professional tax advisor, since a
change in ownership in satisfaction of the loan may result in tax
consequences to the owner, depending on the structure of the
loan.".
(b) Require certifications, including any of the following,
from the applicant or the insured:
(i) I have not entered into any agreement or arrangement
providing for the future sale of this policy.
(ii) My loan arrangement for this policy provides funds
sufficient to pay for some or all of the premiums, costs, and
expenses associated with obtaining and maintaining my policy, but I
have not entered into any agreement by which I am to receive
consideration in exchange for procuring this policy.
(iii) The borrower has an insurable interest in the insured.
Sec. 4327. (1) A provider entering into a life settlement
contract with any owner of a policy, wherein the insured is
terminally or chronically ill, shall first obtain both of the
following:
(a) If the owner is the insured, a written statement from a
licensed attending physician that the owner 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 provider, broker, or 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 provider, broker, or life insurance
producer not later than 30 calendar days after the date the request
is received. The request for verification of coverage shall be made
on a form approved by the commissioner. 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 regarding the validity of the policy.
(3) Before or at the time of execution of the life settlement
contract, the provider shall obtain a witnessed document in which
the owner consents to the life settlement contract, represents that
the owner has a full and complete understanding of the life
settlement contract, that the owner has a full and complete
understanding of the benefits of the policy, acknowledges that the
owner is entering into the life settlement contract freely and
voluntarily, and, for persons with a terminal or chronic illness or
condition, acknowledges that the insured has a terminal or chronic
illness and that the terminal or chronic illness or condition was
diagnosed after the policy was issued.
(4) The insurer shall not unreasonably delay effecting change
of ownership or beneficiary with any life settlement contract
lawfully entered into in this state or with a resident of this
state.
(5) If a broker or insurance producer performs any of these
activities required of the provider, the provider is considered to
have fulfilled the requirements of this section.
(6) Within 20 days after an owner executes the life settlement
contract, the provider shall give written notice to the insurer
that issued that policy that the policy has become subject to a
life settlement contract.
(7) All medical information solicited or obtained by any
licensee is subject to all applicable provisions of state law
relating to confidentiality of medical information, if not
otherwise provided in this chapter.
(8) All life settlement contracts entered into in this state
shall provide that the owner may rescind the contract on or before
15 days after the date it is executed by all parties. Rescission,
if exercised by the owner, is effective only if both notice of the
rescission is given and the owner repays all proceeds and any
premiums, loans, and loan interest paid on account of the provider
within the rescission period. If the insured dies during the
rescission period, the contract shall be considered rescinded
subject to repayment by the owner or the owner's estate of all
proceeds and any premiums, loans, and loan interest to the
provider.
(9) Not later than 3 business days after receipt from the
owner of documents to effect the transfer of the policy, the
provider shall pay the proceeds of the settlement to an escrow or
trust account managed by a trustee or escrow agent in a state or
federally chartered financial institution pending acknowledgement
of the transfer by the issuer of the policy. The trustee or escrow
agent shall be required to transfer the proceeds due to the owner
within 3 business days of acknowledgement of the transfer from the
insurer.
(10) Failure to tender the life settlement contract proceeds
to the owner by the date disclosed to the owner renders the
contract voidable by the owner for lack of consideration until the
time the proceeds are tendered to and accepted by the owner. A
failure to give written notice of the right of rescission under
this section tolls the right of rescission until 30 days after the
written notice of the right of rescission has been given.
(11) Any fee paid by a provider, party, individual, or an
owner to a broker in exchange for services provided to the owner
pertaining to a life settlement contract shall be computed as a
percentage of the offer obtained, not the face value of the policy.
Nothing in this section prohibits a broker from reducing his or her
fee to below this percentage.
(12) The broker shall disclose to the owner anything of value
paid or given to a broker, which relates to a life settlement
contract.
(13) At any time prior to or at the time of the application
for or issuance of a policy, or during a 2-year period beginning
with the date of issuance of the policy, a person shall not enter
into a life settlement contract regardless of the date the
compensation is to be provided and regardless of the date the
assignment, transfer, sale, devise, bequest, or surrender of the
policy is to occur. This prohibition does not apply if the owner
does 1 of the following:
(a) Certifies to the provider that the policy was issued upon
the owner'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) Submits independent evidence to the provider that 1 or
more of the following conditions have been met within the 2-year
period:
(i) The owner or insured is terminally or chronically ill.
(ii) The owner 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 policy
was initially issued.
(iii) The owner's spouse dies.
(iv) The owner divorces his or her spouse.
(v) The owner retires from full-time employment.
(vi) The owner becomes physically or mentally disabled and a
physician determines that the disability prevents the owner from
maintaining full-time employment.
(vii) A final order, judgment, or decree is entered by a court
of competent jurisdiction, on the application of a creditor of the
owner, adjudicating the owner bankrupt or insolvent, or approving a
petition seeking reorganization of the owner or appointing a
receiver, trustee, or liquidator to all or a substantial part of
the owner's assets.
(14) Copies of the independent evidence required by subsection
(13)(b) shall be submitted to the insurer when the provider submits
a request to the insurer for verification of coverage. The copies
shall be accompanied by a letter of attestation from the provider
that the copies are true and correct copies of the documents
received by the provider. Nothing in this section prohibits an
insurer from exercising its right to contest the validity of any
policy. If the provider submits to the insurer a copy of the
independent evidence when the provider submits a request to the
insurer to effect the transfer of the policy to the provider, the
requirements of subsection (13)(b) are satisfied.
Sec. 4329. (1) If there are more than 2 owners on a single
policy, and the owners are residents of different states, the life
settlement contract 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 of the owners. The law of the
state of the insured shall govern if equal owners fail to agree in
writing upon a state of residence for jurisdictional purposes.
(2) A provider from this state who enters into a life
settlement contract with an owner who is a resident of another
state that has enacted statutes or adopted regulations governing
life settlement contracts shall be governed in the effectuation of
that life settlement contract by the statutes and regulations of
the owner's state of residence. If the state in which the owner is
a resident has not enacted statutes or regulations governing life
settlement contracts, the provider shall give the owner notice that
neither state regulates the transaction upon which he or she is
entering. For transactions in those states, however, the provider
is to maintain all records required if the transactions were
executed in the owner's state of residence. The forms used in those
states need not be approved by the commissioner.
(3) If there is a conflict in the laws that apply to an owner
and a purchaser in any individual transaction, the laws of the
state that apply to the owner shall take precedence and the
provider shall comply with those laws.
Sec. 4331. (1) It is unlawful for any person to do any of the
following:
(a) Enter into a life settlement contract if such person knows
or reasonably should have known that the policy was obtained by
means of a false, deceptive, or misleading application for the
policy.
(b) Engage in any transaction, practice, or course of business
if the person knows or reasonably should have known that the intent
was to avoid the notice requirements of this chapter.
(c) Engage in any fraudulent act or practice in connection
with any transaction relating to any life settlement contract
involving an owner who is a resident of this state.
(d) Issue, solicit, market, or otherwise promote the purchase
of a policy for the purpose of or with an emphasis on settling the
policy.
(e) Enter into a premium finance loan with any person or
agency, or any person affiliated with such person or agency,
pursuant to which the person shall receive any proceeds, fees, or
other consideration, directly or indirectly, from the policy or
owner of the policy or any other person with respect to the premium
finance agreement or any life settlement contract or other
transaction related to that policy that are in addition to the
amounts required to pay the principal, interest, and service
charges related to policy premiums pursuant to the premium finance
agreement or subsequent sale of the agreement; provided, further,
that any payments, charges, fees, or other amounts in addition to
the amounts required to pay the principal, interest, and service
charges related to policy premiums paid under the premium finance
agreement shall be remitted to the original owner of the policy or
to his or her estate if he or she is not living at the time of the
determination of the overpayment.
(f) With respect to a broker and any life settlement contract
or policy, knowingly solicit an offer from, effectuate a settlement
with or make a sale to any provider, financing entity, or related
provider trust that is controlling, controlled by, or under common
control with that broker.
(g) With respect to a provider and any life settlement
contract or policy, knowingly enter into a life settlement contract
with an owner, if, in connection with the life settlement contract,
anything of value will be paid to a broker that is controlling,
controlled by, or under common control with the provider or the
financing entity or related provider trust that is involved in the
life settlement contract.
(h) With respect to a provider, enter into a life settlement
contract using life settlement promotional, advertising, and
marketing materials, that have been requested by, but not supplied
to, the commissioner or that have been disapproved by the
commissioner. In no event shall any marketing materials expressly
reference that the insurance is free for any period of time. The
inclusion of any reference in the marketing materials that would
cause an owner to reasonably believe that the insurance is free for
any period of time is a violation of this chapter.
(i) With respect to any life insurance producer, insurer,
broker, or provider, make any statement or representation to the
applicant or policyholder in connection with the sale or financing
of a policy to the effect that the insurance is free or without
cost to the policyholder for any period of time unless provided in
the policy.
(2) A violation of this section is a fraudulent life
settlement act.
Sec. 4333. (1) A person shall not commit a fraudulent life
settlement act.
(2) A person shall not knowingly or intentionally interfere
with the enforcement of this chapter or with investigations of
suspected or actual violations of this chapter.
(3) A person in the business of life settlements shall not
knowingly or intentionally permit any person convicted of a felony
involving dishonesty or breach of trust to participate in the
business of life settlements.
(4) Each life settlement contract and each 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 may be subject to fines and imprisonment.".
(5) The lack of a statement described in subsection (4) does
not constitute a defense in any prosecution for a fraudulent life
settlement act.
(6) Every person engaged in the business of life settlements
having knowledge or a reasonable belief that a fraudulent life
settlement act is being, will be, or has been committed shall
provide to the commissioner the information required by the
commissioner. The person shall provide the information in a manner
prescribed by the commissioner.
(7) Every person having knowledge or a reason to believe that
a fraudulent life settlement act is being, will be, or has been
committed may provide to the commissioner the information required
by the commissioner. The person shall provide the information in a
manner prescribed by the commissioner.
Sec. 4335. (1) Civil liability shall not be imposed on, and no
cause of action shall 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) Law enforcement or regulatory officials of this state,
another state, the United States, or a political subdivision of
this state or another state, or any employee, agent, or
representative of any of those officials.
(c) A person involved in the prevention and detection of
fraudulent life settlement acts or any agent, employee, or
representative of any person so involved.
(d) Any regulatory body and its employees, agents, or
representatives overseeing life insurance, life settlements,
securities, or investment fraud.
(e) The insurer that issued the policy covering the life of
the insured.
(f) The licensee and any agents, employees, or representatives
of the licensee.
(2) The immunity provided in subsection (1) shall not apply to
any 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, the party bringing the
action shall plead specifically any allegation that the immunity
provided in subsection (1) does not apply because the person filing
the report or furnishing the information did so with actual malice.
(3) If a person is the prevailing party in a civil action for
libel, slander, or any other relevant tort arising out of
activities in carrying out the provisions of this chapter, if the
prevailing party is a person identified in subsection (1) and the
immunity described in subsection (1) applies to the person, and if
the party who brought the action was not substantially justified in
doing so, the person who is the prevailing party is entitled to an
award of attorney fees and costs arising out of the action. For
purposes of this subsection, an action is "substantially justified"
if it had a reasonable basis in law or fact at the time that it was
initiated.
(4) This section does not abrogate or modify any common law or
statutory privilege or immunity enjoyed by a person described in
subsection (1).
(5) The documents and evidence provided pursuant to
subsections (1) to (4) or obtained by the commissioner in an
investigation of any suspected or actual fraudulent life settlement
act is privileged and confidential, is not a public record open for
inspection under the freedom of information act, and is not subject
to discovery or subpoena in a civil or criminal action.
(6) Subsection (5) does not prohibit release by the
commissioner of any document or evidence obtained in an
investigation of suspected or actual fraudulent life settlement
acts, in any of the following manners or circumstances:
(a) In any administrative or judicial proceeding to enforce
any laws administered by the commissioner.
(b) To any law enforcement or regulatory agency of this state,
another state, the United States, or a political subdivision of
this state or another state, 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.
(7) Release of documents and evidence under subsection (6)
does not abrogate or modify the privilege granted in subsection
(5).
Sec. 4337. This chapter does not do any of the following:
(a) Preempt the authority or relieve the duty of any other law
enforcement or regulatory agencies to investigate, examine, or
prosecute suspected violations of law.
(b) Preempt, supersede, or limit any provision of any state
securities law or any rule, order, or notice issued thereunder.
(c) Prevent or prohibit a person from disclosing voluntarily
any information concerning fraudulent life settlement acts to a law
enforcement or regulatory agency other than the office of financial
and insurance regulation.
(d) Limit any power granted elsewhere by the law of this state
to the commissioner or an insurance fraud unit to investigate and
examine possible violations of law and to take appropriate action
against wrongdoers.
Sec. 4339. Providers and brokers shall adopt and have in place
antifraud initiatives reasonably calculated to detect, prosecute,
and prevent fraudulent life settlement acts. At the discretion of
the commissioner, the commissioner may order, or a provider or
broker may request and the commissioner may grant, any
modifications of the following required initiatives described in
this section that are necessary to ensure an effective antifraud
program. The modifications may be more or less restrictive than the
required initiatives so long as the modifications may reasonably be
expected to accomplish the purpose of this section. Antifraud
initiatives under this section shall include all of the following:
(a) Fraud investigators, who may be provider or broker
employees or independent contractors.
(b) An antifraud plan submitted to the commissioner that
includes, but is not limited to, all of the following:
(i) A description of the procedures for detecting and
investigating possible fraudulent life settlement acts and
procedures for resolving material inconsistencies between medical
records and insurance applications.
(ii) A description of the procedures for reporting possible
fraudulent life settlement acts to the commissioner.
(iii) A description of the plan for antifraud education and
training of underwriters and other personnel.
(iv) A description or chart 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.
Sec. 4341. (1) In addition to the penalties and other
enforcement provisions contained in this chapter, if any person
violates any provision of this chapter or any rule or regulation
implementing any provision of this chapter, the commissioner may
seek an injunction in a court of competent jurisdiction and may
apply for any temporary or permanent order that the commissioner
determines is necessary to restrain the person from committing the
violation.
(2) Any person damaged by any act of a person in violation of
this chapter or any rule or regulation implementing any provision
of this chapter 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 who violates any provision of this chapter or any rule,
regulation, or order adopted by the commissioner, or any written
agreement entered into with the commissioner.
(4) If the commissioner finds that an action presents an
immediate danger to the public and requires an immediate final
order, he or she may issue an emergency cease and desist order
reciting with particularity the facts underlying such 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 nonemergency cease and desist proceedings
are begun, the emergency cease and desist order remains effective,
absent an order by an appellate court of competent jurisdiction. In
the event of a willful violation of this chapter, the trial court
may award statutory damages in addition to actual damages in an
additional amount up to 3 times the actual damage award. The
provisions of this chapter shall not be waived by agreement. A
choice of law provision shall not be used to prevent the
application of this chapter to any settlement in which a party to
the settlement is a resident of this state.
Sec. 4343. (1) A person who commits a fraudulent life
settlement act or violates this chapter is subject to a civil fine
not exceeding $2,500.00 and the amount of the claim for each
violation upon any person, including those persons and their
employees licensed pursuant to this chapter.
(2) The license of a person licensed or permitted to operate
under this chapter that commits a fraudulent life settlement act
shall be revoked for a period of not less than 5 years.
Sec. 4345. A violation of this chapter is an unfair trade
practice under chapter 20.
Sec. 4347. The commissioner may promulgate rules in accordance
with the administrative procedures act of 1969 for purposes of
implementing this chapter, including, but not limited to, rules
that do the following:
(a) Govern the relationship and responsibilities of insurers,
providers, and brokers during the settlement of a policy.
(b) Establish standards for evaluating the reasonableness of
payments under life settlement contracts for persons who are
terminally or chronically ill. This authority includes, but is not
limited to, the regulation of discount rates used to determine the
amount paid in exchange for the assignment, release, transfer,
sale, devise, or bequest of a benefit under a policy insuring
persons who are terminally or chronically ill.
(c) Establish appropriate licensing requirements, fees, and
standards for continued licensure for providers and brokers.
Sec. 4349. (1) A provider lawfully transacting business in
this state prior to the effective date of this chapter may continue
to do so pending approval or disapproval of that person's
application for a license as long as the application is filed with
the commissioner not later than 30 days after publication by the
commissioner of an application form and instructions for licensure
of providers. If the publication of the application form and
instructions is prior to the effective date of this chapter, then
the filing of the application shall not be later than 30 days after
the effective date of this chapter. During the time that the
application is pending with the commissioner, the applicant may use
any form of life settlement contract that has been filed with the
commissioner so long as the form is otherwise in compliance with
this chapter. Any person transacting business in this state under
this subsection shall comply with all other requirements of this
chapter.
(2) A person who has lawfully negotiated life settlement
contracts between any owner residing in this state and 1 or more
providers for at least 1 year immediately prior to the effective
date of this chapter may continue to do so pending approval or
disapproval of that person's application for a license as long as
the application is filed with the commissioner not later than 30
days after publication by the commissioner of an application form
and instructions for licensure of brokers. If the publication of
the application form and instructions is prior to the effective
date of this chapter, then the filing of the application shall not
be later than 30 days after the effective date of this chapter. Any
person transacting business in this state under this subsection
shall comply with all other requirements of this chapter.
Enacting section 1. 1996 PA 386, MCL 550.521 to 550.528, is
repealed.