§ 7813 — General rules

New York § 7813

• Jurisdiction: New York
• Law ISC: Insurance
• Art. 78: Life Settlements

Text

§ 7813. General rules. (a) A life settlement provider entering into a\nlife settlement contract shall first obtain a written consent from the\ninsured to the release of the insured's medical records subject to the\nlimitations contained in section seven thousand eight hundred ten of\nthis article.\n (b) The insurer shall respond to a request for verification of\ncoverage submitted by a life settlement provider, life settlement broker\nor life settlement intermediary within fifteen days after the date the\nrequest is received. The insurer shall complete and issue the\nverification of coverage or indicate the specific reasons why it is\nunable to respond. In its response, the insurer shall indicate whether,\nbased on the medical evidence and documents provided, the insurer is\npursuing or intends to pursue an investigation regarding the validity of\nthe policy.\n (c) The life settlement provider shall give written notice to the\ninsurer that issued the policy within ten days after the life settlement\ncontract is executed by all parties.\n (d) Unless the insurer is pursuing or intends to pursue an\ninvestigation, the insurer shall, within fifteen days of receipt of a\nrequest for a change of ownership or assignment used to effectuate the\ntransfer or assignment of the owner's rights or benefits under a policy\nto a life settlement provider, process the change of ownership or\nassignment and notify the life settlement provider and the owner that\nthe transfer or assignment has been effectuated.\n (e) If a life settlement broker performs any activity required of the\nlife settlement provider in this section or provides any disclosures\nrequired by section seven thousand eight hundred eleven of this article,\nthen the life settlement provider is deemed to have performed that\nactivity or provided that disclosure.\n (f) All medical information solicited or obtained by any licensee or\nany other person shall be subject to the provisions applicable to health\ncare providers under the public health law and all applicable laws\nrelating to confidentiality of medical information, provided that, to\nthe extent that this chapter provides for greater confidentiality of\nmedical information, this chapter shall govern.\n (g)(1) Every life settlement contract shall provide that the owner has\nan unconditional right to rescind the life settlement contract from the\ntime of execution of the contract until fifteen days after the receipt\nof the life settlement proceeds by the owner by giving notice of\nrescission to the life settlement provider by midnight of the fifteenth\nday.\n (2) Within five days after receipt of the notice of rescission, the\nlife settlement provider shall provide a written statement to the owner\nitemizing the amount of all life settlement proceeds and any premiums,\nloans and loan interest paid or to be paid as of a date certain as may\nbe requested by the owner.\n (3) Within fifteen days after the receipt of the written, itemized\nstatement by the owner, the owner must repay all such life settlement\nproceeds and any premiums, loans and loan interest paid by the life\nsettlement provider.\n (4) If the insured dies during the rescission period, the life\nsettlement contract shall be deemed to have been rescinded, subject to\nrepayment of all life settlement proceeds and any premiums, loans and\nloan interest paid by the life settlement provider.\n (5) Within five days after receipt of notice of the insured's death\nduring the rescission period, the life settlement provider shall provide\na written statement to the owner or, if the owner is deceased, to the\nlegal representative of the owner's estate, itemizing the amount of all\nlife settlement proceeds and any premiums, loans and loan interest paid\nor to be paid as of a date certain as may be requested by the owner or\nthe legal representative of the owner's estate. As soon as practicable,\nthe owner or the owner's estate shall repay all such proceeds and any\npremiums, loans and loan interest paid by the life settlement provider.\n (h) Within three business days after receipt from the owner of\ndocuments to effect the transfer of the policy that is the subject of a\nlife settlement contract, the life settlement provider shall deposit the\nproceeds of the life settlement contract into an escrow or trust account\nin a state or federally chartered financial institution. The escrow\nagent or trustee shall be required to transfer the proceeds due to the\nowner within three business days of acknowledgement of the transfer from\nthe insurer.\n (i) Failure to tender the life settlement contract proceeds to the\nowner by the date disclosed to the owner shall render the life\nsettlement contract voidable by the owner for lack of consideration\nuntil the time the proceeds are tendered to and accepted by the owner. A\nfailure to give written notice of the right of rescission hereunder\nshall toll the right of rescission until thirty days after the written\nnotice of the right of rescission has been given.\n (j)(1) No person, at any time prior to, or at the time of, the\napplication for, or issuance of, a policy, or during the two-year period\ncommencing with the date of issuance of the policy, shall enter into a\nlife settlement contract, regardless of the date the compensation is to\nbe provided and regardless of the date the assignment, transfer, sale,\ndevise or bequest of the policy is to occur. This prohibition shall not\napply if the owner certifies to the life settlement provider that:\n (A) the policy was issued upon the owner's exercise of conversion\nrights arising out of a policy, provided the total of the time covered\nunder the conversion policy plus the time covered under the prior policy\nis at least twenty-four months. The time covered under a group policy\nshall be calculated without regard to a change in insurers, provided the\ncoverage has been continuous and under the same group sponsorship; or\n (B) one or more of the following conditions, for which the owner\nsubmits independent evidence to the life settlement provider, have been\nmet within the two-year period:\n (i) the owner or insured is terminally or chronically ill;\n (ii) the owner or insured disposes of ownership interests in a closely\nheld corporation, pursuant to the terms of a buyout or other similar\nagreement in effect at the time the insurance policy was initially\nissued;\n (iii) the owner's spouse dies;\n (iv) the owner divorces his or her spouse;\n (v) the owner retires from full-time employment or involuntarily\nceases employment;\n (vi) the owner becomes physically or mentally disabled and a physician\ndetermines that the disability prevents the owner from maintaining\nfull-time employment;\n (vii) a final order, judgment or decree is entered by a court of\ncompetent jurisdiction, on the application of a creditor of the owner,\nadjudicating the owner bankrupt or insolvent, or approving a petition\nseeking reorganization of the owner or appointing a receiver, trustee or\nliquidator to all or a substantial part of the owner's assets; or\n (viii) any other condition that the superintendent may determine by\nregulation to be an extraordinary circumstance for the owner or the\ninsured.\n (2) Copies of the independent evidence required by subparagraph (B) of\nparagraph one of this subsection shall be submitted to the insurer when\nthe life settlement provider submits a request to the insurer for\nverification of coverage. The copies shall be accompanied by a letter of\nattestation from the life settlement provider that the copies are true\nand correct copies of the documents received by the life settlement\nprovider. Nothing in this section shall prohibit an insurer from\nexercising its right to contest the validity of any policy.\n (3) For the purposes of this section a person is:\n (A) terminally ill if the individual has an illness, sickness or\nphysical condition that can reasonably be expected to result in death in\ntwenty-four months or less; or\n (B) chronically ill if that individual has been certified by a\nlicensed health care practitioner as:\n (i) being unable to perform without substantial assistance from\nanother individual at least two activities of daily living (i.e.,\neating, toileting, transferring, bathing, dressing or continence) for a\nperiod of at least ninety days, due to a loss of functional capacity;\n (ii) requiring substantial supervision to protect the individual from\nthreats to health and safety due to severe cognitive impairment for a\nperiod of at least ninety days, due to a loss of functional capacity; or\n (iii) having a level of disability similar to that described in clause\n(i) of this subparagraph, as determined by the United States Secretary\nof Health and Human Services.\n (k) Contacts with the insured for the purpose of determining the\nhealth status of the insured by a licensed life settlement provider\nafter the life settlement contract has been executed shall be made only\nby the licensed life settlement provider or licensed life settlement\nbroker, or any authorized representative thereof, and shall be limited\nto once every three months for an insured with a life expectancy of more\nthan one year, and to no more than once per month for an insured with a\nlife expectancy of one year or less.\n (l) The life settlement broker shall represent only the owner and owes\na fiduciary duty to the owner, including a duty to act according to the\nowner's instructions and in the best interest of the owner.\n (m) A life settlement provider, life settlement broker, or life\nsettlement intermediary shall be responsible for the actions of its\nauthorized representative.\n (n)(1) A life settlement intermediary's services shall not be limited\nto life settlement providers or life settlement brokers that are\naffiliates, parents, or subsidiaries of the life settlement\nintermediary.\n (2) A life settlement intermediary shall establish and maintain\nsystems, practices and procedures to ensure that:\n (A) every transaction with an affiliate, parent or subsidiary of the\nlife settlement intermediary is fair and equitable and conducted on an\narms-length basis; and\n (B) an affiliate, parent or subsidiary of the life settlement\nintermediary is not granted or provided with preferential treatment or\naccess to information or services that are not granted or provided to an\nunaffiliated life settlement provider or life settlement broker that\nconducts business with the life settlement intermediary.\n (o) A life settlement provider may sell, assign, pledge or otherwise\ntransfer the ownership of a settled policy only to a licensed life\nsettlement provider, an accredited investor or qualified institutional\nbuyer, financing entity, special purpose entity, or related provider\ntrust; provided, however, a life settlement provider may sell, assign,\npledge or otherwise transfer a beneficial interest in a settled policy\nto someone other than a life settlement provider licensed in this state,\nan accredited investor or qualified institutional buyer, financing\nentity, special purpose entity, or related provider trust if a licensed\nlife settlement provider continues to administer and service the settled\npolicy and protects the privacy of the insured and owner pursuant to\nsection seven thousand eight hundred ten of this article.\n (p) The failure to follow the provisions of this section shall be a\ndefined violation under article twenty-four of this chapter.\n