§ 27-72-11. General rules.
(a) 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:
(1) 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 settlement contract; and
(2) A document in which the insured consents to the release of his or her medical records
to a provider, settlement broker, or insurance producer and, if the policy was issued
less than two (2) years from the date of application for a settlement contract, to
the insurance company that issued the policy.
(b) The insurer shall respond to a request for verification of coverage submitted by a
provider, settlement broker, or life insurance producer not later than thirty (30)
calendar days from the date the request is received. The request for verification
of coverage must 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 insurance contract.
(c) Before or at the time of execution of the settlement contract, the provider shall
obtain a witnessed document in which the owner consents to the settlement contract;
represents that the owner has a full and complete understanding of the 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 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.
(d) 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.
(e) If a settlement broker or life insurance producer performs any of these activities
required of the provider, the provider is deemed to have fulfilled the requirements
of this chapter.
(f) If a broker performs those verification of coverage activities required of the provider,
the provider is deemed to have fulfilled the requirements of § 27-72-9.
(g) Within twenty (20) days after an owner executes the life settlement contract, the
provider shall give written notice to the insurer that issued that insurance policy
that the policy has become subject to a life settlement contract. The notice shall
be accompanied by the documents required by § 27-72-10(a)(2).
(h) All medical information solicited or obtained by any licensee shall be subject to
the applicable provision of state law relating to confidentiality of medical information,
if not otherwise provided in this chapter.
(i) All life settlement contracts entered into in this state shall provide that the owner
may rescind the contract on or before fifteen (15) days after the date it is executed
by all parties thereto. 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 deemed
to have been 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.
(j) Within three (3) business days after receipt from the owner of documents to effect
the transfer of the insurance 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 three (3) business days of acknowledgement of the transfer
from the insurer.
(k) 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 hereunder shall toll the right of rescission
until thirty (30) days after the written notice of the right of rescission has been
given.
(l) 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 shall be construed as prohibiting a broker from reducing such
broker's fee below this percentage if the broker so chooses.
(m) The broker shall disclose to the owner anything of value paid or given to a broker,
which relates to a life settlement contract.
(n) No person at any time prior to, or at the time of, the application for, or issuance
of, a policy, or during a two-year (2) period commencing with the date of issuance
of the policy, shall enter into a life settlement 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 shall not apply
if the owner certifies to the provider that:
(1) 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 twenty-four (24) months.
The time covered under a group policy must be calculated without regard to a change
in insurance carriers, provided the coverage has been continuous and under the same
group sponsorship; or
(2)(i) The owner submits independent evidence to the provider that one or more of the following
conditions have been met within the two-year (2) period:
(A) The owner or insured is terminally or chronically ill;
(B) 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 insurance policy was initially issued;
(C) The owner's spouse dies;
(D) The owner divorces his or her spouse;
(E) The owner retires from full-time employment;
(F) The owner becomes physically or mentally disabled and a physician determines that
the disability prevents the owner from maintaining full-time employment; or
(G) 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.
(ii) Copies of the independent evidence required by subsection (n)(2)(i) of this section
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 shall prohibit an insurer from exercising
its right to contest the validity of any policy.
(iii) If the provider submits to the insurer a copy of independent evidence provided for
in subsection (n)(2)(i) of this section when the provider submits a request to the
insurer to effect the transfer of the policy to the provider, the copy is deemed to
establish that the settlement contract satisfies the requirements of this section.