As used in this chapter:
(1) “Advertising” 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, which are published, disseminated, circulated, or placed directly before the public in this State for the purpose of creating an interest in or inducing a person to purchase, sell, assign, devise, bequest, or transfer the death benefit or ownership of a life insurance policy pursuant to a viatical settlement contract.
(2) “Business of viatical settlements” means an activity involved in, but not limited to, the offering, soliciting, negotiating, procuring, effectuating, purchasing, investing, financing, monitoring, tracking, underwriting, selling, transferring, assigning, pledging, hypothecating or in any other manner, acquiring an interest in a life insurance policy by means of a viatical settlement contract. The term does not include a “viatical settlement investment” as defined in the Delaware Securities Act, § 73-103(a) of Title 6.
(3) “Chronically ill” means any of the following:
a. Being chronically unable to perform at least 2 activities of daily living (i.e., eating, toileting, transferring, bathing, dressing or continence).
b. Requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment.
c. Having a level of disability similar to that described in paragraph (3)a. of this section as determined by the Secretary of Health and Human Services.
(4) “Commissioner” means the Insurance Commissioner of this State.
(5) “Financing entity” means an underwriter, placement agent, lender, purchaser of securities, purchaser of a policy or certificate from a viatical settlement provider, credit enhancer, or any person that has a direct ownership in a policy or certificate that is the subject of a viatical settlement contract and all of the following:
a. The person's principal activity related to the transaction is providing funds to effect the viatical settlement or purchase of 1 or more viaticated policies.
b. The person has an agreement in writing with 1 or more licensed viatical settlement providers to finance the acquisition of viatical settlement contracts.
The term does not include a nonaccredited investor or a viatical settlement purchaser.
(6) “Fraudulent viatical settlement act” includes:
a. Acts or omissions committed by any person who knowingly or with intent to defraud, for the purpose of depriving another of property or for pecuniary gain, commits or permits its employees or its agents to engage in acts including:
1. Presenting, causing to be presented or preparing with knowledge or belief that it will be presented to or by a viatical settlement provider, viatical settlement broker, viatical settlement purchaser, financing entity, 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:
A. An application for the issuance of a viatical settlement contract or insurance policy.
B. The underwriting of a viatical settlement contract or insurance policy.
C. A claim for payment or benefit pursuant to a viatical settlement contract or insurance policy.
D. Premiums paid on an insurance policy.
E. Payments and changes in ownership or beneficiary made in accordance with the terms of a viatical settlement contract or insurance policy.
F. The reinstatement or conversion of an insurance policy.
G. The solicitation, offer, effectuation, or sale of a viatical settlement contract or insurance policy.
H. The issuance of written evidence of viatical settlement contract or insurance.
I. A financing transaction.
2. Employing any plan, financial structure, device, scheme, or artifice to defraud related to viaticated policies.
b. In the furtherance of a fraud or to prevent the detection of a fraud any person commits or permits its employees or its agents to do any of the following:
1. Remove, conceal, alter, destroy or sequester the assets or records of a licensee or other person engaged in the business of viatical settlements.
2. Misrepresent or conceal the financial condition of a licensee, financing entity, insurer, or other person.
3. Transact the business of viatical settlements in violation of laws requiring a license, certificate of authority or other legal authority for the transaction of the business of viatical settlements.
4. File with the Commissioner or the equivalent chief insurance regulatory official of another jurisdiction a document containing false information or otherwise conceals information about a material fact from the Commissioner.
c. Embezzlement, theft, misappropriation or conversion of monies, funds, premiums, credits, or other property of a viatical settlement provider, insurer, insured, viator, insurance policy owner or any other person engaged in the business of viatical settlements or insurance.
d. Recklessly entering into, negotiating, brokering, otherwise dealing in a viatical 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 person intended to defraud the policy's issuer, the viatical settlement provider, or the viator. “Recklessly” means engaging in the conduct in conscious and clearly unjustifiable disregard of a substantial likelihood of the existence of the relevant facts or risks, such disregard involving a gross deviation from acceptable standards of conduct.
e. Facilitating the change of state of ownership of a policy or certificate or the state of residency of a viator to a state or jurisdiction that does not have a law similar to this Act for the express purposes of evading or avoiding the provisions of this Act.
f. Attempting to commit, assisting, aiding or abetting in the commission of, or attempting or conspiring to commit, the acts or omissions specified in this paragraph (6).
(7) “Life insurance producer” means any person licensed in this State as a resident or nonresident insurance producer who has received qualification or authority for life insurance coverage or a life line of coverage pursuant to Chapter 17 of this title.
(8) “Person” means a legal entity, including an individual, partnership, limited liability company, association, trust, corporation, or other legal entity.
(9) “Policy” or “insurance 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.
(10) “Related provider trust” means a titling trust or other trust established by a licensed viatical settlement provider or a financing entity for the sole purpose of holding the ownership or beneficial interest in purchased policies in connection with a financing transaction.
(11) “Special purpose entity” means a corporation, partnership, trust, limited liability company or other similar entity formed solely to provide either directly or indirectly access to institutional capital markets:
a. For a financing entity or licensed viatical settlement provider; or
b. 1. In connection with a transaction in which the securities in the special purpose entity are acquired by the viator or by “qualified institutional buyers” as defined in Rule 144A [17 C.F.R. 230.144A] promulgated under the Securities Act of 1933 [15 U.S.C. § 77a et seq.], as amended; or
2. The securities pay a fixed rate of return commensurate with established asset-backed institutional capital markets.
(12) “Terminally ill” means having an illness or sickness that can reasonably be expected to result in death in 24 months or fewer.
(13) “Viatical settlement broker” means a person, including a life insurance producer as provided for in § 7503 of this title, who working exclusively on behalf of a viator and for a fee, commission or other valuable consideration offers or attempts to negotiate viatical settlement contracts between a viator and 1 or more viatical settlement providers or 1 or more viatical settlement brokers. Irrespective of the manner in which the viatical settlement broker is compensated, a viatical settlement broker is deemed to represent only the viator, and not the insurer or the viatical settlement provider, and owes a fiduciary duty to the viator to act according to the viator's instructions and in the best interest of the viator. The term does not include an attorney, licensed CPA, or financial planner accredited by a nationally recognized accreditation agency, who is retained to represent the viator and whose compensation is not paid directly or indirectly by the viatical settlement provider or purchaser.
(14) a. “Viatical settlement contract” means a written agreement entered into between a viator and a viatical settlement provider or any affiliate of the viatical settlement provider establishing the terms under which compensation or anything of value is or will be paid, which compensation or value is less than the expected death benefits of the insurance policy or certificate, in return for the viator's present or future assignment, transfer, sale, devise, or bequest of the death benefit or ownership of all or any portion of the insurance policy or certificate of insurance.
b. “Viatical settlement contract” includes a premium finance loan made for a life insurance policy by a lender to viator on, before, or after the date of issuance of the policy where any of the following are met:
1. The viator or the insured receives on the date of the premium finance loan a guarantee of a future viatical settlement value of the policy.
2. The viator or the insured 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.
c. “Viatical settlement contract” does not include any of the following:
1. A policy loan or accelerated death benefit made by the insurer pursuant to the policy's terms.
2. Loan proceeds that are used solely to pay any of the following:
A. Premiums for the policy.
B. The costs of the loan, including interest, arrangement fees, utilization fees and similar fees, closing costs, legal fees and expenses, trustee fees and expenses, and third-party collateral provider fees and expenses, including fees payable to letter of credit issuers.
3. A loan made by a bank or other licensed financial institution in which the lender takes an interest in a life insurance policy solely to secure repayment of a loan or, if there is a default on the loan and the policy is transferred, the transfer of such a policy by the lender, if the default itself is not pursuant to an agreement or understanding with any other person for the purpose of evading regulation under this Act.
4. A loan made by a lender that does not violate Chapter 48 of this title, if the premium finance loan is not described in paragraph (14)b. of this section.
5. An agreement where all the parties have an insurable interest in the insured as defined in § 2704 or § 2705 of this title.
6. 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, where the employer or the trustee has an insurable interest as defined in § 2704(c)(3) of this title.
7. A bona fide business succession planning arrangement between any of the following:
A. One or more shareholders in a corporation or between a corporation and 1 or more of its shareholders or 1 or more trust established by its shareholders.
B. One or more partners in a partnership or between a partnership and 1 or more of its partners or 1 or more trust established by its partners.
C. One 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 trust established by its members.
8. 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.
9. Any other contract, transaction or arrangement exempted from the definition of viatical settlement contract by the Commissioner based on a determination that the contract, transaction, or arrangement is not of the type intended to be regulated by this Act.
(15) “Viatical settlement provider” means a person, other than a viator, that enters into or effectuates a viatical settlement contract with a viator resident in this State.
The term does not include any of the following:
a. A bank, savings bank, savings and loan association, credit union, or other licensed lending institution that takes an assignment of a life insurance policy solely as collateral for a loan.
b. A premium finance company making premium finance loans and exempted by the Commissioner from the licensing requirement under the premium finance laws that takes an assignment of a life insurance policy solely as collateral for a loan.
c. The issuer of the life insurance policy.
d. An authorized or eligible insurer that provides stop loss coverage or financial guaranty insurance to a viatical settlement provider, purchaser, financing entity, special purpose entity or related provider trust.
e. A natural person who enters into or effectuates no more than 1 agreement in a calendar year for the transfer of life insurance policies for any value less than the expected death benefit.
f. A financing entity.
g. A special purpose entity.
h. A related provider trust.
i. A viatical settlement purchaser.
j. Any other person that the Commissioner determines is not the type of person intended to be covered by the definition of viatical settlement provider.
(16) “Viatical settlement purchaser” means a person who provides a sum of money as consideration for a life insurance policy or an interest in the death benefits of a life insurance policy, or a person who owns or acquires or is entitled to a beneficial interest in a trust that owns a viatical settlement contract or is the beneficiary of a life insurance policy that has been or will be the subject of a viatical settlement contract, for the purpose of deriving an economic benefit.
The term does not include any of the following:
a. A licensee under this Act.
b. An accredited investor or qualified institutional buyer as defined, respectively, in Rule 501(a) [17 C.F.R. § 230.501(a)] or Rule 144A [17 C.F.R. § 230.144A] promulgated under the Federal Securities Act of 1933 [15 U.S.C. § 77a et seq.], as amended.
c. A financing entity.
d. A special purpose entity.
e. A related provider trust.
(17) “Viaticated policy” means a life insurance policy or certificate that has been acquired by a viatical settlement provider pursuant to a viatical settlement contract.
(18) “Viator” means the owner of a life insurance policy or a certificate holder under a group policy who resides in this State and enters or seeks to enter into a viatical settlement contract. For the purposes of this Act, a viator is not limited to an owner of a life insurance policy or a certificate holder under a group policy insuring the life of an individual with a terminal or chronic illness or condition except where specifically addressed. If there is more than 1 viator on a single policy and the viators are residents of different states, the transaction is governed by the law of the state in which the viator having the largest percentage ownership resides or, if the viators hold equal ownership, the state of residence of 1 viator agreed upon in writing by all the viators. The term does not include any of the following:
a. A licensee under this Act, including a life insurance producer acting as a viatical settlement broker pursuant to this Act.
b. A person who is a qualified institutional buyer as defined, respectively, in Rule 144A [17 C.F.R. § 230.144A] promulgated under the Federal Securities Act of 1933 [15 U.S.C. § 77a et seq.], as amended.
c. A financing entity.
d. A special purpose entity.
e. A related provider trust.