As used in this chapter:
Employing any plan, financial structure, device, scheme or artifice to defraud related to viaticated policies;
Entering into any agreement or undertaking any act or plan that involves stranger-originated life insurance; or
Failing to disclose to the insurer when requested by the insurer that the prospective insured has undergone a life expectancy evaluation within one (1) year prior to or subsequent to applying for the insurance policy by any person or entity other than the insurer or its authorized representative in connection with the issuance of a policy;
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:
Remove, conceal, alter, destroy or sequester from the commissioner the assets or records of a licensee or other person engaged in the business of viatical settlements;
Misrepresent or conceal the financial condition of a licensee, financing entity, insurer or other person;
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; or
File with the commissioner or the equivalent chief insurance regulatory official of another jurisdiction a document containing false information or otherwise conceal information about a material fact from the commissioner;
Embezzlement, theft, misappropriation or conversion of moneys, funds, premiums, credits or other property of a viatical settlement provider, insurer, insured, viator, insurance policyowner or any other person engaged in the business of viatical settlements or insurance;
Recklessly entering into, negotiating, brokering or 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 or the persons 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;
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 chapter for the express purposes of evading or avoiding this chapter; or
Attempting to commit, assisting, aiding or abetting in the commission of, or conspiracy to commit the acts or omissions specified in this subdivision (6);
“Life insurance producer” means any person licensed in this state as a resident or nonresident insurance producer that has received qualification or authority for life insurance coverage or a life line of coverage pursuant to chapter 6, part 1 of this title;
“Person” means a natural person or a legal entity, including, but not limited to, an individual, partnership, limited liability company, association, trust or corporation;
“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;
“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. The trust shall have a written agreement with the licensed viatical settlement provider under which the licensed viatical settlement provider is responsible for ensuring compliance with all statutory and regulatory requirements and under which the trust agrees to make all records and files related to viatical settlement transactions available to the commissioner as if those records and files were maintained directly by the licensed viatical settlement provider;
“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:
For a financing entity or licensed viatical settlement provider; or
(i) 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 17 CFR 230.144A, promulgated under the Securities Act of 1933 (15 U.S.C. § 77a et seq.); or
In connection with a transaction in which the securities pay a fixed rate of return commensurate with established asset-backed institutional capital markets;
(A) “Stranger-originated life insurance” means a practice or an act to initiate a life insurance policy for the benefit of a third-party investor who, at the time of policy origination, has no insurable interest in the insured;
“Stranger-originated life insurance practices” include cases in which life insurance is purchased with resources or guarantees from or through a person or entity that, at the time of the policy inception, could not lawfully initiate the policy by the person or entity, and where, at the time of the policy's inception, there is an arrangement or agreement, whether verbal or written, 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 an insurable interest, and are used to initiate policies for investors, violate insurable interest laws and the prohibition against wagering on life;
“Stranger-originated life insurance arrangements” do not include a lawful viatical settlement contract as defined in this section, or those practices set forth in subdivision (15)(D);
“Terminally ill” means having an illness or sickness that can reasonably be expected to result in death in twenty-four (24) months or less;
“Viatical settlement broker” means a person, including a life insurance producer, as provided for in §56-50-103, 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 one (1) or more viatical settlement providers or one (1) or more viatical settlement brokers. Notwithstanding 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. “Viatical settlement broker” does not include an attorney, certified public accountant or a 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;
(A) “Viatical settlement contract” means a written agreement between a viator and a 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 policy, in return for the viator's present or future assignment, transfer, sale, devise or bequest of the death benefit or ownership of any portion of the insurance policy or certificate of insurance;
“Viatical settlement contract” includes a premium finance loan made for a life insurance policy by a lender to a viator on, before or after the date of issuance of the policy where:
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; or
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;
“Viatical settlement contract” also includes the transfer for compensation or value of ownership or beneficial interest in a trust or other entity that owns a life insurance policy if the trust or other entity was formed or availed of for the principal purpose of acquiring one (1) or more life insurance policies, which life insurance policy insures the life of a person residing in this state;
“Viatical settlement contract” does not include:
A policy loan or accelerated death benefit made by the insurer pursuant to the policy's terms;
Loan proceeds that are used solely to pay:
Premiums for the policy; or
The costs of the loan, including, but not limited to, 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;
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; provided, that the default itself is not pursuant to an agreement or understanding with any other person for the purpose of evading regulation under this chapter;
A loan made by a lender that does not violate chapter 37 of this title; provided, that the premium finance loan is not described in subdivision (15)(B);
An agreement where all the parties are closely related to the insured by blood or law or 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 such parties;
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;
A bona fide business succession planning arrangement:
Between one (1) or more shareholders in a corporation or between a corporation and one (1) or more of its shareholders or one (1) or more trusts established by its shareholders;
Between one (1) or more partners in a partnership or between a partnership and one (1) or more of its partners or one (1) or more trusts established by its partners; or
Between one (1) or more members in a limited liability company or between a limited liability company and one (1) or more of its members or one (1) or more trusts established by its members;
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; or
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 chapter;
“Viatical settlement investment agent” means a person who is an appointed or contracted agent of a licensed viatical settlement provider who solicits or arranges the funding for the purchase of a viatical settlement by a viatical settlement purchaser and who is acting on behalf of a viatical settlement provider;
A viatical settlement investment agent shall not have any contact directly or indirectly with the viator or insured or have knowledge of the identity of the viator or insured;
A viatical settlement investment agent is deemed to represent the viatical settlement provider of whom the viatical settlement investment agent is an appointed or contracted agent;
(A) “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;
“Viatical settlement provider” does not include:
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;
The issuer of the life insurance policy;
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;
A natural person who enters into or effectuates no more than one (1) agreement in a calendar year for the transfer of life insurance policies for any value less than the expected death benefit;
A financing entity;
A special purpose entity;
A related provider trust;
A viatical settlement purchaser; or
Any other person that the commissioner determines is not the type of person intended to be covered by the definition of viatical settlement provider;
“Viatical settlement purchase agreement” means a contract or agreement, entered into by a viatical settlement purchaser, to which the viator is not a party, to purchase a life insurance policy or an interest in a life insurance policy that is entered into for the purpose of deriving an economic benefit;
(A) “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;
“Viatical settlement purchaser” does not include:
A licensee under this chapter;
An accredited investor, as defined in 17 CFR 230.501(a), or a qualified institutional buyer as defined in 17 CFR 230.144A, both promulgated under the Federal Securities Act of 1933 (15 U.S.C. § 77a et seq.);
A financing entity;
A special purpose entity; or
A related provider trust;
“Viaticated policy” means a life insurance policy or certificate that has been acquired by a viatical settlement provider pursuant to a viatical settlement contract; and
(A) “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 chapter, a “viator” includes, but 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 one (1) viator on a single policy and the viators are residents of different states, the transaction shall be 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 one (1) viator agreed upon in writing by all the viators;
“Viator” does not include:
A licensee under this chapter, including a life insurance producer acting as a viatical settlement broker pursuant to this chapter;
A qualified institutional buyer as defined in 17 CFR 230.144A, promulgated under the Federal Securities Act of 1933;
A financing entity;
A special purpose entity; or
A related provider trust.