§ 3847. Fraud prevention and control
(a)(1) A person shall not commit a fraudulent life settlement act.
(2) A person shall not knowingly or with reason to know interfere with the enforcement of the provisions of this subchapter or investigations of suspected or actual violations of this subchapter.
(3) It shall be a violation of this subchapter for a person in the business of life settlements who with knowledge or who reasonably should know to permit any person convicted of a felony involving dishonesty or breach of trust to participate in the business of life settlements.
(b)(1) Life settlement contracts and applications for life settlements, 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 may be guilty of a crime and may be subject to fines and confinement in prison."
(2) The lack of a statement as required in subdivision (1) of this subsection does not constitute a defense in any prosecution for a fraudulent life settlement act.
(c)(1) Any person engaged in the business of life settlements having knowledge or a reasonable suspicion that a fraudulent life settlement act is being, will be, or has been committed shall immediately provide to the Commissioner such information as required and in a manner prescribed by the Commissioner by rule or order.
(2) Any other person having knowledge or a reasonable belief that a fraudulent life settlement act is being, will be, or has been committed may provide to the Commissioner such information required and in a manner prescribed by the Commissioner by order or rule.
(d)(1) No civil liability shall 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:
(A) the Commissioner or the Commissioner's employees, agents, or representatives;
(B) federal, State, or local law enforcement or regulatory officials or their employees, agents, or representatives;
(C) a person involved in the prevention and detection of fraudulent viatical settlement acts or that person's agents, employees, or representatives;
(D) the National Association of Insurance Commissioners, the Financial Industry Regulatory Authority (FINRA), the North American Securities Administrators Association (NASAA), or their employees, agents, or representatives, or another regulatory body overseeing life insurance, life settlements, or securities or investment fraud; or
(E) the life insurer that issued the life insurance policy covering the life of the insured.
(2) Subdivision (1) of this subsection shall not apply to statements 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 subdivision (1) of this subsection does not apply because the person filing the report or furnishing the information did so with actual malice.
(3) A person furnishing information as identified in subdivision (1) of this subsection shall be entitled to an award of attorney's fees and costs if he or she is the prevailing party in a civil cause of action for libel, slander, or any other relevant tort arising out of activities in carrying out the provisions of this subchapter and if the party bringing the action was not substantially justified in doing so. For the purposes of this section, a proceeding is "substantially justified" if it had a reasonable basis in law or fact at the time that it was initiated. However, such an award does not apply to any person furnishing information concerning his or her own fraudulent life settlement acts.
(4) This section does not abrogate or modify common law or statutory privileges or immunities enjoyed by a person described in subdivision (1) of this subsection.
(5) Confidentiality.
(A) The documents and evidence provided pursuant to this subsection or obtained by the Commissioner in an investigation of suspected or actual fraudulent life settlement acts shall be privileged and confidential and shall not be a public record and shall not be subject to discovery or subpoena in any private civil action.
(B) Subdivision (A) of this subdivision does not prohibit release by the Commissioner of documents and evidence obtained in an investigation of suspected or actual fraudulent life settlement acts:
(i) in administrative or judicial proceedings to enforce laws administered by the Commissioner;
(ii) to federal, state, or local law enforcement or regulatory agencies, to an organization established for the purpose of detecting and preventing fraudulent viatical settlement acts, or to the National Association of Insurance Commissioners; or
(iii) at the discretion of the Commissioner, to a person in the business of life settlements that is aggrieved by a fraudulent life settlement act.
(C) Release of documents and evidence under subdivision (B) of this subdivision does not abrogate or modify the privilege granted in subdivision (A) of this subdivision.
(6) This subchapter shall not:
(A) preempt the authority or relieve the duty of other law enforcement or regulatory agencies to investigate, examine, and prosecute suspected violations of law;
(B) prevent or prohibit a person from disclosing voluntarily or otherwise information concerning life settlement fraud to a law enforcement or regulatory agency other than the Department of Financial Regulation; or
(C) limit the powers granted elsewhere by the laws 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.
(7)(A) Life settlement providers shall have in place antifraud initiatives reasonably calculated to detect, prosecute, and prevent fraudulent life settlement acts. The Commissioner may, at his or her discretion, order or a licensee may request and the Commissioner may grant such modifications of the required initiatives listed in subdivision (B) of this subdivision (7) as 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.
(B) Antifraud initiatives shall include:
(i) The use of fraud investigators, who may be life settlement provider employees or independent contractors.
(ii) An antifraud plan, which shall be submitted to the Department at the request of the Commissioner. The antifraud plan shall include:
(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; and
(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.
(e) Antifraud plans submitted to the Commissioner shall be privileged and confidential and shall not be a public record and shall not be subject to discovery or subpoena in a civil or criminal action. (Added 2009, No. 53, § 1, eff. Jan. 1, 2010; amended 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)