HF 3878

as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to insurance; regulating life settlements; providing enforcement;
prescribing criminal penalties and civil remedies; proposing coding for new law
in Minnesota Statutes, chapter 60A; repealing Minnesota Statutes 2006, sections
60A.961; 60A.962; 60A.963; 60A.964; 60A.965; 60A.966; 60A.967; 60A.968;
60A.969; 60A.970; 60A.971; 60A.972; 60A.973; 60A.974.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [60A.957] SHORT TITLE.
new text end

new text begin Sections 60A.957 to 60A.9587 may be cited as the "Life Settlements Act."
new text end

Sec. 2.

new text begin [60A.9572] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Terms. new text end

new text begin For the purpose of sections 60A.957 to 60A.9587, the terms
in subdivision 2 to 27 have the meanings given them.
new text end

new text begin Subd. 2. new text end

new text begin Advertisement. new text end

new text begin "Advertisement" 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 published, disseminated, circulated, or placed
before the public, directly or indirectly, for the purpose of creating an interest in or
inducing a person to purchase or sell, assign, devise, bequest, or transfer the death benefit
or ownership of a life insurance policy or an interest in a life insurance policy pursuant to
a life settlement contract.
new text end

new text begin Subd. 3. new text end

new text begin Broker. new text end

new text begin "Broker" means a person who, on behalf of an owner and for a fee,
commission, or other valuable consideration, offers or attempts to negotiate life settlement
contracts between an owner and providers. A broker represents only the owner and owes a
fiduciary duty to the owner to act according to the owner's instructions, and in the best
interest of the owner, notwithstanding the manner in which the broker is compensated.
A broker does not include an attorney, certified public accountant, or financial planner
retained in the type of practice customarily performed in that person's professional
capacity to represent the owner whose compensation is not paid directly or indirectly by
the provider or any other person except the owner.
new text end

new text begin Subd. 4. new text end

new text begin Business of life settlements. new text end

new text begin "Business of life settlements" means an
activity involved in, but not limited to, offering to enter into, soliciting, negotiating,
procuring, effectuating, monitoring, or tracking of life settlement contracts.
new text end

new text begin Subd. 5. new text end

new text begin Chronically ill. new text end

new text begin "Chronically ill" means:
new text end

new text begin (1) being unable to perform at least two activities of daily living including, but not
limited to, eating, toileting, transferring, bathing, dressing or continence;
new text end

new text begin (2) requiring substantial supervision to protect the individual from threats to health
and safety due to severe cognitive impairment; or
new text end

new text begin (3) having a level of disability similar to that described in clause (1) as determined
by the United States secretary of health and human services.
new text end

new text begin Subd. 6. new text end

new text begin Commissioner. new text end

new text begin "Commissioner" means the commissioner of commerce.
new text end

new text begin Subd. 7. new text end

new text begin Financing entity. new text end

new text begin "Financing entity" means an underwriter, placement
agent, lender, purchaser of securities, purchaser of a policy or certificate from a provider,
credit enhancer, or any entity that has a direct ownership in a policy or certificate that is
the subject of a life settlement contract, but:
new text end

new text begin (1) whose principal activity related to the transaction is providing funds to effect the
life settlement contract or purchase of one or more policies; and
new text end

new text begin (2) who has an agreement in writing with one or more providers to finance the
acquisition of life settlement contracts.
new text end

new text begin Financing entity does not include a nonaccredited investor or purchaser.
new text end

new text begin Subd. 8. new text end

new text begin Financing transaction. new text end

new text begin "Financing transaction" means a transaction in
which a licensed provider obtains financing from a financing entity including, without
limitation, any secured or unsecured financing, any securitization transaction, or any
securities offering which either is registered or exempt from registration under federal
and state securities law.
new text end

new text begin Subd. 9. new text end

new text begin Fraudulent life settlement act. new text end

new text begin "Fraudulent life settlement act" includes:
new text end

new text begin (a) acts or omissions committed by any person who, knowingly and with intent to
defraud, for the purpose of depriving another of property or for pecuniary gain, commits
or permits the person's employees or the person's agents to engage in acts including,
but not limited to:
new text end

new text begin (1) presenting, causing to be presented, or preparing with knowledge and belief
that it will be presented to or by a provider, premium finance lender, broker, 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 one or more of
the following:
new text end

new text begin (i) an application for the issuance of a life settlement contract or insurance policy;
new text end

new text begin (ii) the underwriting of a life settlement contract or insurance policy;
new text end

new text begin (iii) a claim for payment or benefit pursuant to a life settlement contract or insurance
policy;
new text end

new text begin (iv) premiums paid on an insurance policy;
new text end

new text begin (v) payments and changes in ownership or beneficiary made in accordance with the
terms of a life settlement contract or insurance policy;
new text end

new text begin (vi) the reinstatement or conversion of an insurance policy;
new text end

new text begin (vii) in the solicitation, offer to enter into, or effectuation of a life settlement contract
or insurance policy;
new text end

new text begin (viii) the issuance of written evidence of life settlement contracts or insurance;
new text end

new text begin (ix) any application for or the existence of or any payments related to a loan secured
directly or indirectly by any interest in a life insurance policy; or
new text end

new text begin (x) stranger-originated life insurance;
new text end

new text begin (2) employing any device, scheme, or artifice to defraud in the business of life
settlements; or
new text end

new text begin (3) in the solicitation, application, or issuance of a life insurance policy, employing
any device, scheme, or artifice in violation of state insurable interest laws; and
new text end

new text begin (b) in the furtherance of a fraud or to prevent the detection of a fraud, acts by any
person which commit or permit the person's employees or the person's agents to:
new text end

new text begin (1) remove, conceal, alter, destroy, or sequester from the commissioner the assets or
records of a licensee or other person engaged in the business of life settlements;
new text end

new text begin (2) misrepresent or conceal the financial condition of a licensee, financing entity,
insurer, or other person;
new text end

new text begin (3) transact the business of life settlements in violation of laws requiring a license,
certificate of authority, or other legal authority for the transaction of the business of life
settlements;
new text end

new text begin (4) file with the commissioner or the chief insurance regulatory official of another
jurisdiction a document containing false information or otherwise concealing information
about a material fact from the commissioner;
new text end

new text begin (5) engage in embezzlement, theft, misappropriation, or conversion of money, funds,
premiums, credits, or other property of a provider, insurer, insured, owner, insurance
policy owner, or any other person engaged in the business of life settlements or insurance;
new text end

new text begin (6) knowingly and with intent to defraud, enter into, broker, or otherwise deal in a
life 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 owner or the owner's agent intended to defraud the policy's issuer;
new text end

new text begin (7) attempt to commit, assist, aid or abet in the commission of, or conspiracy to
commit, the acts or omissions specified in this subdivision; or
new text end

new text begin (8) misrepresent the state of residence of an owner to be a state or jurisdiction that
does not have a law substantially similar to sections 60A.957 to 60A.9587 for the purpose
of evading or avoiding the provisions of sections 60A.957 to 60A.9587.
new text end

new text begin Subd. 10. new text end

new text begin Insured. new text end

new text begin "Insured" means the person covered under the policy being
considered for sale in a life settlement contract.
new text end

new text begin Subd. 11. new text end

new text begin Life expectancy. new text end

new text begin "Life expectancy" means the arithmetic mean of the
number of months the insured under the life insurance policy to be settled can be expected
to live as determined by a life expectancy company considering medical records and
appropriate experiential data.
new text end

new text begin Subd. 12. new text end

new text begin Life insurance producer. new text end

new text begin "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
........
new text end

new text begin Subd. 13. new text end

new text begin Life settlement contract. new text end

new text begin (a) "Life settlement contract" means a written
agreement entered into between a provider and an owner, establishing the terms under
which compensation or anything of value will be paid, which compensation or thing of
value is less than the expected death benefit of the insurance policy or certificate, in return
for the owner's assignment, transfer, sale, devise, or bequest of the death benefit or any
portion of an insurance policy or certificate of insurance for compensation, provided,
however, that the minimum value for a life settlement contract shall be greater than a cash
surrender value or accelerated death benefit available at the time of an application for a life
settlement contract. Life settlement contract also includes the transfer for compensation or
value of ownership or beneficial interest in a trust or other entity that owns such policy if
the trust or other entity was formed or availed of for the principal purpose of acquiring
one or more life insurance contracts, which life insurance contract insures the life of a
person residing in this state.
new text end

new text begin (b) Life settlement contract also includes a written agreement for a loan or other
lending transaction, secured primarily by a policy or a premium finance loan made for a
policy on or before the date of issuance of the policy where:
new text end

new text begin (i) the loan proceeds are not used solely to pay premiums for the policy and any
costs or expenses incurred by the lender or the borrower in connection with the financing;
new text end

new text begin (ii) the owner receives on the date of the premium finance loan a guarantee of the
future life settlement value of the policy; or
new text end

new text begin (iii) the owner 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.
new text end

new text begin (c) Life settlement contract does not include:
new text end

new text begin (1) a policy loan by a life insurance company pursuant to the terms of the life
insurance policy or accelerated death provisions contained in the life insurance policy,
whether issued with the original policy or as a rider;
new text end

new text begin (2) a premium finance loan, as defined herein, or any loan made by a bank or other
licensed financial institution, provided that neither default on such loan nor the transfer of
the policy in connection with such default is pursuant to an agreement or understanding
with any other person for the purpose of evading regulation under sections 60A.957
to 60A.9587;
new text end

new text begin (3) a collateral assignment of a life insurance policy by an owner;
new text end

new text begin (4) a loan made by a lender that does not violate chapter 59A, provided the loan is
not described in clause (1), and is not otherwise within the definition of life settlement
contract;
new text end

new text begin (5) an agreement where all the parties (i) are closely related to the insured by blood
or law or (ii) 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 the parties;
new text end

new text begin (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;
new text end

new text begin (7) a bona fide business succession planning arrangement:
new text end

new text begin (i) between one or more shareholders in a corporation or between a corporation and
one or more of its shareholders or one or more trusts, established by its shareholders;
new text end

new text begin (ii) between one or more partners in a partnership or between a partnership and one
or more of its partners or one or more trusts, established by its partners; or
new text end

new text begin (iii) between one or more members in a limited liability company or between a
limited liability company and one or more of its members or one or more trusts established
by its members;
new text end

new text begin (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; or
new text end

new text begin (9) any other contract, transaction, or arrangement from the definition of life
settlement contract that the commissioner determines is not of the type intended to be
regulated by sections 60A.957 to 60A.9587.
new text end

new text begin Subd. 14. new text end

new text begin Net death benefit. new text end

new text begin "Net death benefit" means the amount of the life
insurance policy or certificate to be settled less any outstanding debts or liens.
new text end

new text begin Subd. 15. new text end

new text begin Owner. new text end

new text begin "Owner" means the owner of a life insurance policy or a
certificate holder under a group policy, with or without a terminal illness, who enters or
seeks to enter into a life settlement contract. An owner shall not be limited to an owner
of a life insurance policy or a certificate holder under a group policy that insures the life
of an individual with a terminal or chronic illness or condition except where specifically
addressed. Owner does not include:
new text end

new text begin (1) any provider or other licensee under sections 60A.957 to 60A.9587;
new text end

new text begin (2) a qualified institutional buyer as defined in Rule 144A of the federal Securities
Act of 1933, as amended;
new text end

new text begin (3) a financing entity;
new text end

new text begin (4) a special purpose entity; or
new text end

new text begin (5) a related provider trust.
new text end

new text begin Subd. 16. new text end

new text begin Patient identifying information. new text end

new text begin "Patient identifying information"
means an insured's address, telephone number, facsimile number, electronic mail address,
photograph or likeness, employer, employment status, Social Security number, or any
other information that is likely to lead to the identification of the insured.
new text end

new text begin Subd. 17. new text end

new text begin Policy. new text end

new text begin "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.
new text end

new text begin Subd. 18. new text end

new text begin Premium finance loan. new text end

new text begin "Premium finance loan" is a loan made primarily
for the purposes of making premium payments on a life insurance policy, which loan is
secured by an interest in such life insurance policy.
new text end

new text begin Subd. 19. new text end

new text begin Person. new text end

new text begin "Person" means any natural person or legal entity including, but
not limited to, a partnership, limited liability company, association, trust, or corporation.
new text end

new text begin Subd. 20. new text end

new text begin Provider. new text end

new text begin "Provider" means a person, other than an owner, who enters
into or effectuates a life settlement contract with an owner. A provider does not include:
new text end

new text begin (1) any bank, savings bank, savings and loan association, or credit union;
new text end

new text begin (2) a licensed lending institution or creditor or secured party pursuant to a premium
finance loan agreement which takes an assignment of a life insurance policy or certificate
issued pursuant to a group life insurance policy as collateral for a loan;
new text end

new text begin (3) the insurer of a life insurance policy or rider to the extent of providing accelerated
death benefits or riders under section 61A.072 or cash surrender value;
new text end

new text begin (4) any natural person who enters into or effectuates no more than one agreement in
a calendar year for the transfer of a life insurance policy or certificate issued pursuant to a
group life insurance policy for compensation or anything of value less than the expected
death benefit payable under the policy;
new text end

new text begin (5) a purchaser;
new text end

new text begin (6) any authorized or eligible insurer that provides stop-loss coverage to a provider,
purchaser, financing entity, special purpose entity, or related provider trust;
new text end

new text begin (7) a financing entity;
new text end

new text begin (8) a special purpose entity;
new text end

new text begin (9) a related provider trust;
new text end

new text begin (10) a broker; or
new text end

new text begin (11) an accredited investor or qualified institutional buyer as defined respectively in
Regulation D, Rule 501 or Rule 144A of the federal Securities Act of 1933, as amended,
who purchases a life settlement policy from a provider.
new text end

new text begin Subd. 21. new text end

new text begin Purchased policy. new text end

new text begin "Purchased policy" means a policy or group certificate
that has been acquired by a provider pursuant to a life settlement contract.
new text end

new text begin Subd. 22. new text end

new text begin Purchaser. new text end

new text begin "Purchaser" means a person who pays compensation or
anything of value as consideration for a beneficial interest in a trust which is vested with,
or for the assignment, transfer or sale of, an ownership or other interest in a life insurance
policy or a certificate issued pursuant to a group life insurance policy which has been
the subject of a life settlement contract.
new text end

new text begin Subd. 23. new text end

new text begin Related provider trust. new text end

new text begin "Related provider trust" means a titling trust or
other trust established by a licensed 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. In order to qualify as a related provider trust, the trust must
have a written agreement with the licensed provider under which the licensed provider
is responsible for ensuring compliance with all statutory and regulatory requirements
and under which the trust agrees to make all records and files relating to life settlement
transactions available to the Department of Commerce as if those records and files were
maintained directly by the licensed provider.
new text end

new text begin Subd. 24. new text end

new text begin Settled policy. new text end

new text begin "Settled policy" means a life insurance policy or certificate
that has been acquired by a provider pursuant to a life settlement contract.
new text end

new text begin Subd. 25. new text end

new text begin Special purpose entity. new text end

new text begin "Special purpose entity" means a corporation,
partnership, trust, limited liability company, or other legal entity formed solely to provide
either directly or indirectly access to institutional capital markets for a financing entity or
provider in connection with a transaction in which the securities in the special purpose
entity are acquired by the owner or by a qualified institutional buyer as defined in Rule 144
promulgated under the Securities Act of 1933, as amended; or the securities pay a fixed
rate of return commensurate with established asset-backed institutional capital markets.
new text end

new text begin Subd. 26. new text end

new text begin Stranger-originated life insurance; STOLI. new text end

new text begin "Stranger-originated life
insurance" or "STOLI" means the procurement of new life insurance by persons or entities
that lack insurable interest on the insured and, at policy inception, such person or entity
owns or controls the policy or the majority of the death benefit in the policy and the
insured or insured's beneficiaries receive little or none of the proceeds of the death benefits
of the policy. Trusts that are created to give the appearance of insurable interest and are
used to initiate policies for investors violate insurable interest laws and the prohibition
against wagering on life.
new text end

new text begin Subd. 27. new text end

new text begin Terminally ill. new text end

new text begin "Terminally ill" means having an illness or sickness that
can reasonably be expected to result in death in 24 months or less.
new text end

Sec. 3.

new text begin [60A.9573] LICENSING.
new text end

new text begin Subdivision 1. new text end

new text begin Requirements. new text end

new text begin No person, wherever located, shall act as a provider
or broker with an owner or multiple owners who is a resident of this state, without first
having obtained a license from the commissioner. If there is more than one owner on a
single policy and the owners are residents of different states, the life settlement contract
shall be governed by the law of the state in which the owner having the largest percentage
ownership resides or, if the owners hold equal ownership, the state of residence of one
owner agreed upon in writing by all owners.
new text end

new text begin Subd. 2. new text end

new text begin Application. new text end

new text begin Application for a provider or broker license shall be made
to the commissioner by the applicant on a form prescribed by the commissioner, and the
application shall be accompanied by a fee in an amount established by the commissioner,
provided, however, that the license and renewal fees for a provider license shall be
reasonable and that the license and renewal fees for a broker license shall not exceed
those established for an insurance producer, as such fees are otherwise provided for in
this chapter.
new text end

new text begin Subd. 3. new text end

new text begin Nonresident producer. new text end

new text begin A life insurance producer who has been duly
licensed as a resident insurance producer with a life line of authority in this state or the
producer's home state for at least one year and is licensed as a nonresident producer in
this state shall be deemed to meet the licensing requirements of this section and shall be
permitted to operate as a broker.
new text end

new text begin Subd. 4. new text end

new text begin Brokers. new text end

new text begin Not later than 30 days from the first day of operating as a broker,
the life insurance producer shall notify the commissioner that the producer is acting as
a broker on a form prescribed by the commissioner, and shall pay any applicable fee to
be determined by the commissioner. Notification shall include an acknowledgment by
the life insurance producer that the producer will operate as a broker in accordance with
sections 60A.957 to 60A.9587.
new text end

new text begin Subd. 5. new text end

new text begin Life settlement contracts. new text end

new text begin The insurer that issued the policy that is the
subject of a life settlement contract shall not be responsible for any act or omission of a
broker, provider, or purchaser arising out of or in connection with the life settlement
transaction, unless the insurer receives compensation for the placement of a life settlement
contract from the broker, provider, or purchaser in connection with the life settlement
contract.
new text end

new text begin Subd. 6. new text end

new text begin Exception. new text end

new text begin A person licensed as an attorney, certified public accountant,
or financial planner accredited by a nationally recognized accreditation agency, who is
retained to represent the owner, whose compensation is not paid directly or indirectly by
the provider or purchaser, may negotiate life settlement contracts on behalf of the owner
without having to obtain a license as a broker.
new text end

new text begin Subd. 7. new text end

new text begin Renewals. new text end

new text begin Licenses may be renewed every 24 months on the anniversary
date upon payment of the periodic renewal fee. As specified in subdivision 2 the renewal
fee for a provider shall not exceed a reasonable fee. Failure to pay the fee within the terms
prescribed shall result in the automatic revocation of the license requiring periodic renewal.
new text end

new text begin Subd. 8. new text end

new text begin Term. new text end

new text begin The term of a provider license shall be equal to that of a domestic
stock life insurance company and the term of a broker license shall be equal to that of an
insurance producer license. A license requiring periodic renewal may be renewed on its
anniversary date upon payment of the periodic renewal fee as specified in subdivision 2.
Failure to pay the fees on or before the renewal date shall result in expiration of the license.
new text end

new text begin Subd. 9. new text end

new text begin Disclosure of identity of stockholders. new text end

new text begin The applicant shall provide such
information as the commissioner may require on forms prepared by the commissioner.
The commissioner shall have authority, at any time, to require the applicant to fully
disclose the identity of the applicant's stockholders, except stockholders owning fewer
than ten percent of the shares of an applicant whose shares are publicly traded, partners,
officers, and employees, and the commissioner may, in the exercise of the commissioner's
sole discretion, refuse to issue such a license in the name of any person if not satisfied that
any officer, employee, stockholder, or partner thereof who may materially influence the
applicant's conduct meets the standards of sections 60A.957 to 60A.9584.
new text end

new text begin Subd. 10. new text end

new text begin Entity licenses. new text end

new text begin A license issued to a partnership, corporation, or other
entity authorizes all members, officers, and designated employees to act as a licensee
under the license if those persons are named in the application and any supplements
to the application.
new text end

new text begin Subd. 11. new text end

new text begin Issuance. new text end

new text begin Upon the filing of an application and the payment of the license
fee, the commissioner shall make an investigation of each applicant and may issue a
license if the commissioner finds that the applicant:
new text end

new text begin (1) if a provider, has provided a detailed plan of operation;
new text end

new text begin (2) is competent and trustworthy and intends to transact its business in good faith;
new text end

new text begin (3) has a good business reputation and has had experience, training, or education so
as to be qualified in the business for which the license is applied;
new text end

new text begin (4) if the applicant is a legal entity, is formed or organized pursuant to the laws of
this state, is a foreign legal entity authorized to transact business in this state, or provides a
certificate of good standing from the state of its domicile; and
new text end

new text begin (5) has provided to the commissioner an antifraud plan that meets the requirements
of section 60A.9583 and includes:
new text end

new text begin (i) a description of the procedures for detecting and investigating possible fraudulent
acts and procedures for resolving material inconsistencies between medical records and
insurance applications;
new text end

new text begin (ii) a description of the procedures for reporting fraudulent insurance acts to the
commissioner;
new text end

new text begin (iii) a description of the plan for antifraud education and training of its underwriters
and other personnel; and
new text end

new text begin (iv) a written description or chart outlining the arrangement of the antifraud
personnel who are responsible for the investigation and reporting of possible fraudulent
insurance acts and investigating unresolved material inconsistencies between medical
records and insurance applications.
new text end

new text begin Subd. 12. new text end

new text begin Designation of agent for service of process. new text end

new text begin The commissioner shall
not issue any license to any nonresident applicant, unless a written designation of an
agent for service of process is filed and maintained with the commissioner or unless the
applicant has filed with the commissioner the applicant's written irrevocable consent that
any action against the applicant may be commenced against the applicant by service
of process on the commissioner.
new text end

new text begin Subd. 13. new text end

new text begin Annual statement. new text end

new text begin Each licensee shall file with the commissioner
on or before March 1 of each year an annual statement containing the information the
commissioner prescribes by rule.
new text end

new text begin Subd. 14. new text end

new text begin Use of brokers. new text end

new text begin A provider may not use any person to perform the
functions of a broker as defined in sections 60A.957 to 60A.9587 unless the person holds
a current, valid license as a broker, and as provided in this section.
new text end

new text begin Subd. 15. new text end

new text begin Use of providers. new text end

new text begin A broker may not use any person to perform the
functions of a provider as defined in sections 60A.957 to 60A.9587 unless such person
holds a current, valid license as a provider, and as provided in this section.
new text end

new text begin Subd. 16. new text end

new text begin Providers and brokers; revised information. new text end

new text begin A provider or broker
shall provide to the commissioner new or revised information about officers, ten percent
or more stockholders, partners, directors, members, or designated employees within 30
days of the change.
new text end

new text begin Subd. 17. new text end

new text begin Broker training. new text end

new text begin An individual licensed as a broker shall complete
on a biennial basis 15 hours of training related to life settlements and life settlement
transactions, as required by the commissioner; provided, however, that a life insurance
producer who is operating as a broker pursuant to this section shall not be subject to the
requirements of this subdivision. Any person failing to meet the requirements of this
subdivision shall be subject to the penalties imposed by the commissioner.
new text end

Sec. 4.

new text begin [60A.9574] LICENSE SUSPENSION, REVOCATION, OR REFUSAL
TO RENEW.
new text end

new text begin Subdivision 1. new text end

new text begin Generally. new text end

new text begin The commissioner may suspend, revoke, or refuse to
renew the license of any licensee if the commissioner finds that:
new text end

new text begin (1) there was any material misrepresentation in the application for the license;
new text end

new text begin (2) the licensee or any officer, partner, member, or director has been guilty of
fraudulent or dishonest practices, is subject to a final administrative action, or is otherwise
shown to be untrustworthy or incompetent to act as a licensee;
new text end

new text begin (3) the provider demonstrates a pattern of unreasonably withholding payments to
policy owners;
new text end

new text begin (4) the licensee no longer meets the requirements for initial licensure;
new text end

new text begin (5) the licensee or any officer, partner, member, or director has been convicted of
a felony, or of any misdemeanor of which criminal fraud is an element, or the licensee
has pleaded guilty or nolo contendere with respect to any felony or any misdemeanor of
which criminal fraud or moral turpitude is an element, regardless of whether a judgment
of conviction has been entered by the court;
new text end

new text begin (6) the provider has entered into any life settlement contract using a form that has
not been approved pursuant to sections 60A.957 to 60A.9587;
new text end

new text begin (7) the provider has failed to honor contractual obligations set out in a life settlement
contract;
new text end

new text begin (8) the provider has assigned, transferred, or pledged a settled policy to a person
other than a provider licensed in this state, a purchaser, an accredited investor, or qualified
institutional buyer as defined respectively in Regulation D, Rule 501 or Rule 144A of the
federal Securities Act of 1933, as amended, financing entity, special purpose entity, or
related provider trust; or
new text end

new text begin (9) the licensee or any officer, partner, member, or key management personnel has
violated any of the provisions of sections 60A.957 to 60A.9587.
new text end

new text begin Subd. 2. new text end

new text begin Hearing required. new text end

new text begin Before the commissioner denies a license application
or suspends, revokes, or refuses to renew the license of any licensee under sections
60A.957 to 60A.9587, the commissioner shall conduct a hearing in accordance with this
state's laws governing administrative hearings.
new text end

Sec. 5.

new text begin [60A.9575] CONTRACT REQUIREMENTS.
new text end

new text begin Subdivision 1. new text end

new text begin Filing and approval. new text end

new text begin No person may use any form of life
settlement contract in this state unless it has been filed with and approved, if required,
by the commissioner in a manner that conforms with the filing procedures and any time
restrictions or deeming provisions, if any, for life insurance forms, policies, and contracts.
new text end

new text begin Subd. 2. new text end

new text begin Disclosures, consents, waivers, or acknowledgments. new text end

new text begin No insurer may, as
a condition of responding to a request for verification of coverage or in connection with the
transfer of a policy pursuant to a life settlement contract, require that the owner, insured,
provider, or broker sign any form, disclosure, consent, waiver, or acknowledgment that
has not been expressly approved by the commissioner for use in connection with life
settlement contracts in this state.
new text end

new text begin Subd. 3. new text end

new text begin Disclosure statement; filing and approval. new text end

new text begin A person shall not use a
life settlement contract form or provide to an owner a disclosure statement form in
this state unless first filed with and approved by the commissioner. The commissioner
shall disapprove a life settlement contract form or disclosure statement form if, in the
commissioner's opinion, the contract or provisions contained therein fail to meet the
requirements of sections 60A.9578, 60A.9579, 60A.9581, and 60A.9585, subdivision 2,
or are unreasonable, contrary to the interests of the public, or otherwise misleading or
unfair to the owner. At the commissioner's discretion, the commissioner may require the
submission of advertising material.
new text end

Sec. 6.

new text begin [60A.9576] REPORTING REQUIREMENTS AND PRIVACY.
new text end

new text begin Subdivision 1. new text end

new text begin Annual statement. new text end

new text begin (a) For any policy settled within five years
of policy issuance, each provider shall file with the commissioner on or before March
1 of each year an annual statement containing such information as the commissioner
may prescribe by rule. In addition to any other requirements, the annual statement shall
specify the total number, aggregate face amount, and life settlement proceeds of policies
settled during the immediately preceding calendar year, together with a breakdown of the
information by policy issue year for each carrier.
new text end

new text begin (b) Such information shall be limited to only those transactions where the insured
is a resident of this state and shall not include individual transaction data regarding the
business of life settlements or information that there is a reasonable basis to believe could
be used to identify the owner or the insured.
new text end

new text begin (c) Every provider that willfully fails to file an annual statement as required in this
section, or willfully fails to reply within 30 days to a written inquiry by the commissioner
in connection therewith, shall, in addition to other penalties provided by this chapter, be
subject, upon due notice and opportunity to be heard, to a penalty of up to $250 per day of
delay, not to exceed $25,000 in the aggregate, for each such failure.
new text end

new text begin Subd. 2. new text end

new text begin Nondisclosure of identity; exceptions. new text end

new text begin Except as otherwise allowed or
required by law, a provider, broker, insurance company, insurance producer, information
bureau, rating agency or company, or any other person with actual knowledge of an
insured's identity, shall not disclose the identity of an insured or information that there is a
reasonable basis to believe could be used to identify the insured or the insured's financial
or medical information to any other person unless the disclosure:
new text end

new text begin (1) is necessary to effect a life settlement contract between the owner and a provider
and the owner and insured have provided prior written consent to the disclosure;
new text end

new text begin (2) is necessary to effectuate the sale of life settlement contracts, or interests therein,
as investments, provided the sale is conducted in accordance with applicable state and
federal securities law and provided further that the owner and the insured have both
provided prior written consent to the disclosure;
new text end

new text begin (3) is provided in response to an investigation or examination by the commissioner
or any other governmental officer or agency or pursuant to the requirements of section
60A.9583;
new text end

new text begin (4) is a term or condition to the transfer of a policy by one provider to another
provider, in which case the receiving provider shall be required to comply with the
confidentiality requirements of subdivision 2;
new text end

new text begin (5) is necessary to allow the provider, broker, or the provider's or broker's authorized
representatives to make contacts for the purpose of determining health status. For the
purposes of this section, the term authorized representative shall not include any person
who has or may have any financial interest in the settlement contract other than a provider,
licensed broker, financing entity, related provider trust, or special purpose entity; further,
a provider or broker shall require the provider's or broker's authorized representative to
agree in writing to adhere to the privacy provisions of sections 60A.957 to 60A.9587; or
new text end

new text begin (6) is required to purchase stop-loss coverage.
new text end

new text begin Subd. 3. new text end

new text begin Nonpublic personal information. new text end

new text begin Nonpublic personal information
solicited or obtained in connection with a proposed or actual life settlement contract
shall be subject to the provisions applicable to financial institutions under the federal
Gramm Leach Bliley Act, Public Law Number 106-102, and all other state and federal
laws relating to confidentiality of nonpublic personal information.
new text end

Sec. 7.

new text begin [60A.9577] EXAMINATION.
new text end

new text begin Subdivision 1. new text end

new text begin Generally. new text end

new text begin The commissioner may, when the commissioner deems it
reasonably necessary to protect the interests of the public, examine the business and affairs
of any licensee or applicant for a license. The commissioner may order any licensee or
applicant to produce any records, books, files, or other information reasonably necessary
to ascertain whether such licensee or applicant is acting or has acted in violation of the law
or otherwise contrary to the interests of the public. The expenses incurred in conducting
any examination shall be paid by the licensee or applicant.
new text end

new text begin Subd. 2. new text end

new text begin Examination reports. new text end

new text begin In lieu of an examination under sections 60A.957 to
60A.9587 of any foreign or alien licensee licensed in this state, the commissioner may, at
the commissioner's discretion, accept an examination report on the licensee as prepared by
the commissioner for the licensee's state of domicile or port-of-entry state.
new text end

new text begin Subd. 3. new text end

new text begin Classification of data. new text end

new text begin Names of and individual identification data, or for
all owners and insureds shall be considered private and confidential information and shall
not be disclosed by the commissioner unless required by law.
new text end

new text begin Subd. 4. new text end

new text begin Records retention. new text end

new text begin Records of all consummated transactions and life
settlement contracts shall be maintained by the provider for three years after the death of
the insured and shall be available to the commissioner for inspection during reasonable
business hours by the commissioner unless required by law.
new text end

new text begin Subd. 5. new text end

new text begin Conduct of examinations. new text end

new text begin (a) Upon determining that an examination
should be conducted, the commissioner shall issue an examination warrant appointing one
or more examiners to perform the examination and instructing them as to the scope of the
examination. In conducting the examination, the examiner shall use methods common
to the examination of any life settlement licensee and should use those guidelines and
procedures set forth in an examiners' handbook adopted by a national organization.
new text end

new text begin (b) Every licensee or person from whom information is sought, its officers, directors,
and agents shall provide to the examiners timely, convenient, and free access at all
reasonable hours at its offices to all books, records, accounts, papers, documents, assets,
and computers or other recordings relating to the property, assets, business, and affairs of
the licensee being examined. The officers, directors, employees, and agents of the licensee
or person shall facilitate the examination and aid in the examination so far as it is in
their power to do so. The refusal of a licensee, by its officers, directors, employees, or
agents to submit to examination or to comply with any reasonable written request of the
commissioner shall be grounds for suspension or refusal of, or nonrenewal of any license
or authority held by the licensee to engage in the life settlement business or other business
subject to the commissioner's jurisdiction. Any proceedings for suspension, revocation, or
refusal of any license or authority shall be conducted pursuant to chapter 14.
new text end

new text begin (c) The commissioner shall have the power to issue subpoenas, to administer oaths,
and to examine under oath any person as to any matter pertinent to the examination. Upon
the failure or refusal of a person to obey a subpoena, the commissioner may petition a
court of competent jurisdiction, and upon proper showing, the court may enter an order
compelling the witness to appear and testify or produce documentary evidence.
new text end

new text begin (d) When making an examination under sections 60A.957 to 60A.9587, the
commissioner may retain attorneys, appraisers, independent actuaries, independent
certified public accountants, or other professionals and specialists as examiners, the
reasonable cost of which shall be borne by the licensee that is the subject of the
examination.
new text end

new text begin (e) Nothing contained in sections 60A.957 to 60A.9587 shall be construed to limit
the commissioner's authority to terminate or suspend an examination in order to pursue
other legal or regulatory action pursuant to the insurance laws of this state. Findings of
fact and conclusions made pursuant to any examination shall be prima facie evidence
in any legal or regulatory action.
new text end

new text begin (f) Nothing contained in sections 60A.957 to 60A.9587 shall be construed to limit
the commissioner's authority to use and, if appropriate, to make public any final or
preliminary examination report, any examiner or licensee work papers or other documents,
or any other information discovered or developed during the course of any examination
in the furtherance of any legal or regulatory action which the commissioner may, in the
commissioner's sole discretion, deem appropriate.
new text end

new text begin Subd. 6. new text end

new text begin Examination reports. new text end

new text begin (a) Examination reports shall be comprised of
only facts appearing upon the books, from the testimony of its officers or agents or other
persons examined concerning its affairs, and such conclusions and recommendations as
the examiners find reasonably warranted from the facts.
new text end

new text begin (b) No later than 60 days following completion of the examination, the examiner
in charge shall file with the commissioner a verified written report of examination under
oath. Upon receipt of the verified report, the commissioner shall transmit the report to
the licensee examined, together with a notice that shall afford the licensee examined a
reasonable opportunity of not more than 30 days to make a written submission or rebuttal
with respect to any matters contained in the examination report and which shall become
part of the report or to request a hearing on any matter in dispute.
new text end

new text begin (c) In the event the commissioner determines that regulatory action is appropriate
as a result of an examination, the commissioner may initiate any proceedings or actions
provided by law.
new text end

new text begin Subd. 7. new text end

new text begin Confidentiality of examination information. new text end

new text begin (a) Names and individual
identification data for all owners, purchasers, and insureds shall be considered private
and confidential information and shall not be disclosed by the commissioner, unless the
disclosure is to another regulator or is required by law.
new text end

new text begin (b) Except as otherwise provided in sections 60A.957 to 60A.9587, all examination
reports, working papers, recorded information, documents, and copies thereof produced
by, obtained by, or disclosed to the commissioner or any other person in the course of an
examination made under sections 60A.957 to 60A.9587, or in the course of analysis
or investigation by the commissioner of the financial condition or market conduct of a
licensee shall be confidential by law and privileged, shall not be subject to chapter 13,
shall not be subject to subpoena, and shall not be subject to discovery or admissible in
evidence in any private civil action. The commissioner is authorized to use the documents,
materials, or other information in the furtherance of any regulatory or legal action brought
as part of the commissioner's official duties. The licensee being examined may have
access to all documents used to make the report.
new text end

new text begin Subd. 8. new text end

new text begin Conflict of interest. new text end

new text begin (a) An examiner may not be appointed by the
commissioner if the examiner, either directly or indirectly, has a conflict of interest or is
affiliated with the management of or owns a pecuniary interest in any person subject to
examination under sections 60A.957 to 60A.9587. This section shall not be construed to
automatically preclude an examiner from being:
new text end

new text begin (1) an owner;
new text end

new text begin (2) an insured in a life settlement contract or insurance policy; or
new text end

new text begin (3) a beneficiary in an insurance policy that is proposed for a life settlement contract.
new text end

new text begin (b) Notwithstanding the requirements of this subdivision, the commissioner
may retain from time to time, on an individual basis, qualified actuaries, certified
public accountants, or other similar individuals who are independently practicing their
professions, even though these persons may from time to time be similarly employed or
retained by persons subject to examination under sections 60A.957 to 60A.9587.
new text end

new text begin Subd. 9. new text end

new text begin Immunity from liability. new text end

new text begin (a) No cause of action shall arise nor shall
any liability be imposed against the commissioner, the commissioner's authorized
representatives, or any examiner appointed by the commissioner for any statements made
or conduct performed in good faith while carrying out the provisions of sections 60A.957
to 60A.9587.
new text end

new text begin (b) No cause of action shall arise, nor shall any liability be imposed, against any
person for the act of communicating or delivering information or data to the commissioner
or the commissioner's authorized representative or examiner pursuant to an examination
made under sections 60A.957 to 60A.9587, if the act of communication or delivery was
performed in good faith and without fraudulent intent or the intent to deceive. This
paragraph does not abrogate or modify in any way any common law or statutory privilege
or immunity heretofore enjoyed by any person identified in paragraph (a).
new text end

new text begin (c) A person identified in paragraph (a) or (b) shall be entitled to an award of
attorney's fees and costs if the person 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 sections 60A.957 to 60A.9587 and the party bringing the action was
not substantially justified in doing so. For 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.
new text end

new text begin Subd. 10. new text end

new text begin Investigative authority of the commissioner. new text end

new text begin The commissioner may
investigate suspected fraudulent life settlement acts and persons engaged in the business
of life settlements.
new text end

Sec. 8.

new text begin [60A.9578] ADVERTISING.
new text end

new text begin (a) A broker or provider licensed pursuant to sections 60A.957 to 60A.9587 may
conduct or participate in advertisements within this state. Such advertisements shall
comply with all advertising and marketing laws that are applicable to life insurers or to
brokers and providers licensed pursuant to sections 60A.957 to 60A.9587.
new text end

new text begin (b) Advertisements shall be accurate, truthful, and not misleading in fact or by
implication.
new text end

new text begin (c) No person or trust shall directly or indirectly, market, advertise, solicit, or
otherwise promote the purchase of a policy for the sole purpose of or with the primary
emphasis on settling the policy. However, it shall be permitted for any such person or trust
to advise a prospective owner that a life settlement is an available alternative transaction
to the owner in addition to policy surrender and/or policy retention.
new text end

Sec. 9.

new text begin [60A.9579] DISCLOSURE TO OWNERS.
new text end

new text begin Subdivision 1. new text end

new text begin Provider disclosures. new text end

new text begin The provider shall provide in writing, in a
separate document that is signed by the owner and provider, the following information to
the owner no later than the date the life settlement contract is signed by all parties:
new text end

new text begin (1) the fact that possible alternatives to life settlement contracts exist, including, but
not limited to, accelerated benefits offered by the issuer of the life insurance policy;
new text end

new text begin (2) the fact that some or all of the proceeds of a life settlement contract may be
taxable and that assistance should be sought from a professional tax advisor;
new text end

new text begin (3) the fact that the proceeds from a life settlement contract could be subject to
the claims of creditors;
new text end

new text begin (4) the fact that receipt of proceeds from a life settlement contract may adversely
affect the recipients' eligibility for public assistance or other government benefits or
entitlements and that advice should be obtained from the appropriate agencies;
new text end

new text begin (5) the fact that the owner has a right to terminate a life settlement contract within 15
days of the date it is executed by all parties and the owner has received the disclosures
contained herein. 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;
new text end

new text begin (6) the fact that proceeds will be sent to the owner within three business days after the
provider has received the insurer or group administrator's acknowledgment that ownership
of the policy or interest in the certificate has been transferred and the beneficiary has been
designated in accordance with the terms of the life settlement contract;
new text end

new text begin (7) the fact that entering into a life settlement contract may cause other rights or
benefits, including conversion rights and waiver of premium benefits that may exist under
the policy or certificate of a group policy to be forfeited by the owner and that assistance
should be sought from a professional financial advisor;
new text end

new text begin (8) the amount and method of calculating the compensation paid or to be paid to
the broker, or any other person acting for the owner in connection with the transaction,
wherein the term compensation includes anything of value paid or given;
new text end

new text begin (9) the date by which the funds will be available to the owner and the transmitter of
the funds;
new text end

new text begin (10) the fact that the commissioner shall require delivery of a buyer's guide or a
similar consumer advisory package in the form prescribed by the commissioner to owners
during the solicitation process;
new text end

new text begin (11) the disclosure document shall contain the following language: "all medical,
financial, or personal information solicited or obtained by a provider or broker about an
insured, including the insured's identity or the identity of family members, a spouse or
a significant other may be disclosed as necessary to effect the life settlement contract
between the owner and provider. If you are asked to provide this information, you will be
asked to consent to the disclosure. The information may be provided to someone who
buys the policy or provides funds for the purchase. You may be asked to renew your
permission to share information every two years";
new text end

new text begin (12) the fact that the commissioner shall require providers and brokers to print
separate signed fraud warnings on their applications and on their life settlement contracts
is as follows:
new text end

new text begin "Any person who knowingly presents false information in an application for
insurance or life settlement contract is guilty of a crime and may be subject to fines
and confinement in prison.";
new text end

new text begin (13) the fact that the insured may be contacted by either the provider or broker or
the provider's or broker's authorized representative for the purpose of determining the
insured's health status or to verify the insured's address. This contact is limited to once
every three months if the insured has a life expectancy of more than one year, and no more
than once per month if the insured has a life expectancy of one year or less;
new text end

new text begin (14) the affiliation, if any, between the provider and the issuer of the insurance
policy to be settled;
new text end

new text begin (15) that a broker represents exclusively the owner, and not the insurer or the
provider or any other person, and owes a fiduciary duty to the owner, including a duty to
act according to the owner's instructions and in the best interest of the owner;
new text end

new text begin (16) the document shall include the name, address, and telephone number of the
provider;
new text end

new text begin (17) the name, business address, and telephone number of the independent
third-party escrow agent, and the fact that the owner may inspect or receive copies of the
relevant escrow or trust agreements or documents; and
new text end

new text begin (18) the fact that a change of ownership could in the future limit the insured's ability
to purchase future insurance on the insured's life because there is a limit to how much
coverage insurers will issue on one life.
new text end

new text begin Subd. 2. new text end

new text begin Display. new text end

new text begin The written disclosures shall be conspicuously displayed in any
life settlement contract furnished to the owner by a provider including any affiliations or
contractual arrangements between the provider and the broker.
new text end

new text begin Subd. 3. new text end

new text begin Broker disclosures. new text end

new text begin A broker shall provide the owner and the provider
with at least the following disclosures no later than the date the life settlement contract
is signed by all parties. The disclosures shall be conspicuously displayed in the life
settlement contract or in a separate document signed by the owner and provide the
following information:
new text end

new text begin (1) the name, business address, and telephone number of the broker;
new text end

new text begin (2) a full, complete, and accurate description of all the offers, counteroffers,
acceptances, and rejections relating to the proposed life settlement contract;
new text end

new text begin (3) a written disclosure of any affiliations or contractual arrangements between the
broker and any person making an offer in connection with the proposed life settlement
contracts;
new text end

new text begin (4) the name of each broker who receives compensation and the amount of
compensation received by that broker, which compensation includes anything of value
paid or given to the broker in connection with the life settlement contract;
new text end

new text begin (5) a complete reconciliation of the gross offer or bid by the provider to the net
amount of proceeds or value to be received by the owner. For the purpose of this section,
gross offer or bid shall mean the total amount or value offered by the provider for the
purchase of one or more life insurance policies, inclusive of commissions and fees; and
new text end

new text begin (6) the failure to provide the disclosures or rights described in this section shall be
deemed an unfair trade practice pursuant to section 60A.9587.
new text end

Sec. 10.

new text begin [60A.958] DISCLOSURE BY INSURER.
new text end

new text begin Subdivision 1. new text end

new text begin Premium payment financing. new text end

new text begin In addition to other questions an
insurance carrier may lawfully pose to a life insurance applicant, insurance carriers
may inquire in the application for insurance whether the proposed owner intends to
pay premiums with the assistance of financing from a lender that will use the policy as
collateral to support the financing.
new text end

new text begin If, as described in section 60A.9572, subdivision 13, the loan provides funds which
can be used for a purpose other than paying for the premiums, costs, and expenses
associated with obtaining and maintaining the life insurance policy and loan, the
application shall be rejected as a violation of the prohibited practices in section 60A.9583.
new text end

new text begin If the financing does not violate 60A.9583 in this manner, the insurance carrier:
new text end

new text begin (1) may make disclosures, including but not limited to such as the following, to the
applicant and the insured, either on the application or an amendment to the application
to be completed no later than the delivery of the policy:
new text end

new text begin "If you have entered into a loan arrangement where the policy is used as collateral,
and the policy does change ownership at some point in the future in satisfaction
of the loan, the following may be true:
new text end

new text begin (i) a change of ownership could lead to a stranger owning an interest in the insured's
life;
new text end

new text begin (ii) a change of ownership could in the future limit your ability to purchase future
insurance on the insured's life because there is a limit to how much coverage insurers
will issue on one life;
new text end

new text begin (iii) should there be a change of ownership and you wish to obtain more insurance
coverage on the insured's life in the future, the insured's higher issue age, a change
in health status, and/or other factors may reduce the ability to obtain coverage and/or
may result in significantly higher premiums;
new text end

new text begin (iv) you should consult a professional advisor, since a change in ownership in
satisfaction of the loan may result in tax consequences to the owner, depending on
the structure of the loan"; and
new text end

new text begin (2) may require certifications, such as the following, from the applicant and the
insured:
new text end

new text begin (i) "I have not entered into any agreement or arrangement providing for the future
sale of this life insurance policy";
new text end

new text begin (ii) "My loan arrangement for this policy provides funds sufficient to pay for some or
all of the premiums, costs, and expenses associated with obtaining and maintaining
my life insurance policy, but I have not entered into any agreement by which I am to
receive consideration in exchange for procuring this policy"; and
new text end

new text begin (iii) "The borrower has an insurable interest in the insured."
new text end

new text begin Subd. 2. new text end

new text begin Notice of alternative transaction. new text end

new text begin With respect to each policy issued by
an insurance company, the insurance company shall send written notice to the owner of an
individual life insurance policy, or a certificate holder under a group life insurance policy,
where the insured person under such policy is age 60 or older or is known to be terminally
ill or chronically ill, that a life settlement is an available alternative transaction to such
owner at the time of each of the following:
new text end

new text begin (1) when a life insurance company receives from such owner a request to surrender,
in whole or in part, an individual life insurance policy, or a certificate under a group
life insurance policy;
new text end

new text begin (2) when a life insurance company receives from such owner a request to receive
an accelerated death benefit under an individual life insurance policy, or a certificate
under a group life insurance policy;
new text end

new text begin (3) when a life insurance company receives from such owner a request to collaterally
assign an individual life insurance policy, or a certificate under a group life insurance
policy as security for a loan;
new text end

new text begin (4) when a life insurance company sends to such owner a notice of lapse of an
individual life insurance policy, or a certificate under a group life insurance policy; or
new text end

new text begin (5) or at any other time that the commissioner may require by rule or regulation.
new text end

Sec. 11.

new text begin [60A.9581] LIFE SETTLEMENT CONTRACTS; GENERAL RULES.
new text end

new text begin Subdivision 1. new text end

new text begin Life settlement contracts. new text end

new text begin 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:
new text end

new text begin (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
new text end

new text begin (2) a document in which the insured consents to the release of the insured's medical
records to a provider, settlement broker, or insurance producer and, if the policy was
issued less than two years from the date of application for a settlement contract, to the
insurance company that issued the policy.
new text end

new text begin Subd. 2. new text end

new text begin Request for verification of coverage. new text end

new text begin The insurer shall respond to a
request for verification of coverage submitted by a provider, settlement broker, or life
insurance producer not later than 30 calendar days of 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.
new text end

new text begin Subd. 3. new text end

new text begin Owner's consent. new text end

new text begin 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.
new text end

new text begin Subd. 4. new text end

new text begin Unreasonable delay in change of ownership or beneficiary. new text end

new text begin 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.
new text end

new text begin Subd. 5. new text end

new text begin Alternative compliance. new text end

new text begin (a) 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 section.
new text end

new text begin (b) If a broker performs those verification of coverage activities required of the
provider, the provider is deemed to have fulfilled the requirements of section 60A.9579,
subdivision 1.
new text end

new text begin Subd. 6. new text end

new text begin Notice that policy subject to life settlement contracts. new text end

new text begin Within 20 days
after an owner executes the life settlement contract, the provider shall give written notice
to the insurer that issued the insurance policy that the policy has become subject to a
life settlement contract. The notice shall be accompanied by the documents required by
section 60A.958, subdivision 1, clause (1).
new text end

new text begin Subd. 7. new text end

new text begin Confidentiality of medical information. new text end

new text begin 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 sections
60A.957 to 60A.9587.
new text end

new text begin Subd. 8. new text end

new text begin Rescission. new text end

new text begin All life settlement contracts entered into in this state shall
provide that the owner may rescind the contract on or before 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.
new text end

new text begin Subd. 9. new text end

new text begin Settlement proceeds. new text end

new text begin Within three 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 acknowledgment 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 business days of acknowledgment
of the transfer from the insurer.
new text end

new text begin Subd. 10. new text end

new text begin Failure to tender proceeds. new text end

new text begin 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 30 days after the written notice of the right of
rescission has been given.
new text end

new text begin Subd. 11. new text end

new text begin Fee computation. new text end

new text begin 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.
new text end

new text begin Subd. 12. new text end

new text begin Broker's disclosure. new text end

new text begin The broker shall disclose to the owner anything of
value paid or given to a broker which relates to a life settlement contract.
new text end

new text begin Subd. 13. new text end

new text begin Prohibition; entry into life settlement contract. new text end

new text begin 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
period commencing with the date of issuance of the policy, shall enter into a life settlement
contract 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:
new text end

new text begin (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 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;
new text end

new text begin (2) the owner submits independent evidence to the provider that one or more of the
following conditions have been met within the two-year period:
new text end

new text begin (i) the owner or insured is terminally or chronically ill;
new text end

new text begin (ii) the owner or insured disposes of his 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;
new text end

new text begin (iii) the owner's spouse dies;
new text end

new text begin (iv) the owner divorces the owner's spouse;
new text end

new text begin (v) the owner retires from full-time employment;
new text end

new text begin (vi) the owner becomes physically or mentally disabled and a physician determines
that the disability prevents the owner from maintaining full-time employment; or
new text end

new text begin (vii) 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;
new text end

new text begin (3) copies of the independent evidence required by clause (2) 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; and
new text end

new text begin (4) if the provider submits to the insurer a copy of independent evidence provided
for in clause (2), item (i), 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.
new text end

Sec. 12.

new text begin [60A.9582] AUTHORITY TO ADOPT RULES; CONFLICT OF LAWS.
new text end

new text begin Subdivision 1. new text end

new text begin Rulemaking. new text end

new text begin The commissioner may adopt rules implementing
sections 60A.957 to 60A.9587 and regulating the activities and relationships of providers,
brokers, insurers, and agents, subject to statutory limitations on administrative rulemaking.
new text end

new text begin Subd. 2. new text end

new text begin Conflict of laws. new text end

new text begin (a) If there is more than one owner on a single policy, and
the owners are residents of different states, the life settlement contract shall be governed
by the law of the state in which the owner having the largest percentage ownership resides
or, if the owners hold equal ownership, the state of residence of one owner agreed upon
in writing by all of the owners. The law of the state of the insured shall govern in the
event that equal owners fail to agree in writing upon a state of residence for jurisdictional
purposes.
new text end

new text begin (b) A provider from this state who enters into a life settlement contract with an
owner who is a resident of another state that has enacted statutes or adopted regulations
governing life settlement contracts shall be governed in the effectuation of that life
settlement contract by the statutes and regulations of the owner's state of residence. If the
state in which the owner is a resident has not enacted statutes or regulations governing life
settlement contracts, the provider shall give the owner notice that neither state regulates
the transaction upon which the owner is entering. For transactions in those states, however,
the provider is to maintain all records required if the transactions were executed in the
state of residence. The forms used in those states need not be approved by the department.
new text end

new text begin (c) If there is a conflict in the laws that apply to an owner and a purchaser in any
individual transaction, the laws of the state that apply to the owner shall take precedence
and the provider shall comply with those laws.
new text end

Sec. 13.

new text begin [60A.9583] PROHIBITED PRACTICES.
new text end

new text begin It is unlawful for any person to:
new text end

new text begin (1) enter into a life settlement contract if such person knows or reasonably should
have known that the life insurance policy was obtained by means of a false, deceptive,
or misleading application for such policy;
new text end

new text begin (2) engage in any transaction, practice, or course of business if such person knows
or reasonably should have known that the intent was to avoid the notice requirements
of this section;
new text end

new text begin (3) engage in any fraudulent act or practice in connection with any transaction
relating to any settlement involving an owner who is a resident of this state;
new text end

new text begin (4) issue, solicit, market, or otherwise promote the purchase of an insurance policy
for the purpose of or with an emphasis on settling the policy;
new text end

new text begin (5) enter into a life settlement contract on a policy that was the subject of a premium
finance agreement as described in section 60A.9572, subdivision 13, paragraph (b),
clause (2);
new text end

new text begin (6) with respect to any settlement contract or insurance policy and a broker,
knowingly solicit an offer from, effectuate a life settlement contract with, or make a sale to
any provider, financing entity, or related provider trust that is controlling, controlled by, or
under common control with such broker unless the relationship is disclosed to the owner;
new text end

new text begin (7) with respect to any life settlement contract or insurance policy and a provider,
knowingly enter into a life settlement contract with a owner, if, in connection with such
life settlement contract, anything of value will be paid to a broker that is controlling,
controlled by, or under common control with such provider or the financing entity or
related provider trust that is involved in such settlement contract unless the relationship is
disclosed to the owner;
new text end

new text begin (8) with respect to a provider, enter into a life settlement contract unless the life
settlement promotional, advertising, and marketing materials, as may be prescribed by
regulation, have been filed with the commissioner. In no event shall any marketing
materials expressly reference that the insurance is "free" for any period of time. The
inclusion of any reference in the marketing materials that would cause an owner to
reasonably believe that the insurance is free for any period of time shall be considered a
violation of this act;
new text end

new text begin (9) with respect to any life insurance producer, insurance company, broker, or
provider, make any statement or representation to the applicant or policyholder in
connection with the sale or financing of a life insurance policy to the effect that the
insurance is free or without cost to the policyholder for any period of time unless provided
in the policy; or
new text end

new text begin (10) if an insurer, to:
new text end

new text begin (i) prohibit, restrict, limit, or impair a life insurance producer from lawfully
negotiating a life settlement contract on behalf of an owner, aiding and assisting an owner
with a life settlement contract, or otherwise participating in a life settlement transaction
under sections 60A.157 to 60A.9587;
new text end

new text begin (ii) engage in or permit any discrimination between individuals of the same class,
same policy amount, and equal expectation of life in the rates charged for any life
insurance policy or annuity contract based upon an individual's having entered into a life
settlement contract or being insured under a settled policy;
new text end

new text begin (iii) make any false or misleading statement as to the business of life settlements or
financing premiums due for a policy or to any owner or insured for the purpose of inducing
or tending to induce the owner or insured not to enter into a life settlement contract; or
new text end

new text begin (iv) engage in any transaction, act, practice or course of business or dealing
which restricts, limits or impairs in any way the lawful transfer of ownership, change
of beneficiary, or assignment of a policy.
new text end

Sec. 14.

new text begin [60A.9584] FRAUD PREVENTION AND CONTROL.
new text end

new text begin Subdivision 1. new text end

new text begin Fraudulent life settlement acts, interference and participation of
convicted felons prohibited. new text end

new text begin (a) A person shall not commit a fraudulent life settlement
act.
new text end

new text begin (b) A person shall not knowingly and intentionally interfere with the enforcement of
the provisions of sections 60A.957 to 60A.9587 or investigations of suspected or actual
violations of sections 60A.957 to 60A.9587.
new text end

new text begin (c) A person in the business of life settlements shall not knowingly or intentionally
permit any person convicted of a felony involving dishonesty or breach of trust to
participate in the business of life settlements.
new text end

new text begin Subd. 2. new text end

new text begin Fraud warning required. new text end

new text begin (a) Life settlement contracts and applications
for life settlement contracts, regardless of the form of transmission, shall contain the
following statement or a substantially similar statement:
new text end

new text begin "Any person who knowingly presents false information in an application for
insurance or life settlement contract is guilty of a crime and may be subject to fines
and confinement in prison."
new text end

new text begin (b) The lack of a statement as required in paragraph (a) does not constitute a defense
in any prosecution for a fraudulent life settlement act.
new text end

new text begin Subd. 3. new text end

new text begin Mandatory reporting of fraudulent life settlement acts. new text end

new text begin (a) Any person
engaged in the business of life settlements having knowledge or a reasonable belief that
a fraudulent life settlement act is being, will be, or has been committed shall provide
to the commissioner the information required by, and in a manner prescribed by, the
commissioner.
new text end

new text begin (b) 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
the information required by, and in a manner prescribed by, the commissioner.
new text end

new text begin Subd. 4. new text end

new text begin Immunity from liability. new text end

new text begin (a) 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:
new text end

new text begin (1) the commissioner or the commissioner's employees, agents, or representatives;
new text end

new text begin (2) federal, state, or local law enforcement or regulatory officials or their employees,
agents, or representatives;
new text end

new text begin (3) a person involved in the prevention and detection of fraudulent life settlement
acts or that person's agents, employees, or representatives;
new text end

new text begin (4) any regulatory body or their employees, agents, or representatives, overseeing
life insurance, life settlements, securities, or investment fraud;
new text end

new text begin (5) the life insurer that issued the life insurance policy covering the life of the
insured; or
new text end

new text begin (6) the licensee and any agents, employees, or representatives.
new text end

new text begin (b) Paragraph (a) 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 or a fraudulent insurance act, the party bringing the action
shall plead specifically any allegation that paragraph (a) does not apply because the person
filing the report or furnishing the information did so with actual malice.
new text end

new text begin (c) A person identified in paragraph (a) shall be entitled to an award of attorney's
fees and costs if the person 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 sections 60A.957 to 60A.9587 and the party bringing the action was not substantially
justified in doing so. For 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.
new text end

new text begin (d) This section does not abrogate or modify common law or statutory privileges or
immunities enjoyed by a person described in paragraph (a).
new text end

new text begin Subd. 5. new text end

new text begin Confidentiality. new text end

new text begin (a) The documents and evidence provided pursuant to
subdivision 4 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 a civil or criminal action.
new text end

new text begin (b) Paragraph (a) does not prohibit release by the commissioner of documents and
evidence obtained in an investigation of suspected or actual fraudulent life settlement acts:
new text end

new text begin (1) in administrative or judicial proceedings to enforce laws administered by the
commissioner;
new text end

new text begin (2) to federal, state, or local law enforcement or regulatory agencies, to an
organization established for the purpose of detecting and preventing fraudulent life
settlement acts or to the National Association of Insurance Commissioners; or
new text end

new text begin (3) at the discretion of the commissioner, to a person in the business of life
settlements that is aggrieved by a fraudulent life settlement act.
new text end

new text begin (c) Release of documents and evidence under paragraph (b) does not abrogate or
modify the privilege granted in paragraph (a).
new text end

new text begin Subd. 6. new text end

new text begin Other law enforcement or regulatory authority. new text end

new text begin Sections 60A.957 to
60A.9587 shall not:
new text end

new text begin (1) preempt the authority or relieve the duty of other law enforcement or regulatory
agencies to investigate, examine, and prosecute suspected violations of law;
new text end

new text begin (2) preempt, supersede, or limit any provision of any state securities law or any rule,
order, or notice issued thereunder;
new text end

new text begin (3) prevent or prohibit a person from disclosing voluntarily information concerning
life settlement fraud to a law enforcement or regulatory agency other than the insurance
department; or
new text end

new text begin (4) 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.
new text end

new text begin Subd. 7. new text end

new text begin Life settlement antifraud initiatives. new text end

new text begin (a) Providers and brokers shall
have in place antifraud initiatives reasonably calculated to detect, prosecute, and prevent
fraudulent life settlement acts. At the discretion of the commissioner, the commissioner
may order, or a licensee may request and the commissioner may grant, such modifications
of the following required initiatives 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.
Antifraud initiatives shall include:
new text end

new text begin (1) fraud investigators, who may be provider or broker employees or independent
contractors; and
new text end

new text begin (2) an antifraud plan, which shall be submitted to the commissioner.
new text end

new text begin (b) The antifraud plan shall include, but not be limited to:
new text end

new text begin (1) 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;
new text end

new text begin (2) a description of the procedures for reporting possible fraudulent life settlement
acts to the commissioner;
new text end

new text begin (3) a description of the plan for antifraud education and training of underwriters
and other personnel; and
new text end

new text begin (4) 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.
new text end

new text begin (c) Antifraud plans submitted to the commissioner are privileged and confidential,
are not a public record, and are not subject to discovery or subpoena in a civil or criminal
action.
new text end

Sec. 15.

new text begin [60A.9586] PENALTIES.
new text end

new text begin (a) It is a violation of sections 60A.957 to 60A.9587 for any person, provider,
broker, or any other party related to the business of life settlements to commit a fraudulent
life settlement act.
new text end

new text begin (b) For criminal liability purposes, a person that commits a fraudulent life settlement
act is guilty of committing insurance fraud and shall be subject to additional penalties
under sections 60A.951 to 60A.956.
new text end

new text begin (c) The commissioner shall be empowered to levy a civil penalty not exceeding
$1,000 and the amount of the claim for each violation upon any person, including those
persons and their employees licensed pursuant to sections 60A.957 to 60A.9587, who is
found to have committed a fraudulent life settlement act or violated any other provision of
sections 60A.957 to 60A.9587.
new text end

new text begin (d) The license of a person licensed under sections 60A.957 to 60A.9587 that
commits a fraudulent life settlement act shall be revoked for a period of at least one year.
new text end

Sec. 16.

new text begin [60A.9587] UNFAIR TRADE PRACTICES.
new text end

new text begin A violation of sections 60A.957 to 60A.9586 shall be considered an unfair trade
practice pursuant to state law and subject to the penalties provided by state law.
new text end

Sec. 17. new text begin EFFECTIVE DATE.
new text end

new text begin (a) A provider lawfully transacting business in this state prior to the effective date of
this act may continue to do so pending approval or disapproval of that person's application
for a license as long as the application is filed with the commissioner not later than 30 days
after publication by the commissioner of an application form and instructions for licensure
of providers. If the publication of the application form and instructions is prior to the
effective date of this act, then the filing of the application shall not be later than 30 days
after the effective date of this act. During the time that such an application is pending with
the commissioner, the applicant may use any form of life settlement contract that has been
filed with the commissioner pending approval thereof, provided that such form is otherwise
in compliance with the provisions of this act. Any person transacting business in this state
under this provision shall be obligated to comply with all other requirements of this act.
new text end

new text begin (b) A person who has lawfully negotiated life settlement contracts between any
owner residing in this state and one or more providers for at least one year immediately
prior to the effective date of this act may continue to do so pending approval or
disapproval of that person's application for a license as long as the application is filed
with the commissioner not later than 30 days after publication by the commissioner of
an application form and instructions for licensure of brokers. If the publication of the
application form and instructions is prior to the effective date of this chapter, then the
filing of the application shall not be later than 30 days after the effective date of this act.
Any person transacting business in this state under this provision shall be obligated to
comply with all other requirements of this act.
new text end

Sec. 18. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2006, sections 60A.961; 60A.962; 60A.963; 60A.964; 60A.965;
60A.966; 60A.967; 60A.968; 60A.969; 60A.970; 60A.971; 60A.972; 60A.973; and
60A.974, new text end new text begin are repealed.
new text end

Sec. 19. new text begin EFFECTIVE DATE.
new text end

new text begin This act is effective January 1, 2009, and applies to policies issued on or after that
date.
new text end