1.1                          A bill for an act 
  1.2             relating to insurance; life; regulating living 
  1.3             benefits settlements; adopting the NAIC viatical 
  1.4             settlements model act; prescribing powers and duties; 
  1.5             amending Minnesota Statutes 1994, section 13.71, by 
  1.6             adding a subdivision; proposing coding for new law in 
  1.7             Minnesota Statutes, chapter 60A. 
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  Minnesota Statutes 1994, section 13.71, is 
  1.10  amended by adding a subdivision to read: 
  1.11     Subd. 18.  [VIATICAL SETTLEMENTS DATA.] Viatical 
  1.12  settlements data provided to the commissioner of commerce is 
  1.13  classified under section 60A.968, subdivision 2. 
  1.14     Sec. 2.  [60A.961] [DEFINITIONS.] 
  1.15     Subdivision 1.  [APPLICATION.] For the purposes of sections 
  1.16  60A.961 to 60A.973, the definitions in this section have the 
  1.17  meanings given them. 
  1.18     Subd. 2.  [PERSON.] "Person" means a natural or artificial 
  1.19  entity, including individuals, partnerships, associations, 
  1.20  trusts, limited liability companies, or corporations. 
  1.21     Subd. 3.  [VIATICAL SETTLEMENT BROKER.] "Viatical 
  1.22  settlement broker" means an individual, partnership, limited 
  1.23  liability company, corporation, or other entity who or which for 
  1.24  another and for a fee, commission, or other valuable 
  1.25  consideration, offers or advertises the availability of viatical 
  1.26  settlements, introduces viators to viatical settlement 
  2.1   providers, or offers or attempts to negotiate viatical 
  2.2   settlements between a viator and one or more viatical settlement 
  2.3   providers.  "Viatical settlement broker" does not include an 
  2.4   attorney, accountant, or financial planner retained to represent 
  2.5   the viator whose compensation is not paid by the viatical 
  2.6   settlement provider. 
  2.7      Subd. 4.  [VIATICAL SETTLEMENT CONTRACT.] "Viatical 
  2.8   settlement contract" means a written agreement entered into 
  2.9   between a viatical settlement provider and a person owning a 
  2.10  life insurance policy or who owns or is covered under a group 
  2.11  policy insuring the life of a person who has a catastrophic or 
  2.12  life threatening illness or condition.  The agreement must 
  2.13  establish the terms under which the viatical settlement provider 
  2.14  will pay compensation or anything of value, which compensation 
  2.15  or value is less than the expected death benefit of the 
  2.16  insurance policy or certificate, in return for the policy 
  2.17  owner's assignment, transfer, sale, devise, or bequest of the 
  2.18  death benefit or ownership of the insurance policy or 
  2.19  certificate to the viatical settlement provider. 
  2.20     Subd. 5.  [VIATICAL SETTLEMENT PROVIDER.] "Viatical 
  2.21  settlement provider" means an individual, partnership, limited 
  2.22  liability company, corporation, or other entity that enters into 
  2.23  an agreement with a person owning a life insurance policy or who 
  2.24  owns or is covered under a group policy insuring the life of a 
  2.25  person who has a catastrophic or life threatening illness or 
  2.26  condition, under the terms of which the viatical settlement 
  2.27  provider pays compensation or anything of value, which 
  2.28  compensation or value is less than the expected death benefit of 
  2.29  the insurance policy or certificate, in return for the policy 
  2.30  owner's assignment, transfer, sale, devise, or bequest of the 
  2.31  death benefit or ownership of the insurance policy or 
  2.32  certificate to the viatical settlement provider.  Viatical 
  2.33  settlement provider does not include: 
  2.34     (1) a bank, savings bank, savings association, credit 
  2.35  union, or other licensed lending institution that takes an 
  2.36  assignment of a life insurance policy as collateral for a loan; 
  3.1      (2) the issuer of a life insurance policy providing 
  3.2   accelerated benefits under section 61A.072; or 
  3.3      (3) a natural person who enters into no more than one 
  3.4   agreement in a calendar year for the transfer of life insurance 
  3.5   policies for any value less than the expected death benefit. 
  3.6      Subd. 6.  [VIATOR.] "Viator" means the owner or certificate 
  3.7   holder of a life insurance policy insuring the life of a person 
  3.8   with a catastrophic or life threatening illness or condition who 
  3.9   enters into an agreement under which the viatical settlement 
  3.10  provider will pay compensation or anything of value, which 
  3.11  compensation or value is less than the expected death benefit of 
  3.12  the insurance policy or certificate, in return for the viator's 
  3.13  assignment, transfer, sale, devise, or bequest of the death 
  3.14  benefit or ownership of the insurance policy or certificate to 
  3.15  the viatical settlement provider. 
  3.16     Sec. 3.  [60A.962] [LICENSE REQUIREMENTS.] 
  3.17     Subdivision 1.  [LICENSE.] No individual, partnership, 
  3.18  limited liability company, corporation, or other entity may act 
  3.19  as a viatical settlement provider or enter into or solicit a 
  3.20  viatical settlement contract without first having obtained a 
  3.21  license from the commissioner of commerce. 
  3.22     Subd. 2.  [FORM.] An applicant for a viatical settlement 
  3.23  provider license shall submit an application to the commissioner 
  3.24  of commerce on a form prescribed by the commissioner. 
  3.25     Subd. 3.  [CONTENTS.] The applicant shall provide 
  3.26  information that the commissioner requires on forms prepared by 
  3.27  the commissioner.  The commissioner may, at any time, require 
  3.28  the applicant to fully disclose the identity of all 
  3.29  shareholders, members, partners, officers, and employees.  The 
  3.30  commissioner may, in the exercise of discretion, refuse to issue 
  3.31  a license in the name of a firm, partnership, limited liability 
  3.32  company, or corporation if not satisfied that an officer, 
  3.33  employee, shareholder, member, or partner who may materially 
  3.34  influence the applicant's conduct meets the requirements of 
  3.35  sections 60A.961 to 60A.973. 
  3.36     Subd. 4.  [NAMED PERSONS.] A license issued to a 
  4.1   partnership, limited liability company, corporation, or other 
  4.2   entity authorizes all members, officers, partners, and 
  4.3   designated employees to act as viatical settlement providers 
  4.4   under the license, and all those persons must be named in the 
  4.5   application and any supplements to the application. 
  4.6      Subd. 5.  [INVESTIGATION.] Upon the filing of an 
  4.7   application and the payment of the license fee, the commissioner 
  4.8   shall investigate each applicant and may issue a license if the 
  4.9   commissioner finds that the applicant: 
  4.10     (1) has provided a detailed plan of operation; 
  4.11     (2) is competent and trustworthy and intends to act in good 
  4.12  faith in the capacity involved in the license applied for; 
  4.13     (3) has a good business reputation and has had experience, 
  4.14  training, or education so as to be qualified in the business for 
  4.15  which the license is applied for; and 
  4.16     (4) if a corporation, is a corporation incorporated under 
  4.17  the laws of this state or a foreign corporation authorized to 
  4.18  transact business in this state. 
  4.19     Sec. 4.  [60A.963] [SERVICE OF PROCESS; NONRESIDENT 
  4.20  LICENSING.] 
  4.21     Subdivision 1.  [LICENSE.] A nonresident of this state may 
  4.22  be licensed as a viatical settlement provider upon compliance 
  4.23  with all provisions of sections 60A.961 to 60A.973. 
  4.24     Subd. 2.  [SERVICE OF PROCESS.] Section 45.028 applies to 
  4.25  service of process upon a viatical settlement provider. 
  4.26     Sec. 5.  [60A.964] [FEES.] 
  4.27     Subdivision 1.  [AMOUNT.] The licensing fee for a viatical 
  4.28  settlement provider license is $750 for initial licensure and 
  4.29  $250 for each annual renewal.  The commissioner may adjust the 
  4.30  fees as provided under section 16A.1285 to recover the costs of 
  4.31  administration and enforcement.  The fees must be limited to the 
  4.32  cost of license administration and enforcement and must be 
  4.33  deposited in the state treasury, credited to the general fund, 
  4.34  and appropriated to the commissioner. 
  4.35     Subd. 2.  [AUTOMATIC REVOCATION.] A license is 
  4.36  automatically revoked for failure to pay the licensing fee 
  5.1   within the terms prescribed by the commissioner. 
  5.2      Sec. 6.  [60A.965] [LICENSE REVOCATION.] 
  5.3      Subdivision 1.  [REVOCATION.] The commissioner may suspend, 
  5.4   revoke, or refuse to renew the license of a viatical settlement 
  5.5   provider if the commissioner finds that: 
  5.6      (1) there was any misrepresentation in the application for 
  5.7   the license; 
  5.8      (2) the holder of the license has been found guilty of 
  5.9   fraudulent or dishonest practices, is subject to a final 
  5.10  administrative action or is otherwise shown to be untrustworthy 
  5.11  or incompetent to act as a viatical settlement provider; 
  5.12     (3) the licensee demonstrates a pattern of unreasonable 
  5.13  payments to policy owners; 
  5.14     (4) the licensee has been convicted of a felony or a 
  5.15  misdemeanor of which criminal fraud is an element; or 
  5.16     (5) the licensee has violated any of the provisions of 
  5.17  sections 60A.961 to 60A.973. 
  5.18     Subd. 2.  [ADMINISTRATIVE ACTION.] Section 45.027 applies 
  5.19  to any action taken by the commissioner in connection with the 
  5.20  administration of sections 60A.961 to 60A.973. 
  5.21     Sec. 7.  [60A.966] [APPROVAL OF VIATICAL SETTLEMENTS 
  5.22  CONTRACTS.] 
  5.23     A viatical settlement provider may not use a viatical 
  5.24  settlement contract form in this state unless it has been filed 
  5.25  with and approved by the commissioner.  A viatical settlement 
  5.26  contract form filed with the commissioner is considered to have 
  5.27  been approved if it has not been disapproved within 60 days of 
  5.28  the filing.  The commissioner shall disapprove a viatical 
  5.29  settlement contract form if, in the commissioner's opinion, the 
  5.30  contract or contract provisions are unreasonable, contrary to 
  5.31  the interests of the public, or otherwise misleading or unfair 
  5.32  to the policy owner.  
  5.33     Sec. 8.  [60A.967] [REPORTING REQUIREMENTS.] 
  5.34     Each licensee shall file with the commissioner on or before 
  5.35  March 1 of each year an annual statement containing the 
  5.36  following information: 
  6.1      (1) for each policy viaticated, the date that the viatical 
  6.2   settlement was entered into; the life expectancy of the viator 
  6.3   at the time of the contract; the face amount of the policy; the 
  6.4   amount paid by the viatical settlement provider to viaticate the 
  6.5   policy; and if the viator has died, the date of death and the 
  6.6   total insurance premiums paid by the viatical settlement 
  6.7   provider to maintain the policy in force; 
  6.8      (2) a breakdown of applications received, accepted, and 
  6.9   rejected, by disease category; 
  6.10     (3) a breakdown of policies viaticated by issuer and policy 
  6.11  type; 
  6.12     (4) the number of secondary market versus primary market 
  6.13  transactions; 
  6.14     (5) the portfolio size; and 
  6.15     (6) the amount of outside borrowings. 
  6.16     Sec. 9.  [60A.968] [EXAMINATION.] 
  6.17     Subdivision 1.  [AUTHORIZATION.] The commissioner may, when 
  6.18  the commissioner considers it reasonably necessary to protect 
  6.19  the interests of the public, examine the business and affairs of 
  6.20  a licensee or applicant for a license.  The commissioner may 
  6.21  order a licensee or applicant to produce records, books, files, 
  6.22  or other information reasonably necessary to determine whether 
  6.23  or not the licensee or applicant is acting or has acted in 
  6.24  violation of the law or otherwise contrary to the interests of 
  6.25  the public.  The licensee or applicant shall pay the expenses 
  6.26  incurred in conducting an examination. 
  6.27     Subd. 2.  [PRIVATE DATA.] Names and individual 
  6.28  identification data for all viators is private information and 
  6.29  must not be disclosed by the commissioner, unless required by 
  6.30  law. 
  6.31     Subd. 3.  [RECORDS.] The licensee shall maintain records of 
  6.32  all transactions of viatical settlement contracts and shall make 
  6.33  them available to the commissioner for inspection during 
  6.34  reasonable business hours. 
  6.35     Sec. 10.  [60A.969] [DISCLOSURE.] 
  6.36     A viatical settlement provider shall disclose the following 
  7.1   information to the viator no later than the date the viatical 
  7.2   settlement contract is signed by all parties: 
  7.3      (1) possible alternatives to viatical settlement contracts 
  7.4   for persons with catastrophic or life threatening illnesses, 
  7.5   including accelerated benefits offered by the issuer of the life 
  7.6   insurance policy; 
  7.7      (2) the fact that some or all of the proceeds of the 
  7.8   viatical settlement may be taxable and that assistance should be 
  7.9   sought from a personal tax advisor; 
  7.10     (3) the fact that the viatical settlement may be subject to 
  7.11  the claims of creditors; 
  7.12     (4) the fact that receipt of a viatical settlement may 
  7.13  adversely affect the recipients' eligibility for Medicaid or 
  7.14  other government benefits or entitlements, and that advice 
  7.15  should be obtained from the appropriate agencies; 
  7.16     (5) the policy owner's right to rescind a viatical 
  7.17  settlement contract within 30 days of the date it is executed by 
  7.18  all parties or 15 days of the receipt of the viatical settlement 
  7.19  proceeds by the viator, whichever is less, as provided in 
  7.20  section 60A.970, subdivision 3; and 
  7.21     (6) the date by which the funds will be available to the 
  7.22  viator and the source of the funds. 
  7.23     Sec. 11.  [60A.970] [GENERAL REQUIREMENTS.] 
  7.24     Subdivision 1.  [REQUIRED DOCUMENTS.] A viatical settlement 
  7.25  provider entering into a viatical settlement contract with a 
  7.26  person with a catastrophic or life threatening illness or 
  7.27  condition shall first obtain: 
  7.28     (1) a written statement from a licensed attending physician 
  7.29  that the person is of sound mind and under no constraint or 
  7.30  undue influence; and 
  7.31     (2) a witnessed document in which the person consents to 
  7.32  the viatical settlement contract, acknowledges the catastrophic 
  7.33  or life threatening illness, represents that the person has a 
  7.34  full and complete understanding of the viatical settlement 
  7.35  contract, acknowledges that the person has a full and complete 
  7.36  understanding of the benefits of the life insurance policy, 
  8.1   releases the person's medical records, and acknowledges that the 
  8.2   person has entered into the viatical settlement contract freely 
  8.3   and voluntarily. 
  8.4      Subd. 2.  [CONFIDENTIALITY OF MEDICAL INFORMATION.] All 
  8.5   medical information solicited or obtained by a licensee is 
  8.6   subject to the applicable provisions of state law relating to 
  8.7   confidentiality of medical information. 
  8.8      Subd. 3.  [UNCONDITIONAL REFUND PROVISION.] All viatical 
  8.9   settlement contracts entered into in this state must contain an 
  8.10  unconditional refund provision of at least 30 days from the date 
  8.11  that the viator signs an agreement to transfer an insurance 
  8.12  policy, or 15 days from the receipt of the viatical settlement 
  8.13  proceeds, whichever is less. 
  8.14     Subd. 4.  [PAYMENT OF PROCEEDS.] Immediately upon receipt 
  8.15  from the viator of documents to effect the transfer of the 
  8.16  insurance policy, the viatical settlement provider shall pay the 
  8.17  proceeds of the settlement to an escrow or trust account managed 
  8.18  by a trustee or escrow agent in a bank approved by the 
  8.19  commissioner, pending acknowledgment of the transfer by the 
  8.20  issuer of the policy.  The trustee or escrow agent must transfer 
  8.21  the proceeds due to the viator immediately upon receipt of 
  8.22  acknowledgment of the transfer from the insurer.  Payment of the 
  8.23  proceeds must be made by means of wire transfers to the viator 
  8.24  or by certified check or cashier's check. 
  8.25     Subd. 5.  [LUMP SUM PAYMENT.] Payment of the proceeds under 
  8.26  a viatical settlement must be made in a lump sum.  Retention of 
  8.27  a portion of the proceeds by the viatical settlement provider or 
  8.28  escrow agent is not permissible.  Payment must not be made by 
  8.29  installments unless the viatical settlement company has 
  8.30  purchased an annuity or similar financial instrument issued by a 
  8.31  licensed insurance company or bank. 
  8.32     Subd. 6.  [ADDITIONAL PAYMENT.] With respect to policies 
  8.33  containing a provision for double or other additional indemnity 
  8.34  for accidental death, the additional payment must remain payable 
  8.35  to the beneficiary last named by the viator before entering into 
  8.36  the viatical settlement agreement, or to a beneficiary 
  9.1   designated by the viator, other than the viatical settlement 
  9.2   provider, or in the absence of a designation, to the estate of 
  9.3   the viator. 
  9.4      Subd. 7.  [PROHIBITED PAYMENTS.] A viatical settlement 
  9.5   provider or broker must not pay or offer to pay a finder's fee, 
  9.6   commission, or other compensation to a viator's physician, 
  9.7   attorney, accountant, or other person providing medical, legal, 
  9.8   or financial planning services to the viator, or to any other 
  9.9   person acting as an agent of the viator with respect to the 
  9.10  viatical settlement. 
  9.11     Subd. 8.  [DISCRIMINATION PROHIBITED.] A viatical 
  9.12  settlement provider or broker must not discriminate in the 
  9.13  making of viatical settlements on the basis of race, age, sex, 
  9.14  national origin, creed, religion, occupation, marital or family 
  9.15  status, or sexual orientation, or discriminate between viators 
  9.16  with dependents and without. 
  9.17     Subd. 9.  [HEALTH STATUS CONTACTS.] Contacts for the 
  9.18  purpose of determining the health status of the viator by the 
  9.19  viatical settlement provider or broker after the viatical 
  9.20  settlement has occurred must not exceed one every three months 
  9.21  for viators with a life expectancy of more than one year, and 
  9.22  must not exceed one per month for viators with a life expectancy 
  9.23  of one year or less.  The provider or broker must explain the 
  9.24  procedure for these contacts at the time the viatical settlement 
  9.25  contract is entered into.  
  9.26     Subd. 10.  [PROHIBITED INVESTOR SOLICITATION.] Viatical 
  9.27  settlement providers and brokers shall not solicit investors who 
  9.28  may influence the treatment of the illness of the viators whose 
  9.29  coverage is the subject of the investment. 
  9.30     Subd. 11.  [CONTRACT NULL AND VOID.] Failure to tender the 
  9.31  viatical settlement by the date disclosed to the viator renders 
  9.32  the contract null and void. 
  9.33     Sec. 12.  [60A.971] [STANDARDS FOR EVALUATIONS OF 
  9.34  REASONABLE PAYMENTS.] 
  9.35     In order to assure that viators receive a reasonable return 
  9.36  for viaticating an insurance policy, the following are the 
 10.1   minimum permitted discounts: 
 10.2                                         Minimum Percentage
 10.3                                           of Face Value
 10.4   Insured's Life Expectancy          Less Outstanding Loans
 10.5                                        Received by Viator
 10.6   Less than 6 months                           80%
 10.7   At least 6 but less than 12 months           70%
 10.8   At least 12 but less than 18 months          65%
 10.9   At least 18 but less than 24 months          60%
 10.10  Twenty-four months or more                   50%
 10.11     The percentage may be reduced by five percent for 
 10.12  viaticating a policy written by an insurer rated lower than the 
 10.13  highest four categories by A.M. Best, or a comparable rating by 
 10.14  another rating agency. 
 10.15     Sec. 13.  [60A.972] [VIATICAL SETTLEMENT BROKERS.] 
 10.16     Subdivision 1.  [LICENSE.] A viatical settlement broker may 
 10.17  not solicit a viatical settlement contract without first 
 10.18  obtaining a license from the commissioner of commerce. 
 10.19     Subd. 2.  [FORM.] An applicant for a viatical settlement 
 10.20  broker license shall submit an application to the commissioner 
 10.21  on a form prescribed by the commissioner. 
 10.22     Subd. 3.  [FEES.] The licensing fee for a viatical 
 10.23  settlement broker is $750 for initial licensure and $250 for 
 10.24  each annual renewal.  Failure to pay the renewal fee within the 
 10.25  time required by the commissioner results in an automatic 
 10.26  revocation of the license.  The commissioner may adjust the fees 
 10.27  as provided under section 16A.1285 to recover the costs of 
 10.28  administration and enforcement.  The fees must be limited to the 
 10.29  cost of license administration and enforcement and must be 
 10.30  deposited in the state treasury, credited to the general fund, 
 10.31  and appropriated to the commissioner. 
 10.32     Subd. 4.  [LICENSE LIMITATION.] The license is a limited 
 10.33  license which allows solicitation only of viatical settlements. 
 10.34     Subd. 5.  [LICENSE REVOCATION.] The commissioner may 
 10.35  suspend, revoke, or refuse to renew the license of a viatical 
 10.36  settlement broker if the commissioner finds that: 
 11.1      (1) there was any misrepresentation in the application for 
 11.2   a license; 
 11.3      (2) the broker has been found guilty of fraudulent or 
 11.4   dishonest practices, has been found guilty of a felony or a 
 11.5   misdemeanor of which criminal fraud is an element, or is 
 11.6   otherwise shown to be untrustworthy or incompetent; 
 11.7      (3) the licensee has placed or attempted to place a 
 11.8   viatical settlement with a viatical settlement provider not 
 11.9   licensed in this state; or 
 11.10     (4) the licensee has violated any of the provisions of 
 11.11  sections 60A.961 to 60A.973. 
 11.12     Subd. 6.  [AGENT.] In the absence of a written agreement 
 11.13  making the broker the viator's agent, viatical settlement 
 11.14  brokers are presumed to be agents of viatical settlement 
 11.15  providers. 
 11.16     Subd. 7.  [COMPENSATION PROHIBITED.] A viatical settlement 
 11.17  broker must not, without the written agreement of the viator 
 11.18  obtained before performing any services in connection with a 
 11.19  viatical settlement, seek or obtain any compensation from the 
 11.20  viator. 
 11.21     Sec. 14.  [60A.973] [ADVERTISING STANDARDS.] 
 11.22     Subdivision 1.  [GENERALLY.] Advertising by viatical 
 11.23  settlement providers or brokers must be truthful and not 
 11.24  misleading by fact or implication. 
 11.25     Subd. 2.  [AVERAGE TIME.] If the advertiser emphasizes the 
 11.26  speed with which the viatication will occur, the advertising 
 11.27  must disclose the average time frame from completed application 
 11.28  to the date of offer and from acceptance of the offer to receipt 
 11.29  of the funds by the viator. 
 11.30     Subd. 3.  [AVERAGE PURCHASE PRICE.] If the advertising 
 11.31  emphasizes the dollar amounts available to viators, the 
 11.32  advertising shall disclose the average purchase prices as a 
 11.33  percent of face value obtained by viators contracting with the 
 11.34  advertiser during the previous six months. 
 11.35     Sec. 15.  [60A.974] [UNFAIR TRADE PRACTICES.] 
 11.36     A violation of sections 60A.961 to 60A.973 is an unfair 
 12.1   trade practice under chapter 72A. 
 12.2      Sec. 16.  [EFFECTIVE DATE.] 
 12.3      Sections 1 to 15 are effective January 1, 1996, and apply 
 12.4   to viatical settlement agreements entered into on or after that 
 12.5   date.