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Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

                            CHAPTER 151-H.F.No. 217 
                  An act relating to insurance; life; regulating living 
                  benefits settlements; adopting the NAIC viatical 
                  settlements model act; prescribing powers and duties; 
                  appropriating money; amending Minnesota Statutes 1994, 
                  section 13.71, by adding a subdivision; proposing 
                  coding for new law in Minnesota Statutes, chapter 60A. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 1994, section 13.71, is 
        amended by adding a subdivision to read: 
           Subd. 18.  [VIATICAL SETTLEMENTS DATA.] Viatical 
        settlements data provided to the commissioner of commerce is 
        classified under section 60A.968, subdivision 2. 
           Sec. 2.  [60A.961] [DEFINITIONS.] 
           Subdivision 1.  [APPLICATION.] For the purposes of sections 
        60A.961 to 60A.974, the definitions in this section have the 
        meanings given them. 
           Subd. 2.  [PERSON.] "Person" means a natural or artificial 
        entity, including individuals, partnerships, associations, 
        trusts, limited liability companies, or corporations. 
           Subd. 3.  [VIATICAL SETTLEMENT BROKER.] "Viatical 
        settlement broker" means an individual, partnership, limited 
        liability company, corporation, or other entity who or which for 
        another and for a fee, commission, or other valuable 
        consideration, offers or advertises the availability of viatical 
        settlements, introduces viators to viatical settlement 
        providers, or offers or attempts to negotiate viatical 
        settlements between a viator and one or more viatical settlement 
        providers.  "Viatical settlement broker" does not include an 
        attorney, accountant, or financial planner retained to represent 
        the viator whose compensation is not paid by the viatical 
        settlement provider. 
           Subd. 4.  [VIATICAL SETTLEMENT CONTRACT.] "Viatical 
        settlement contract" means a written agreement entered into 
        between a viatical settlement provider and a person owning a 
        life insurance policy or who owns or is covered under a group 
        policy insuring the life of a person who has a catastrophic or 
        life threatening illness or condition.  The agreement must 
        establish the terms under which the viatical settlement provider 
        will pay compensation or anything of value, which compensation 
        or value is less than the expected death benefit of the 
        insurance policy or certificate, in return for the policy 
        owner's assignment, transfer, sale, devise, or bequest of the 
        death benefit or ownership of the insurance policy or 
        certificate to the viatical settlement provider. 
           Subd. 5.  [VIATICAL SETTLEMENT PROVIDER.] "Viatical 
        settlement provider" means an individual, partnership, limited 
        liability company, corporation, or other entity that enters into 
        an agreement with a person owning a life insurance policy or who 
        owns or is covered under a group policy insuring the life of a 
        person who has a catastrophic or life threatening illness or 
        condition, under the terms of which the viatical settlement 
        provider pays compensation or anything of value, which 
        compensation or value is less than the expected death benefit of 
        the insurance policy or certificate, in return for the policy 
        owner's assignment, transfer, sale, devise, or bequest of the 
        death benefit or ownership of the insurance policy or 
        certificate to the viatical settlement provider.  Viatical 
        settlement provider does not include: 
           (1) a bank, savings bank, savings association, credit 
        union, or other licensed lending institution that takes an 
        assignment of a life insurance policy as collateral for a loan; 
           (2) the issuer of a life insurance policy providing 
        accelerated benefits under section 61A.072; or 
           (3) a natural person who enters into no more than one 
        agreement in a calendar year for the transfer of life insurance 
        policies for any value less than the expected death benefit. 
           Subd. 6.  [VIATOR.] "Viator" means the owner or certificate 
        holder of a life insurance policy insuring the life of a person 
        with a catastrophic or life threatening illness or condition who 
        enters into an agreement under which the viatical settlement 
        provider will pay compensation or anything of value, which 
        compensation or value is less than the expected death benefit of 
        the insurance policy or certificate, in return for the viator's 
        assignment, transfer, sale, devise, or bequest of the death 
        benefit or ownership of the insurance policy or certificate to 
        the viatical settlement provider. 
           Sec. 3.  [60A.962] [LICENSE REQUIREMENTS.] 
           Subdivision 1.  [LICENSE.] No individual, partnership, 
        limited liability company, corporation, or other entity may act 
        as a viatical settlement provider or enter into or solicit a 
        viatical settlement contract without first having obtained a 
        license from the commissioner of commerce. 
           Subd. 2.  [FORM.] An applicant for a viatical settlement 
        provider license shall submit an application to the commissioner 
        of commerce on a form prescribed by the commissioner. 
           Subd. 3.  [CONTENTS.] The applicant shall provide 
        information that the commissioner requires on forms prepared by 
        the commissioner.  The commissioner may, at any time, require 
        the applicant to fully disclose the identity of all 
        shareholders, members, partners, officers, and employees.  The 
        commissioner may, in the exercise of discretion, refuse to issue 
        a license in the name of a firm, partnership, limited liability 
        company, or corporation if not satisfied that an officer, 
        employee, shareholder, member, or partner who may materially 
        influence the applicant's conduct meets the requirements of 
        sections 60A.961 to 60A.974. 
           Subd. 4.  [NAMED PERSONS.] A license issued to a 
        partnership, limited liability company, corporation, or other 
        entity authorizes all members, officers, partners, and 
        designated employees to act as viatical settlement providers 
        under the license, and all those persons must be named in the 
        application and any supplements to the application. 
           Subd. 5.  [INVESTIGATION.] Upon the filing of an 
        application and the payment of the license fee, the commissioner 
        shall investigate each applicant and may issue a license if the 
        commissioner finds that the applicant: 
           (1) has provided a detailed plan of operation; 
           (2) is competent and trustworthy and intends to act in good 
        faith in the capacity involved in the license applied for; 
           (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 for; and 
           (4) if a corporation, is a corporation incorporated under 
        the laws of this state or a foreign corporation authorized to 
        transact business in this state. 
           Sec. 4.  [60A.963] [SERVICE OF PROCESS; NONRESIDENT 
        LICENSING.] 
           Subdivision 1.  [LICENSE.] A nonresident of this state may 
        be licensed as a viatical settlement provider upon compliance 
        with all provisions of sections 60A.961 to 60A.974. 
           Subd. 2.  [SERVICE OF PROCESS.] Section 45.028 applies to 
        service of process upon a viatical settlement provider. 
           Sec. 5.  [60A.964] [FEES.] 
           Subdivision 1.  [AMOUNT.] The licensing fee for a viatical 
        settlement provider license is $750 for initial licensure and 
        $250 for each annual renewal.  The commissioner may adjust the 
        fees as provided under section 16A.1285 to recover the costs of 
        administration and enforcement. The fees must be limited to the 
        cost of license administration and enforcement and must be 
        deposited in the state treasury, credited to a special account, 
        and appropriated to the commissioner. 
           Subd. 2.  [AUTOMATIC REVOCATION.] A license is 
        automatically revoked for failure to pay the licensing fee 
        within the terms prescribed by the commissioner. 
           Sec. 6.  [60A.965] [LICENSE REVOCATION.] 
           Subdivision 1.  [REVOCATION.] The commissioner may suspend, 
        revoke, or refuse to renew the license of a viatical settlement 
        provider if the commissioner finds that: 
           (1) there was any misrepresentation in the application for 
        the license; 
           (2) the holder of the license has been found 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 viatical settlement provider; 
           (3) the licensee demonstrates a pattern of unreasonable 
        payments to policy owners; 
           (4) the licensee has been convicted of a felony or a 
        misdemeanor of which criminal fraud is an element; or 
           (5) the licensee has violated any of the provisions of 
        sections 60A.961 to 60A.974. 
           Subd. 2.  [ADMINISTRATIVE ACTION.] Section 45.027 applies 
        to any action taken by the commissioner in connection with the 
        administration of sections 60A.961 to 60A.974. 
           Sec. 7.  [60A.966] [APPROVAL OF VIATICAL SETTLEMENTS 
        CONTRACTS.] 
           A viatical settlement provider may not use a viatical 
        settlement contract form in this state unless it has been filed 
        with and approved by the commissioner.  A viatical settlement 
        contract form filed with the commissioner is considered to have 
        been approved if it has not been disapproved within 60 days of 
        the filing.  The commissioner shall disapprove a viatical 
        settlement contract form if, in the commissioner's opinion, the 
        contract or contract provisions are unreasonable, contrary to 
        the interests of the public, or otherwise misleading or unfair 
        to the policy owner.  
           Sec. 8.  [60A.967] [REPORTING REQUIREMENTS.] 
           Each licensee shall file with the commissioner on or before 
        March 1 of each year an annual statement containing the 
        following information for the previous calendar year: 
           (1) for each policy viaticated, the date that the viatical 
        settlement was entered into; the life expectancy of the viator 
        at the time of the contract; the face amount of the policy; the 
        amount paid by the viatical settlement provider to viaticate the 
        policy; and if the viator has died, the date of death and the 
        total insurance premiums paid by the viatical settlement 
        provider to maintain the policy in force; 
           (2) a breakdown of applications received, accepted, and 
        rejected, by disease category; 
           (3) a breakdown of policies viaticated by issuer and policy 
        type; 
           (4) the number of secondary market versus primary market 
        transactions; 
           (5) the portfolio size; and 
           (6) the amount of outside borrowings. 
           Sec. 9.  [60A.968] [EXAMINATION.] 
           Subdivision 1.  [AUTHORIZATION.] The commissioner may, when 
        the commissioner considers it reasonably necessary to protect 
        the interests of the public, examine the business and affairs of 
        a licensee or applicant for a license.  The commissioner may 
        order a licensee or applicant to produce records, books, files, 
        or other information reasonably necessary to determine whether 
        or not the licensee or applicant is acting or has acted in 
        violation of the law or otherwise contrary to the interests of 
        the public.  The licensee or applicant shall pay the expenses 
        incurred in conducting an examination. 
           Subd. 2.  [PRIVATE DATA.] Names and individual 
        identification data for all viators is private and confidential 
        information and must not be disclosed by the commissioner, 
        unless required by law. 
           Subd. 3.  [RECORDS.] The licensee shall maintain records of 
        all transactions of viatical settlement contracts and shall make 
        them available to the commissioner for inspection during 
        reasonable business hours. 
           Sec. 10.  [60A.969] [DISCLOSURE.] 
           A viatical settlement provider shall disclose the following 
        information to the viator no later than the date the viatical 
        settlement contract is signed by all parties: 
           (1) possible alternatives to viatical settlement contracts 
        for persons with catastrophic or life threatening illnesses, 
        including accelerated benefits offered by the issuer of the life 
        insurance policy; 
           (2) the fact that some or all of the proceeds of the 
        viatical settlement may be taxable and that assistance should be 
        sought from a personal tax advisor; 
           (3) the fact that the viatical settlement may be subject to 
        the claims of creditors; 
           (4) the fact that receipt of a viatical settlement may 
        adversely effect the recipients' eligibility for Medicaid or 
        other government benefits or entitlements, and that advice 
        should be obtained from the appropriate agencies; 
           (5) the policy owner's right to rescind a viatical 
        settlement contract within 30 days of the date it is executed by 
        all parties or 15 days of the receipt of the viatical settlement 
        proceeds by the viator, whichever is less, as provided in 
        section 60A.970, subdivision 3; and 
           (6) the date by which the funds will be available to the 
        viator and the source of the funds. 
           Sec. 11.  [60A.970] [GENERAL REQUIREMENTS.] 
           Subdivision 1.  [REQUIRED DOCUMENTS.] A viatical settlement 
        provider entering into a viatical settlement contract with a 
        person with a catastrophic or life threatening illness or 
        condition shall first obtain: 
           (1) a written statement from a licensed attending physician 
        that the person is of sound mind and under no constraint or 
        undue influence; and 
           (2) a witnessed document in which the person consents to 
        the viatical settlement contract, acknowledges the catastrophic 
        or life threatening illness, represents that the person has a 
        full and complete understanding of the viatical settlement 
        contract, acknowledges that the person has a full and complete 
        understanding of the benefits of the life insurance policy, 
        releases the person's medical records, and acknowledges that the 
        person has entered into the viatical settlement contract freely 
        and voluntarily. 
           Subd. 2.  [CONFIDENTIALITY OF MEDICAL INFORMATION.] All 
        medical information solicited or obtained by a licensee is 
        subject to the applicable provisions of state law relating to 
        confidentiality of medical information. 
           Subd. 3.  [UNCONDITIONAL REFUND PROVISION.] All viatical 
        settlement contracts entered into in this state must contain an 
        unconditional refund provision of at least 30 days from the date 
        that the viator signs an agreement to transfer an insurance 
        policy, or 15 days of the receipt of the viatical settlement 
        proceeds, whichever is less. 
           Subd. 4.  [PAYMENT OF PROCEEDS.] Immediately upon receipt 
        from the viator of documents to effect the transfer of the 
        insurance policy, the viatical settlement provider shall pay the 
        proceeds of the settlement to an escrow or trust account managed 
        by a trustee or escrow agent in a bank approved by the 
        commissioner, pending acknowledgment of the transfer by the 
        issuer of the policy.  The trustee or escrow agent must transfer 
        the proceeds due to the viator immediately upon receipt of 
        acknowledgment of the transfer from the insurer.  Payment of the 
        proceeds must be made by means of wire transfer to the viator or 
        by certified check or cashier's check. 
           Subd. 5.  [LUMP SUM PAYMENT.] Payment of the proceeds under 
        a viatical settlement must be made in a lump sum.  Retention of 
        a portion of the proceeds by the viatical settlement provider or 
        escrow agent is not permissible.  Payment must not be made by 
        installments unless the viatical settlement company has 
        purchased an annuity or similar financial instrument issued by a 
        licensed insurance company or bank. 
           Subd. 6.  [ADDITIONAL PAYMENT.] With respect to policies 
        containing a provision for double or other additional indemnity 
        for accidental death, the additional payment must remain payable 
        to the beneficiary last named by the viator before entering into 
        the viatical settlement agreement, or to a beneficiary 
        designated by the viator, other than the viatical settlement 
        provider, or in the absence of a designation, to the estate of 
        the viator. 
           Subd. 7.  [PROHIBITED PAYMENTS.] A viatical settlement 
        provider or broker must not pay or offer to pay a finder's fee, 
        commission, or other compensation to a viator's physician, 
        attorney, accountant, or other person providing medical, legal, 
        or financial planning services to the viator, or to any other 
        person acting as an agent of the viator with respect to the 
        viatical settlement. 
           Subd. 8.  [DISCRIMINATION PROHIBITED.] A viatical 
        settlement provider or broker must not discriminate in the 
        making of viatical settlements on the basis of race, age, sex, 
        national origin, creed, religion, occupation, marital or family 
        status, or sexual orientation, or discriminate between viators 
        with dependents and without. 
           Subd. 9.  [HEALTH STATUS CONTACTS.] Contacts for the 
        purpose of determining the health status of the viator by the 
        viatical settlement provider or broker after the viatical 
        settlement has occurred must not exceed one every three months 
        for viators with a life expectancy of more than one year, and 
        must not exceed one per month for viators with a life expectancy 
        of one year or less.  The provider or broker must explain the 
        procedure for these contacts at the time the viatical settlement 
        contract is entered into.  
           Subd. 10.  [PROHIBITED INVESTOR SOLICITATION.] Viatical 
        settlement providers and brokers shall not solicit investors who 
        may influence the treatment of the illness of the viators whose 
        coverage is the subject of the investment. 
           Subd. 11.  [CONTRACT NULL AND VOID.] Failure to tender the 
        viatical settlement by the date disclosed to the viator renders 
        the contract null and void. 
           Sec. 12.  [60A.971] [STANDARDS FOR EVALUATIONS OF 
        REASONABLE PAYMENTS.] 
           In order to assure that viators receive a reasonable return 
        for viaticating an insurance policy, the following are the 
        minimum permitted discounts: 
                                              Minimum Percentage
                                                of Face Value
        Insured's Life Expectancy          Less Outstanding Loans
                                             Received by Viator
        Less than 6 months                           80%
        At least 6 but less than 12 months           70%
        At least 12 but less than 18 months          65%
        At least 18 but less than 24 months          60%
        Twenty-four months or more                   50%
           The percentage may be reduced by five percent for 
        viaticating a policy written by an insurer rated lower than the 
        highest four categories by A.M. Best, or a comparable rating by 
        another rating agency. 
           Sec. 13.  [60A.972] [VIATICAL SETTLEMENT BROKERS.] 
           Subdivision 1.  [LICENSE.] A viatical settlement broker may 
        not solicit a viatical settlement contract without first 
        obtaining a license from the commissioner of commerce. 
           Subd. 2.  [FORM.] An applicant for a viatical settlement 
        broker license shall submit an application to the commissioner 
        on a form prescribed by the commissioner. 
           Subd. 3.  [FEES.] The licensing fee for a viatical 
        settlement broker is $750 for initial licensure and $250 for 
        each annual renewal.  Failure to pay the renewal fee within the 
        time required by the commissioner results in an automatic 
        revocation of the license.  The commissioner may adjust the fees 
        as provided under section 16A.1285 to recover the costs of 
        administration and enforcement.  The fees must be limited to the 
        cost of license administration and enforcement and must be 
        deposited in the state treasury, credited to a special account, 
        and appropriated to the commissioner. 
           Subd. 4.  [LICENSE LIMITATION.] The license is a limited 
        license which allows solicitation only of viatical settlements. 
           Subd. 5.  [LICENSE REVOCATION.] The commissioner may 
        suspend, revoke, or refuse to renew the license of a viatical 
        settlement broker if the commissioner finds that: 
           (1) there was any misrepresentation in the application for 
        a license; 
           (2) the broker has been found guilty of fraudulent or 
        dishonest practices, has been found guilty of a felony or a 
        misdemeanor of which criminal fraud is an element, or is 
        otherwise shown to be untrustworthy or incompetent; 
           (3) the licensee has placed or attempted to place a 
        viatical settlement with a viatical settlement provider not 
        licensed in this state; or 
           (4) the licensee has violated any of the provisions of 
        sections 60A.961 to 60A.974. 
           Subd. 6.  [AGENT.] In the absence of a written agreement 
        making the broker the viator's agent, viatical settlement 
        brokers are presumed to be agents of viatical settlement 
        providers. 
           Subd. 7.  [COMPENSATION PROHIBITED.] A viatical settlement 
        broker must not, without the written agreement of the viator 
        obtained before performing any services in connection with a 
        viatical settlement, seek or obtain any compensation from the 
        viator. 
           Sec. 14.  [60A.973] [ADVERTISING STANDARDS.] 
           Subdivision 1.  [GENERALLY.] Advertising by viatical 
        settlement providers or brokers must be truthful and not 
        misleading by fact or implication. 
           Subd. 2.  [AVERAGE TIME.] If the advertiser emphasizes the 
        speed with which the viatication will occur, the advertising 
        must disclose the average time frame from completed application 
        to the date of offer and from acceptance of the offer to receipt 
        of the funds by the viator. 
           Subd. 3.  [AVERAGE PURCHASE PRICE.] If the advertising 
        emphasizes the dollar amounts available to viators, the 
        advertising shall disclose the average purchase prices as a 
        percent of face value obtained by viators contracting with the 
        advertiser during the previous six months. 
           Sec. 15.  [60A.974] [UNFAIR TRADE PRACTICES.] 
           A violation of sections 60A.961 to 60A.974 is an unfair 
        trade practice under chapter 72A. 
           Sec. 16.  [EFFECTIVE DATE.] 
           Sections 1 to 15 are effective January 1, 1996, and apply 
        to viatical settlement agreements entered into on or after that 
        date. 
           Presented to the governor May 9, 1995 
           Signed by the governor May 10, 1995, 10:32 a.m.