| Passed by the Senate March 2, 2009 YEAS 46 BRAD OWEN ________________________________________ President of the Senate Passed by the House April 7, 2009 YEAS 98 FRANK CHOPP ________________________________________ Speaker of the House of Representatives | I, Thomas Hoemann, Secretary of the Senate of the State of Washington, do hereby certify that the attached is SUBSTITUTE SENATE BILL 5195 as passed by the Senate and the House of Representatives on the dates hereon set forth. THOMAS HOEMANN ________________________________________ Secretary | |
| Approved April 16, 2009, 3:32 p.m. CHRISTINE GREGOIRE ________________________________________ Governor of the State of Washington | April 17, 2009 Secretary of State State of Washington |
| State of Washington | 61st Legislature | 2009 Regular Session |
READ FIRST TIME 02/11/09.
AN ACT Relating to adopting the life settlements model act; reenacting and amending RCW 42.56.400; adding new sections to chapter 48.102 RCW; repealing RCW 48.102.005, 48.102.010, 48.102.015, 48.102.020, 48.102.025, 48.102.030, 48.102.035, 48.102.040, 48.102.045, 48.102.050, 48.102.055, 48.102.900, and 48.102.901; and prescribing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1
NEW SECTION. Sec. 2
(1) "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 directly before
the public 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 policy or an interest in a policy
pursuant to a life settlement contract.
(2) "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 mean an attorney, certified public
accountant, or financial planner retained in the type of practice
customarily performed in their professional capacity to represent the
owner whose compensation is not paid directly or indirectly by the
provider or any other person, except the owner.
(3) "Business of life settlements" means an activity involved in,
but not limited to, offering to enter into, soliciting, negotiating,
procuring, effectuating, monitoring, or tracking life settlement
contracts.
(4) "Chronically ill" means:
(a) Being unable to perform at least two activities of daily
living, i.e., eating, toileting, transferring, bathing, dressing, or
continence;
(b) Requiring substantial supervision to protect the individual
from threats to health and safety due to severe cognitive impairment;
or
(c) Having a level of disability substantially similar to that
described in (a) of this subsection made in a written determination, as
existing on the effective date of this section, by the United States
secretary of health and human services.
(5) "Commissioner" means the insurance commissioner.
(6)(a) "Financing entity" means an underwriter, placement agent,
lender, purchaser of securities, purchaser of a policy from a provider,
credit enhancer, or any entity that has a direct ownership in a policy
that is the subject of a life settlement contract, but:
(i) Whose principal activity related to the transaction is
providing funds to effect the life settlement contract or purchase of
one or more policies; and
(ii) Who has an agreement in writing with one or more providers to
finance the acquisition of life settlement contracts.
(b) "Financing entity" does not mean a nonaccredited investor or
purchaser.
(7) "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.
(8) "Fraudulent life settlement act" includes:
(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 its employees or
its agents to engage in acts including, but not limited to:
(i) 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:
(A) An application for the issuance of a life settlement contract
or policy;
(B) The underwriting of a life settlement contract or policy;
(C) A claim for payment or benefit pursuant to a life settlement
contract or policy;
(D) Premiums paid on a policy;
(E) Payments and changes in ownership or beneficiary made in
accordance with the terms of a life settlement contract or policy;
(F) The reinstatement or conversion of a policy;
(G) In the solicitation, offer to enter into, or effectuation of a
life settlement contract, or policy;
(H) The issuance of written evidence of life settlement contracts
or insurance; or
(I) Any application for, or the existence of or any payments
related to, a loan secured directly or indirectly by any interest in a
policy;
(ii) Entering into any act, practice, or arrangement that involves
stranger-originated life insurance;
(iii) Failing to disclose to the insurer where the request for such
disclosure has been asked for by the insurer that the prospective
insured has undergone a life expectancy evaluation by any person or
entity other than the insurer or its authorized representatives in
connection with the issuance of the policy;
(iv) Employing any device, scheme, or artifice to defraud in the
business of life settlements; or
(v) In the solicitation, application, or issuance of a policy,
employing any device, scheme, or artifice in violation of state
insurable interest laws.
(b) In the furtherance of a fraud or to prevent the detection of a
fraud any person commits or permits its employees or its agents to:
(i) Remove, conceal, alter, destroy, or sequester from the
commissioner the assets or records of either a broker or provider, or
both or other person engaged in the business of life settlements;
(ii) Misrepresent or conceal the financial condition of either a
broker or provider, or both, financing entity, insurer, or other
person;
(iii) 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;
(iv) 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;
(v) Engage in embezzlement, theft, misappropriation, or conversion
of moneys, funds, premiums, credits, or other property of a provider,
insured, owner, or any other person engaged in the business of life
settlements;
(vi) Knowingly and with intent to defraud, enter into, broker, or
otherwise deal in a life settlement contract, the subject of which is
a 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;
(vii) Attempt to commit, assist, aid, or abet in the commission of,
or conspiracy to commit, the acts or omissions specified in this
subsection; or
(viii) Misrepresent the state of residence of an owner to be a
state or jurisdiction that does not have a law substantially similar to
this chapter for the purpose of evading or avoiding the provisions of
this chapter.
(9) "Insured" means the person covered under the policy being
considered for sale in a life settlement contract.
(10) "Life expectancy" means the arithmetic mean of the number of
months the insured under the policy to be settled can be expected to
live considering medical records and appropriate experiential data.
(11) "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 RCW 48.17.170.
(12)(a) "Life settlement contract" means a written agreement
entered into between a provider and an owner, establishing the terms
under which compensation or any thing of value will be paid, which
compensation or thing of value is less than the expected death benefit
of the policy, in return for the owner's assignment, transfer, sale,
devise, or bequest of the death benefit or any portion of a policy 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.
(b) "Life settlement contract" also means 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.
(c) "Life settlement contract" also means 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:
(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;
(ii) The owner receives on the date of the premium finance loan a
guarantee of the future life settlement value of the policy; or
(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.
(d) "Life settlement contract" does not mean:
(i) A policy loan by a life insurance company pursuant to the terms
of the policy or accelerated death provisions contained in the policy,
whether issued with the original policy or as a rider;
(ii) A premium finance loan or any loan made by a bank or other
licensed financial institution, provided that neither the default on
the loan nor the transfer of the policy in connection with such a
default is pursuant to an agreement or understanding with any other
person for the purpose of evading regulation under this chapter;
(iii) A collateral assignment of a policy by an owner;
(iv) A loan made by a lender that does not violate any provision of
this title, provided the loan is not described in (a) of this
subsection, and is not otherwise within the definition of life
settlement contract;
(v) An agreement where all the parties (A) are closely related to
the insured by blood or law, or (B) 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 those
parties;
(vi) 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;
(vii) A bona fide business succession planning arrangement:
(A) 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;
(B) 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
(C) 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;
(viii) 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
(ix) 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 this chapter.
(13) "Net death benefit" means the amount of the policy to be
settled less any outstanding debts or liens.
(14)(a) "Owner" means the owner of a policy, with or without a
terminal illness, who enters or seeks to enter into a life settlement
contract. For the purposes of this chapter, an owner shall not be
limited to an owner of a policy that insures the life of an individual
with a terminal or chronic illness or condition except where
specifically addressed.
(b) "Owner" does not mean:
(i) Any provider or other licensee under this chapter;
(ii) A qualified institutional buyer as defined, as of the
effective date of this section, in rule 144A of the federal securities
act of 1933, as amended;
(iii) A financing entity;
(iv) A special purpose entity; or
(v) A related provider trust.
(15) "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.
(16) "Policy" means an individual or group life insurance 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.
(17) "Premium finance loan" means a loan made primarily for the
purposes of making premium payments on a policy, which loan is secured
by an interest in the policy.
(18) "Person" means any natural person or legal entity, including
but not limited to, a partnership, limited liability company,
association, trust, or corporation.
(19)(a) "Provider" means a person, other than an owner, who enters
into or effectuates a life settlement contract with an owner.
(b) "Provider" does not mean:
(i) Any bank, savings bank, savings and loan association, or credit
union;
(ii) A licensed lending institution or creditor or secured party
pursuant to a premium finance loan agreement which takes an assignment
of a policy as collateral for a loan;
(iii) The insurer of a policy or rider to the extent of providing
accelerated death benefits or riders under an approved policy form or
cash surrender value;
(iv) Any natural person who enters into or effectuates no more than
one agreement in a calendar year for the transfer of a policy, for
compensation or anything of value less than the expected death benefit
payable under the policy;
(v) A purchaser;
(vi) Any authorized or eligible insurer that provides financial
guaranty insurance to a provider, purchaser, financing entity, special
purpose entity, or related provider trust;
(vii) A financing entity;
(viii) A special purpose entity;
(ix) A related provider trust;
(x) A broker; or
(xi) 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 policy from
a provider.
(20) "Purchased policy" means a policy that has been acquired by a
provider pursuant to a life settlement contract.
(21) "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 policy which has been the subject of a life
settlement contract.
(22) "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 commissioner as if those records and files were maintained directly
by the licensed provider.
(23) "Settled policy" means a policy that has been acquired by a
provider pursuant to a life settlement contract.
(24) "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:
(a) 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
federal securities act of 1933, as amended; or
(b) When the securities pay a fixed rate of return commensurate
with established asset-backed institutional capital markets.
(25) "Stranger-originated life insurance" means an act, practice,
or arrangement to initiate a policy for the benefit of a third-party
investor who, at the time of policy origination, has no insurable
interest in the insured under chapter 48.18 RCW. Stranger-originated
life insurance practices include, but are not limited to, cases in
which life insurance is purchased with resources or guarantees from or
through a person or entity who, at the time of policy inception, could
not lawfully initiate the policy and where, at the time of inception,
there is an arrangement or agreement to directly or indirectly transfer
the ownership of the policy or the policy benefits, or both, to a third
party. Any trust that is created to give the appearance of insurable
interest, and is used to initiate one or more policies for investors,
violates chapter 48.18 RCW and the prohibition against wagering on
human life. Stranger-originated life insurance arrangements do not
include those practices set forth in subsection (12)(d) of this
section.
(26) "Terminally ill" means having an illness or sickness that can
reasonably be expected to result in death in twenty-four months or
less.
NEW SECTION. Sec. 3
(2) An application for a provider 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 licensing fee in the
amount of two hundred fifty dollars, which shall be deposited to the
insurance commissioner's regulatory account under RCW 48.02.190.
(3) All provider licenses shall continue in force until suspended,
revoked, or not renewed. A license shall be subject to renewal
annually on the first day of July upon application of the provider and
payment of a renewal fee of two hundred fifty dollars, which shall be
deposited to the insurance commissioner's regulatory account under RCW
48.02.190. If not so renewed, the license shall automatically expire
on the renewal date.
(a) If the renewal fee is not received by the commissioner prior to
the expiration date, the provider shall pay to the commissioner in
addition to the renewal fee, a surcharge as follows:
(i) For the first thirty days or part thereof delinquency the
surcharge is fifty percent of the renewal fee;
(ii) For the next thirty days or part thereof delinquency the
surcharge is one hundred percent of the renewal fee;
(b) If the renewal fee is not received by the commissioner after
sixty days but prior to twelve months after the expiration date the
payment of the renewal fee shall be for reinstatement of the license
and the provider shall pay to the commissioner the renewal fee and a
surcharge of two hundred percent.
(4) Subsection (3)(a) and (b) of this section does not exempt any
person from any penalty provided by law for transacting a life
settlement business without a valid and subsisting license.
(5) The applicant shall provide such information as the
commissioner may require on forms prescribed by the commissioner. The
commissioner has the authority, at any time, to require such an
applicant to fully disclose the identity of its stockholders, 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 this chapter.
(6) 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.
(7) Upon the filing of an application for a provider's license 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:
(a) Has provided a detailed plan of operation;
(b) Is competent and trustworthy and intends to transact its
business in good faith;
(c) 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;
(d)(i) Has demonstrated evidence of financial responsibility in a
form and in an amount prescribed by the commissioner by rule.
(ii) The commissioner may ask for evidence of financial
responsibility at any time the commissioner deems necessary;
(e) 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
(f) Has provided to the commissioner an antifraud plan that meets
the requirements of section 17 of this act and includes:
(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;
(ii) A description of the procedures for reporting fraudulent
insurance acts to the commissioner;
(iii) A description of the plan for antifraud education and
training of its underwriters and other personnel; and
(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.
(8)(a) A nonresident provider shall appoint the commissioner as its
attorney to receive service of, and upon whom shall be served, all
legal process issued against it in this state upon causes of action
arising within this state. Service upon the commissioner as attorney
shall constitute service upon the provider. Service of legal process
against the provider can be had only by service upon the commissioner.
(b) With the appointment the provider shall designate the person to
whom the commissioner shall forward legal process so served upon him or
her. The provider may change the person by filing a new designation.
(c) The appointment of the commissioner as attorney shall be
irrevocable, shall bind any successor in interest or to the assets or
liabilities of the provider, and shall remain in effect as long as
there is in this state any contract made by the provider or liabilities
or duties arising therefrom.
(d) Duplicate copies of legal process against a provider for whom
the commissioner is attorney shall be served upon him or her either by
a person competent to serve summons, or by registered mail. At the
time of service the plaintiff shall pay to the commissioner ten
dollars, taxable as costs in the action.
(e) The commissioner shall immediately send one of the copies of
the process, by registered mail with return receipt requested, to the
person designated for the purpose by the provider in its most recent
designation filed with the commissioner.
(f) The commissioner shall keep a record of the day and hour of
service upon him or her of all legal process. Proceedings shall not be
had against the provider, and the provider shall not be required to
appear, plead, or answer until the expiration of forty days after the
date of service upon the commissioner.
(9) A provider may not use any person to perform the functions of
a broker unless the person is authorized to act as a broker under this
chapter.
(10) A provider shall provide to the commissioner new or revised
information about officers, stockholders, partners, directors, members,
or designated employees within thirty days of the change.
NEW
SECTION. Sec. 4
(2) Not later than thirty days from the first day of operating as
a broker, the life insurance producer shall notify the commissioner
that he or she intends acting as a broker on a form prescribed by the
commissioner, pay a fee of one hundred dollars, and if a nonresident
producer appoint the commissioner as attorney for service of process
under subsection (6) of this section. Notification shall include an
acknowledgement by the life insurance producer that he or she will
operate as a broker in accordance with this chapter.
(3) 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.
(4) The authority to act as a broker shall continue in force until
suspended, revoked, or not renewed. The authority to act as a broker
shall automatically expire if not timely renewed. The authority to act
as a broker shall be valid for a time period coincident with the
expiration date of the broker's insurance producer license. The
authority to act as a broker is renewable at that time, upon payment of
a renewal fee in the amount of one hundred dollars and if the payment
is received by the commissioner prior to the expiration date, the
broker's authority to act as a broker continues in effect.
(a) If the renewal fee is not received by the commissioner prior to
the expiration date, the broker shall pay to the commissioner in
addition to the renewal fee, a surcharge as follows:
(i) For the first thirty days or part thereof of delinquency the
surcharge is fifty percent of the renewal fee;
(ii) For the next thirty days or part thereof delinquency the
surcharge is one hundred percent of the renewal fee;
(b) If the payment of the renewal fee is not received by the
commissioner after sixty days the surcharge is two hundred percent of
the renewal fee.
(5) Subsection (4)(a) of this section does not exempt any person
from any penalty provided by law for transacting life settlement
business without the valid authority to act as a broker.
(6)(a) A nonresident broker shall appoint the commissioner as its
attorney to receive service of, and upon whom shall be served, all
legal process issued against it in this state upon causes of action
arising within this state. Service upon the commissioner as attorney
shall constitute service upon the broker. Service of legal process
against the broker can be had only by service upon the commissioner.
(b) With the appointment the broker shall designate the person to
whom the commissioner shall forward legal process so served upon him or
her. The broker may change the person by filing a new designation.
(c) The appointment of the commissioner as attorney shall be
irrevocable, shall bind any successor in interest or to the assets or
liabilities of the broker, and shall remain in effect as long as there
is in this state any contract made by the broker or liabilities or
duties arising therefrom.
(d) Duplicate copies of legal process against a broker for whom the
commissioner is attorney shall be served upon him or her either by a
person competent to serve summons, or by registered mail. At the time
of service the plaintiff shall pay to the commissioner ten dollars,
taxable as costs in the action.
(e) The commissioner shall immediately send one of the copies of
the process, by registered mail with return receipt requested, to the
person designated for the purpose by the broker in its most recent
designation filed with the commissioner.
(f) The commissioner shall keep a record of the day and hour of
service upon him or her of all legal process. Proceedings shall not be
had against the broker, and the broker shall not be required to appear,
plead, or answer until the expiration of forty days after the date of
service upon the commissioner.
(7) A broker may not use any person to perform the functions of a
provider unless such a person holds a current, valid license as a
provider, and as provided in this chapter.
NEW SECTION. Sec. 5
(a) Committed a fraudulent life settlement act;
(b) 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;
(c) 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 whether a judgment of
conviction has been entered by the court; or
(d) Has violated any of the provisions of this chapter or fails to
comply with any proper order or regulation of the commissioner;
then such action shall be an additional cause under RCW 48.17.530 to
place on probation, suspend, revoke, or refuse to renew the insurance
producer's license of the broker.
The procedure to suspend, revoke, or nonrenew the broker's
insurance producer license shall be governed by RCW 48.17.540. The
suspension, revocation, or nonrenewal of the broker's insurance
producer license shall terminate the insurance producer's authority to
act as a broker under this chapter.
(2) The commissioner may refuse, suspend, revoke, or refuse to
renew a provider's license if the commissioner finds that:
(a) The provider committed a fraudulent life settlement act;
(b) There was any material misrepresentation in the provider's
application for its license;
(c) The provider 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;
(d) The provider demonstrates a pattern of unreasonably withholding
payments to policy owners;
(e) The provider no longer meets the requirements for initial
licensure or authority to act as a provider;
(f) The provider 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 provider 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 whether a
judgment of conviction has been entered by the court;
(g) The provider has entered into any life settlement contract that
has not been approved under this chapter;
(h) The provider has failed to honor contractual obligations set
out in a life settlement contract;
(i) 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, a financing entity, a
special purpose entity, or a related provider trust; or
(j) The provider or any officer, partner, member, or key management
personnel has violated any of the provisions of this chapter or fails
to comply with any proper order or regulation of the commissioner.
(3) The commissioner shall give the provider notice of his or her
intention to suspend, revoke, or not renew its license not less than
ten days before the order of suspension, revocation, or nonrenewal is
to become effective. The commissioner shall not suspend a provider's
license for a period in excess of one year, and the commissioner shall
state in the order of suspension the period during which it shall be
effective.
(4) After hearing or with the consent of the provider or broker and
in addition to or in lieu of the suspension, revocation, or refusal to
renew any license, the commissioner may levy a fine upon the provider
or broker or its employees in an amount not less than two hundred fifty
dollars and not more than ten thousand dollars. The order levying the
fine shall specify the period within which the fine shall be fully paid
and which period shall not be less than fifteen nor more than thirty
days from the date of the order. Upon failure to pay the fine when due
the commissioner shall revoke the license of the provider or the
insurance producer license of the broker if not already revoked, and
the fine shall be recovered in a civil action brought on behalf of the
commissioner by the attorney general. Any fine so collected shall be
paid by the commissioner to the state treasurer for the account of the
general fund.
NEW SECTION. Sec. 6
(2) An insurer may not, 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.
(3) 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
10, 11, 14, and 18 of this act 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 SECTION. Sec. 7
(2) Every provider that fails to file an annual statement as
required in this section, or fails to reply within thirty calendar 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 fifty dollars per day of delay, not to exceed twenty-five
thousand dollars in the aggregate, for each such failure.
(3) 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.
NEW SECTION. Sec. 8
(a) 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;
(b) Is necessary to effectuate the sale of life settlement
contracts, or interests therein, as investments, provided (i) the sale
is conducted in accordance with applicable state and federal securities
law, and (ii) the owner and the insured have both provided prior
written consent to the disclosure;
(c) 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 sections 9, 17, and 18 of this act;
(d) 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
this subsection;
(e) Is necessary to allow the provider or broker or their
authorized representatives to make contacts for the purpose of
determining health status.
(i) For the purposes of this section, the "authorized
representative" does 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.
(ii) A provider or broker shall require its authorized
representative to agree in writing to adhere to the privacy provisions
of this chapter; or
(f) Is required to purchase stop loss coverage.
(2) 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, P.L. 106-102 (1999).
(3) Names and individual identification data 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 SECTION. Sec. 9
(2) For the purpose of ascertaining its condition, or compliance
with this title, the commissioner may as often as the commissioner
finds advisable examine the accounts, records, documents, and
transactions of:
(a) Any life settlement provider, broker, or person licensed or
regulated under this chapter;
(b) Any person having a contract under which he or she enjoys in
fact the exclusive or dominant right to manage or control a provider or
broker; and
(c) Any person holding the shares of capital stock of a provider or
broker for the purpose of control of its management either as voting
trustee or otherwise.
(3) In lieu of an examination or market conduct oversight activity
under this chapter of any foreign or alien licensee licensed in this
state, the commissioner may, at the commissioner's discretion, accept
an examination report or market conduct oversight action on the
provider or broker as prepared by the commissioner for the provider's
or broker's state of domicile or port-of-entry state.
(4)(a) Every examination, whatsoever, or any part of the
examination of any person licensed or regulated under this chapter
shall be at the expense of the person examined. RCW 48.03.060 (1) and
(2) are not applicable to persons licensed or regulated under this
chapter.
(b) When making an examination under this section, the commissioner
may retain attorneys, appraisers, independent actuaries, independent
certified public accountants, or other professionals and specialists as
examiners, the cost of which shall be borne by the person who is the
subject of the examination.
(c) The person examined and liable therefore shall reimburse the
state upon presentation of an itemized statement thereof, for the
actual travel expenses of the commissioner's examiners, their
reasonable living expense allowance, and their per diem compensation,
including salary and the employer's cost of employee benefits, at a
reasonable rate approved by the commissioner, incurred on account of
the examination. Per diem salary and expenses for employees shall be
established by the commissioner on the basis of the national
association of insurance commissioner's recommended salary and expense
schedule for zone examiners, or the salary schedule established by the
Washington personnel resources board and the expense schedule
established by the office of financial management, whichever is higher.
(d) The commissioner or the commissioner's examiners shall not
receive or accept any additional emolument on account of any
examination.
(5) Nothing contained in this section limits the commissioner's
authority to terminate or suspend any examination or market conduct
oversight activities in order to pursue other legal or regulatory
action under the insurance laws of this state. Findings of fact and
conclusions made pursuant to any order adopting an examination report
are prima facie evidence in any legal or regulatory action.
NEW SECTION. Sec. 10
(2) Advertisements shall be accurate, truthful, and not misleading
in fact or by implication.
(3) A person or trust shall not:
(a) Directly or indirectly, market, advertise, solicit, or
otherwise promote the purchase of a policy, not previously issued, for
the sole purpose of, or with the primary emphasis on, settling the
policy; or
(b) Use the words "free," "no cost," or words of similar import in
the marketing, advertising, soliciting or otherwise promoting of the
purchase of a policy.
NEW SECTION. Sec. 11
(a) 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;
(b) 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;
(c) The fact that the proceeds from a life settlement contract
could be subject to the claims of creditors;
(d) 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;
(e) The fact that the owner has a right to terminate a life
settlement contract within fifteen days of the date it is executed by
all parties and the owner has received the disclosures required by this
section. 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;
(f) 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 acknowledgement 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;
(g) 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 to be forfeited by
the owner and that assistance should be sought from a professional
financial advisor;
(h) The date by which the funds will be available to the owner and
the transmitter of the funds;
(i) The fact that the commissioner may 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;
(j) 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.";
(k) A separate signed fraud warning as follows:
"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.";
(l) The fact that the insured may be contacted by either the
provider or broker or its 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;
(m) The affiliation, if any, between the provider and the issuer of
the insurance policy to be settled;
(n) 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;
(o) The document shall include the name, address, and telephone
number of the provider;
(p) 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
(q) 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.
(2) 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.
(3) 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:
(a) The name, business address, and telephone number of the broker;
(b) A full, complete, and accurate description of all the offers,
counter-offers, acceptances, and rejections relating to the proposed
life settlement contract;
(c) 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;
(d) 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;
(e) 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 means 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
(f) The failure to provide the disclosures or rights described in
this section is an unfair trade practice pursuant to section 21 of this
act.
NEW SECTION. Sec. 12
(1) If, as described in section 2 of this act, 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 16 of this act.
(2) If the financing does not violate section 16 of this act in
this manner, the insurance carrier:
(a) May make disclosures, including but not limited 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:
"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:
(i) A change of ownership could lead to a stranger owning an
interest in the insured's life;
(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;
(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;
(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
(b) May require certifications, such as the following, from the
applicant and/or the insured:
"(i) I have not entered into any agreement or arrangement providing
for the future sale of this life insurance policy;
(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
(iii) The borrower has an insurable interest in the insured."
NEW SECTION. Sec. 13 (1) With respect to each policy issued by
an insurance company, the insurance company shall notify the owner of
an individual life insurance policy when the insured person under such
a policy is age sixty or older, or is known to be terminally ill or
chronically ill, that there may be alternative transactions available
to that owner at the time of each of the following:
(a) When a life insurance company receives from such an owner a
request to surrender, in whole or in part, an individual policy;
(b) When a life insurance company receives from such an owner a
request to receive an accelerated death benefit under an individual
policy;
(c) When a life insurance company sends to such an owner all
notices of lapse of an individual policy; or
(d) At any other time that the commissioner may require by rule.
(2)(a) The commissioner shall approve a document calculated to
appraise the consumer of his or her rights as an owner of a life
insurance policy. The document shall be made available at no cost to
all insurance companies and life insurance producers and written in lay
terms.
(b) The document shall advise the consumer:
(i) That life insurance is a critical part of a broader financial
plan, and that the consumer is encouraged, and has a right, to seek
additional financial advice and opinions;
(ii) That possible alternatives to lapse exist; and
(iii) Of the definitions of common industry terms.
(c) In addition to the information described in (a) and (b) of this
subsection, the document must contain the following statement in large,
bold, or otherwise conspicuous typeface calculated to draw the eye:
"Life insurance is a critical part of a broader financial plan. There
are many options available, and you have the right to shop around and
seek advice from different financial advisers in order to find the
option best suited to your needs."
(d) The document may include brief descriptions of common products
available from providers. These products must be discussed in general
terms for informative purposes only, and not identifiable to any
specific provider.
(e) The document will be considered part of the notice required in
subsection (1) of this section.
NEW SECTION. Sec. 14
(a) 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
(b) A document in which the insured consents to the release of his
or her 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.
(2) The insurer shall respond to a request for verification of
coverage submitted by a provider, settlement broker, or life insurance
producer not later than thirty 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.
(3) 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 and 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.
(4) 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.
(5) 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.
(6) If a broker performs the verification of coverage activities
required of the provider, the provider has fulfilled the requirements
of section 11(1) of this act.
(7) Within twenty days after an owner executes the life settlement
contract, the provider shall give written notice to the insurer that
issued that insurance policy that the policy has become subject to a
life settlement contract. The notice shall be accompanied by the
documents required by section 12(2) of this act.
(8) 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
this chapter.
(9) All life settlement contracts entered into in this state shall
provide that the owner may rescind the contract on or before fifteen
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 is considered 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.
(10) 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 acknowledgement 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
acknowledgement of the transfer from the insurer.
(11) 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 under this section tolls the right of
rescission until thirty days after the written notice of the right of
rescission has been given.
(12) 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. This section does
not prohibit a broker from reducing the broker's fee below this
percentage if the broker so chooses.
(13) The broker shall disclose to the owner anything of value paid
or given to a broker, which relate to a life settlement contract.
(14) A 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 not enter
into a life settlement 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:
(a) 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 twenty-four 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; or
(b) The owner submits independent evidence to the provider that one
or more of the following conditions have been met within the two-year
period:
(i) The owner or insured is terminally or chronically ill;
(ii) The owner or insured disposes of his or her 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;
(iii) The owner's spouse dies;
(iv) The owner divorces his or her spouse;
(v) The owner retires from full-time employment;
(vi) The owner becomes physically or mentally disabled and a
physician determines that the disability prevents the owner from
maintaining full-time employment; or
(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;
(c) Copies of the independent evidence required by (b) of this
subsection 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. This section does not prohibit an insurer from exercising
its right to contest the validity of any policy;
(d) If the provider submits to the insurer a copy of independent
evidence provided for in (b)(i) of this subsection 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 SECTION. Sec. 15
(2) 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 he or she 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
commissioner.
(3) 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 SECTION. Sec. 16
(a) 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;
(b) 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 chapter;
(c) 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;
(d) Issue, solicit, market, or otherwise promote the purchase of an
insurance policy, not previously issued, for the sole purpose of, or
with the primary emphasis on, settling the policy;
(e) If providing premium financing, receive any proceeds, fees, or
other consideration from the policy or owner of the policy that are in
addition to the amounts required to pay principal, interest, and any
costs or expenses incurred by the lender or borrower in connection with
the premium finance agreement, except for the event of a default,
unless either the default on such a loan or transfer of the policy
occurs pursuant to an agreement or understanding with any other person
for the purpose of evading regulation under this chapter. Any
payments, charges, fees, or other amounts received by a person
providing premium financing in violation of this subsection shall be
remitted to the original owner of the policy or to the original owner's
estate if the original owner is not living at the time of the
determination of overpayment;
(f) 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 this relationship is disclosed
to the owner;
(g) With respect to any life settlement contract or insurance
policy and a provider, knowingly enter into a life settlement contract
with an 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 this relationship is disclosed to the
owner;
(h) 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 rule, 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 is a violation of this chapter;
(i) 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
(j) With respect to an insurer, 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.
(2) A violation of this section constitutes a fraudulent life
settlement act.
NEW SECTION. Sec. 17
(b) A person shall not knowingly and intentionally interfere with
the enforcement of this chapter or investigations of suspected or
actual violations of this chapter.
(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.
(2)(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:
"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."
(b) The lack of a statement as required in (a) of this subsection
does not constitute a defense in any prosecution for a fraudulent life
settlement act.
(3)(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.
(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.
(4)(a) Civil liability shall not 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:
(i) The commissioner or the commissioner's employees, agents, or
representatives;
(ii) Federal, state, or local law enforcement or regulatory
officials or their employees, agents, or representatives;
(iii) A person involved in the prevention and detection of
fraudulent life settlement acts or that person's agents, employees, or
representatives;
(iv) Any regulatory body or their employees, agents, or
representatives, overseeing life insurance, life settlements,
securities, or investment fraud;
(v) The life insurer that issued the life insurance policy covering
the life of the insured; or
(vi) Either a broker or provider, or both and any agents,
employees, or representatives.
(b) Subsection (4)(a) of this section 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 (a) of this
subsection does not apply because the person filing the report or
furnishing the information did so with actual malice.
(c) A person identified in (a) of this subsection shall be entitled
to an award of attorneys' fees and costs if he or she is the prevailing
party in a civil cause of action for libel, slander, or any other
relevant tort arising out of activities in carrying out the provisions
of this chapter 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.
(d) This section does not abrogate or modify common law or
statutory privileges or immunities enjoyed by a person described in (a)
of this subsection.
(5)(a) The documents and evidence provided pursuant to subsection
(4) of this section 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.
(b) Subsection (5)(a) of this section does not prohibit release by
the commissioner of documents and evidence obtained in an investigation
of suspected or actual fraudulent life settlement acts:
(i) In administrative or judicial proceedings to enforce laws
administered by the commissioner;
(ii) To federal, state, or local law enforcement or regulatory
agencies, to an organization established for the purpose of detecting
and preventing fraudulent life settlement acts, or to the national
association of insurance commissioners; or
(iii) At the discretion of the commissioner, to a person in the
business of life settlements that is aggrieved by a fraudulent life
settlement act.
(c) Release of documents and evidence under (b) of this subsection
does not abrogate or modify the privilege granted in (a) of this
subsection.
(6) This chapter does not:
(a) Preempt the authority or relieve the duty of other law
enforcement or regulatory agencies to investigate, examine, and
prosecute suspected violations of law;
(b) Preempt, supersede, or limit any provision of chapter 21.20 RCW
or any rule, order, or notice issued thereunder;
(c) Prevent or prohibit a person from disclosing voluntarily
information concerning life settlement fraud to a law enforcement or
regulatory agency other than the commissioner; or
(d) Limit the powers granted elsewhere by the laws of this state to
the commissioner or an insurance fraud unit to investigate and examine
possible violations of law and to take appropriate action against
wrongdoers.
(7)(a) 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 either a broker or
provider, or both 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:
(i) Fraud investigators, who may be provider or broker employees or
independent contractors; and
(ii) An antifraud plan, which shall be submitted to the
commissioner. The antifraud plan shall include, but not be limited to:
(A) 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;
(B) A description of the procedures for reporting possible
fraudulent life settlement acts to the commissioner;
(C) A description of the plan for antifraud education and training
of underwriters and other personnel; and
(D) 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.
(b) Antifraud plans submitted to the commissioner shall be
privileged and confidential and shall not be a public record and shall
not be subject to discovery or subpoena in a civil or criminal action.
NEW SECTION. Sec. 18
(2) If the commissioner has cause to believe that any person is
violating or is about to violate any provision of this title or any
regulation or order of the commissioner, the commissioner may:
(a) Issue a cease and desist order; and/or
(b) Bring an action in any court of competent jurisdiction to
enjoin the person from continuing the violation or doing any action in
furtherance thereof.
NEW SECTION. Sec. 19
(2) It is a violation of this chapter for any person, provider,
broker, or any other party related to the business of life settlements,
to commit a fraudulent life settlement act.
(3) For criminal liability purposes, a person that knowingly
commits a fraudulent life settlement act is guilty of a class B felony
punishable under chapter 9A.20 RCW.
(4) Any person who knowingly acts as a life settlement provider
without being licensed by the commissioner is guilty of a class B
felony punishable under chapter 9A.20 RCW.
(5) Any person who knowingly acts as a life settlement broker
without the proper authorization under this chapter is guilty of a
class B felony punishable under chapter 9A.20 RCW.
(6) Any criminal penalty imposed under this section is in addition
to, and not in lieu of, any other civil or administrative penalty or
sanction otherwise authorized under state law.
(7) If the commissioner has cause to believe that any person has:
(a) Knowingly acted as a life settlement provider without being
licensed by the commissioner; or
(b) Knowingly acted as a life settlement broker without the proper
authorization under section 4 this act;
the commissioner may assess a civil penalty of not more than twenty-five thousand dollars for each violation, after providing notice and an
opportunity for a hearing in accordance with chapters 34.05 and 48.04
RCW.
(8) Upon failure to pay a civil penalty when due, the attorney
general may bring a civil action on behalf of the commissioner to
recover the unpaid penalty. Any amounts collected by the commissioner
must be paid to the state treasurer for the account of the general
fund.
NEW SECTION. Sec. 20
(1) Establishing standards for evaluating reasonableness of
payments under life settlement contracts for persons who are terminally
ill or chronically ill including, but not limited to, regulation of
discount rates used to determine the amount paid in exchange for
assignment, transfer, sale, devise, or bequest of a benefit under a
life insurance policy insuring the life of a person that is chronically
or terminally ill;
(2) Requiring a bond or other mechanism for financial
accountability for life settlement providers; and
(3) Governing the activities, relationships, and responsibilities
of providers, brokers, insurers, and their agents.
NEW SECTION. Sec. 21
NEW SECTION. Sec. 22
(2) All viatical settlement providers' licenses that are in effect
on the effective date of this section shall be converted to a life
settlement provider license and upon the next renewal date of the
license the life settlement provider must be in compliance with the
requirements to be licensed as a life settlement provider under section
3 of this act.
(3) A provider lawfully transacting business in this state prior to
the effective date of this section may continue to do so if the
provider submits a completed application and pays the required fee to
the commissioner within thirty days of the effective date of this
section. A provider that has submitted an application and paid the
required fee to the commissioner within thirty days of the effective
date of this section may continue to act as a provider for an
additional ninety days from the receipt of the application by the
commissioner and payment of the required fee, or approval or denial of
the license by the commissioner, whichever is earlier. Any person
transacting business in this state under this subsection must comply
with all other requirements of this chapter.
Sec. 23 RCW 42.56.400 and 2007 c 197 s 7, 2007 c 117 s 36, and
2007 c 82 s 17 are each reenacted and amended to read as follows:
The following information relating to insurance and financial
institutions is exempt from disclosure under this chapter:
(1) Records maintained by the board of industrial insurance appeals
that are related to appeals of crime victims' compensation claims filed
with the board under RCW 7.68.110;
(2) Information obtained and exempted or withheld from public
inspection by the health care authority under RCW 41.05.026, whether
retained by the authority, transferred to another state purchased
health care program by the authority, or transferred by the authority
to a technical review committee created to facilitate the development,
acquisition, or implementation of state purchased health care under
chapter 41.05 RCW;
(3) The names and individual identification data of ((all viators
regulated)) either all owners or all insureds, or both, received by the
insurance commissioner under chapter 48.102 RCW;
(4) Information provided under RCW 48.30A.045 through 48.30A.060;
(5) Information provided under RCW 48.05.510 through 48.05.535,
48.43.200 through 48.43.225, 48.44.530 through 48.44.555, and 48.46.600
through 48.46.625;
(6) Examination reports and information obtained by the department
of financial institutions from banks under RCW 30.04.075, from savings
banks under RCW 32.04.220, from savings and loan associations under RCW
33.04.110, from credit unions under RCW 31.12.565, from check cashers
and sellers under RCW 31.45.030(3), and from securities brokers and
investment advisers under RCW 21.20.100, all of which is confidential
and privileged information;
(7) Information provided to the insurance commissioner under RCW
48.110.040(3);
(8) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.02.065, all of which are confidential and
privileged;
(9) Confidential proprietary and trade secret information provided
to the commissioner under RCW 48.31C.020 through 48.31C.050 and
48.31C.070;
(10) Data filed under RCW 48.140.020, 48.140.030, 48.140.050, and
7.70.140 that, alone or in combination with any other data, may reveal
the identity of a claimant, health care provider, health care facility,
insuring entity, or self-insurer involved in a particular claim or a
collection of claims. For the purposes of this subsection:
(a) "Claimant" has the same meaning as in RCW 48.140.010(2).
(b) "Health care facility" has the same meaning as in RCW
48.140.010(6).
(c) "Health care provider" has the same meaning as in RCW
48.140.010(7).
(d) "Insuring entity" has the same meaning as in RCW 48.140.010(8).
(e) "Self-insurer" has the same meaning as in RCW 48.140.010(11);
(11) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.135.060;
(12) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.37.060;
(13) Confidential and privileged documents obtained or produced by
the insurance commissioner and identified in RCW 48.37.080;
(14) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.37.140; ((and))
(15) Documents, materials, or information obtained by the insurance
commissioner under RCW 48.17.595; and
(16) Documents, materials, or information obtained by the insurance
commissioner under sections 8(1) and 17 (3) and (7)(a)(ii) of this act.
NEW SECTION. Sec. 24 Captions used in this act are not any part
of the law.
NEW SECTION. Sec. 25 Sections 1 through 22, 24, and 26 of this
act are each added to chapter 48.102 RCW.
NEW SECTION. Sec. 26 This act does not affect any existing right
acquired or liability or obligation incurred under the sections
repealed in this act or under any rule or order adopted under those
sections, nor does it affect any proceeding instituted under those
sections.
NEW SECTION. Sec. 27 The following acts or parts of acts are
each repealed:
(1) RCW 48.102.005 (Definitions) and 1995 c 161 s 1;
(2) RCW 48.102.010 (License required for providers and brokers -- Application -- Requirements -- Fee -- Rules) and 1995 c 161 s 2;
(3) RCW 48.102.015 (Commissioner may suspend, revoke, or refuse to
issue or renew license -- Information requirements -- Hearing -- Fine) and
2002 c 227 s 5 & 1995 c 161 s 3;
(4) RCW 48.102.020 (Commissioner approval required for contract
form, rate, fee, commission, or other compensation charged -- Finding
necessary for disapproval) and 1995 c 161 s 4;
(5) RCW 48.102.025 (Licensee must file annual statement) and 1995
c 161 s 5;
(6) RCW 48.102.030 (Examination of business and affairs of
applicant or licensee -- Production of information -- Expenses -- Confidentiality of information -- Recordkeeping requirements) and 1995 c
161 s 6;
(7) RCW 48.102.035 (Requirement to provide information to the
viator) and 1995 c 161 s 7;
(8) RCW 48.102.040 (Requirement for provider to obtain
information -- Medical information is confidential -- Rescission rights -- Time is of the essence) and 1995 c 161 s 8;
(9) RCW 48.102.045 (Must be licensed -- Transfer to unlicensed entity
is void -- Rights in policy restored to viator -- Exceptions allowed by
rule) and 1995 c 161 s 9;
(10) RCW 48.102.050 (Rules as necessary to implement chapter) and
1995 c 161 s 10;
(11) RCW 48.102.055 (Consumer protection act applies -- Civil
action -- Damages -- Costs -- Attorneys' fees) and 1995 c 161 s 11;
(12) RCW 48.102.900 (Short title -- 1995 c 161) and 1995 c 161 s 12;
and
(13) RCW 48.102.901 (Application of chapter 21.20 RCW -- 1995 c 161)
and 1995 c 161 s 13.