BILL REQ. #: S-4415.1
| State of Washington | 60th Legislature | 2008 Regular Session |
Read first time 01/21/08. Referred to Committee on Financial Institutions & Insurance.
AN ACT Relating to adopting the life settlements model act; adding a new chapter to Title 48 RCW; 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 before the
public, directly or indirectly, for the purpose of creating an interest
in or inducing a person to purchase or sell, assign, devise, bequest,
or transfer the death benefit or ownership of a life insurance policy
or an interest in a life insurance policy pursuant to a life settlement
contract.
(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 include 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 similar to that described in (a)
of this subsection as determined 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 or certificate
from a provider, credit enhancer, or any entity that has a direct
ownership in a policy or certificate that is the subject of a life
settlement contract, but:
(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 include 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 insurance policy;
(B) The underwriting of a life settlement contract or insurance
policy;
(C) A claim for payment or benefit pursuant to a life settlement
contract or insurance policy;
(D) Premiums paid on an insurance policy;
(E) Payments and changes in ownership or beneficiary made in
accordance with the terms of a life settlement contract or insurance
policy;
(F) The reinstatement or conversion of an insurance policy;
(G) In the solicitation, offer to enter into, or effectuation of a
life settlement contract, or insurance policy;
(H) The issuance of written evidence of life settlement contracts
or insurance;
(I) Any application for, or the existence of or any payments
related to, a loan secured directly or indirectly by any interest in a
life insurance policy; or
(J) Enter into any practice or plan which involves stranger-originated life insurance.
(ii) 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.
(iii) Employing any device, scheme, or artifice to defraud in the
business of life settlements.
(iv) In the solicitation, application, or issuance of a life
insurance 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 a licensee or other person
engaged in the business of life settlements;
(ii) Misrepresent or conceal the financial condition of a licensee,
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,
insurer, insured, owner, insurance, policy owner, or any other person
engaged in the business of life settlements or insurance;
(vi) Knowingly and with intent to defraud, enter into, broker, or
otherwise deal in a life settlement contract, the subject of which is
a life insurance policy that was obtained by presenting false
information concerning any fact material to the policy or by
concealing, for the purpose of misleading another, information
concerning any fact material to the policy, where the owner or the
owner's agent intended to defraud the policy's issuer;
(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 life insurance policy to be settled can be
expected to live as determined by a life expectancy company considering
medical records and appropriate experiential data.
(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 insurance policy or certificate, in return for the owner's
assignment, transfer, sale, devise, or bequest of the death benefit or
any portion of an insurance policy or certificate of insurance for
compensation, provided, however, that the minimum value for a life
settlement contract shall be greater than a cash surrender value or
accelerated death benefit available at the time of an application for
a life settlement contract.
(b) "Life settlement contract" also includes the transfer for
compensation or value of ownership or beneficial interest in a trust or
other entity that owns such policy if the trust or other entity was
formed or availed of for the principal purpose of acquiring one or more
life insurance contracts, which life insurance contract insures the
life of a person residing in this state.
(c) "Life settlement contract" also includes:
(i) A written agreement for a loan or other lending transaction,
secured primarily by an individual or group life insurance policy; or
(ii) A premium finance loan made for a policy on or before the date
of issuance of the policy where:
(A) 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;
(B) The owner receives on the date of the premium finance loan a
guarantee of the future life settlement value of the policy; or
(C) 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 include:
(i) A policy loan by a life insurance company pursuant to the terms
of the life insurance policy or accelerated death provisions contained
in the life insurance policy, whether issued with the original policy
or as a rider;
(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 life insurance 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 trust
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 trust
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 trust 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 life insurance
policy or certificate to be settled less any outstanding debts or
liens.
(14)(a) "Owner" means the owner of a life insurance policy or a
certificate holder under a group policy, with or without a terminal
illness, who enters or seeks to enter into a life settlement contract.
For the purposes of this chapter, an owner shall not be limited to an
owner of a life insurance policy or a certificate holder under a group
policy that insures the life of an individual with a terminal or
chronic illness or condition except where specifically addressed.
(b) "Owner" does not include:
(i) Any provider or other licensee under this chapter;
(ii) A qualified institutional buyer as defined 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 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 life insurance policy, which
loan is secured by an interest in the life insurance 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 include:
(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 life insurance policy or certificate issued pursuant to a group
life insurance policy as collateral for a loan;
(iii) The insurer of a life insurance 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 life insurance
policy or certificate issued pursuant to a group life insurance policy,
for compensation or anything of value less than the expected death
benefit payable under the policy;
(v) A purchaser;
(vi) Any authorized or eligible insurer that provides stop loss
coverage 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 life
settlement policy from a provider.
(20) "Purchased policy" means a policy or group certificate 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 life insurance policy or a certificate issued
pursuant to a group life insurance 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 life insurance policy or certificate
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" is a practice or plan to
initiate a life insurance policy for the benefit of a third-party
investor who, at the time of policy origination, has no insurable
interest in the insured. 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 himself or itself, and where, at the time of
inception, there is an arrangement or agreement, whether verbal or
written, to directly or indirectly transfer the ownership of the policy
and/or the policy benefits to a third party. Trusts that are created
to give the appearance of insurable interest and are used to initiate
policies for investors violate insurable interest laws and the
prohibition against wagering on life. 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) Application for a provider or broker license shall be made to
the commissioner by the applicant on a form prescribed by the
commissioner, and the application shall be accompanied by a fee in an
amount established by the commissioner. However, the license and
renewal fees for a provider license shall be reasonable and the license
and renewal fees for a broker license shall not exceed those
established for an insurance producer, as those fees are otherwise
provided for in this chapter.
(3) A life insurance producer who has been duly licensed as a
resident insurance producer with a life line of authority in this state
or his or her home state for at least one year and is licensed as a
nonresident producer in this state meets the licensing requirements of
this section and is permitted to operate as a broker.
(4) 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 is acting as a broker on a form prescribed by the
commissioner, and shall pay any applicable fee to be determined by the
commissioner. Notification shall include an acknowledgement by the
life insurance producer that he or she will operate as a broker in
accordance with this chapter.
(5) The insurer that issued the policy that is the subject of a
life settlement contract is not responsible for any act or omission of
a broker, provider, or purchaser arising out of or in connection with
the life settlement transaction, unless the insurer receives
compensation for the placement of a life settlement contract from the
provider, purchaser, or broker in connection with the life settlement
contract.
(6) 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.
(7) Licenses are valid for the time established by the commissioner
and may be renewed into a new period under RCW 48.17.500(4). As
specified by subsection (2) of this section, the renewal fee for a
provider shall not exceed a reasonable fee. Failure to pay the fee
within the terms prescribed shall result in the automatic revocation of
the license requiring periodic renewal.
(8) The term of a provider license shall be equal to that of a
domestic stock life insurance company and the term of a broker license
shall be equal to that of an insurance producer license. Licenses
requiring periodic renewal may be renewed on their anniversary date
upon payment of the periodic renewal fee as specified in subsection (2)
of this section. Failure to pay the fees on or before the renewal date
shall result in expiration of the license.
(9) The applicant shall provide such information as the
commissioner may require on forms prepared by the commissioner. The
commissioner has the authority, at any time, to require such an
applicant to fully disclose the identity of its stockholders, except
stockholders owning fewer than ten percent of the shares of an
applicant whose shares are publicly traded, partners, officers, and
employees, and the commissioner may, in the exercise of the
commissioner's sole discretion, refuse to issue such a license in the
name of any person if not satisfied that any officer, employee,
stockholder, or partner thereof who may materially influence the
applicant's conduct meets the standards of this chapter.
(10) 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.
(11) Upon the filing of an application and the payment of the
license fee, the commissioner shall make an investigation of each
applicant and may issue a license if the commissioner finds that the
applicant:
(a) If a provider, 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) 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
(e) Has provided to the commissioner an antifraud plan that meets
the requirements of section 14 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.
(12) The commissioner shall not issue any license to any
nonresident applicant, unless a written designation of an agent for
service of process is filed and maintained with the commissioner or
unless the applicant has filed with the commissioner the applicant's
written irrevocable consent that any action against the applicant may
be commenced against the applicant by service of process on the
commissioner.
(13) Each licensee shall file with the commissioner on or before
the first day of March of each year an annual statement containing the
information as the commissioner by rule may prescribe.
(14) A provider may not use any person to perform the functions of
a broker unless the person holds a current, valid license as a broker,
and as provided in this section.
(15) 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 section.
(16) A provider or broker shall provide to the commissioner new or
revised information about officers, ten percent or more stockholders,
partners, directors, members, or designated employees within thirty
days of the change.
(17) An individual licensed as a broker shall complete on a
biennial basis fifteen hours of training related to life settlements
and life settlement transactions, as required by the commissioner.
However, a life insurance producer who is operating as a broker
pursuant to this section is not subject to the requirements of this
subsection. Any person failing to meet the requirements of this
subsection is subject to the penalties imposed by the commissioner.
NEW SECTION. Sec. 4
(a) There was any material misrepresentation in the application for
the license;
(b) The licensee or any officer, partner, member, or director has
been guilty of fraudulent or dishonest practices, is subject to a final
administrative action or is otherwise shown to be untrustworthy or
incompetent to act as a licensee;
(c) The provider demonstrates a pattern of unreasonably withholding
payments to policy owners;
(d) The licensee no longer meets the requirements for initial
licensure;
(e) The licensee or any officer, partner, member, or director has
been convicted of a felony, or of any misdemeanor of which criminal
fraud is an element; or the licensee has pleaded guilty or nolo
contendere with respect to any felony or any misdemeanor of which
criminal fraud or moral turpitude is an element, regardless whether a
judgment of conviction has been entered by the court;
(f) The provider has entered into any life settlement contract that
has not been approved under this chapter;
(g) The provider has failed to honor contractual obligations set
out in a life settlement contract;
(h) 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
(i) The licensee or any officer, partner, member, or key management
personnel has violated any of the provisions of this chapter.
(2) Before the commissioner denies a license application or
suspends, revokes, or refuses to renew the license of any licensee
under this chapter, the commissioner shall conduct a hearing in
accordance with this state's laws governing administrative hearings.
NEW SECTION. Sec. 5
(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
8, 9, 11, and 15(2) 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. 6
(a) This information is limited to only those transactions where
the insured is a resident of this state and does not include individual
transaction data regarding the business of life settlements or
information that there is a reasonable basis to believe could be used
to identify the owner or the insured.
(b) Every provider that willfully fails to file an annual statement
as required in this section, or willfully fails to reply within thirty
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 two hundred fifty dollars per day of delay, not to exceed
twenty-five thousand dollars in the aggregate, for each such failure.
(2) Except as otherwise allowed or required by law, a provider,
broker, insurance company, insurance producer, information bureau,
rating agency or company, or any other person with actual knowledge of
an insured's identity, shall not disclose the identity of an insured or
information that there is a reasonable basis to believe could be used
to identify the insured or the insured's financial or medical
information to any other person unless the disclosure:
(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 section 13 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.
(3) 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), and all other
state and federal laws relating to confidentiality of nonpublic
personal information.
NEW SECTION. Sec. 7
(2) In lieu of an examination 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 on the licensee
as prepared by the commissioner for the licensee's state of domicile or
port-of-entry state.
(3) Names of, 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.
(4) 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.
(5)(a) Upon determining that an examination should be conducted,
the commissioner shall issue an examination warrant appointing one or
more examiners to perform the examination and instructing them as to
the scope of the examination. In conducting the examination, the
examiner shall use methods common to the examination of any life
settlement licensee and should use those guidelines and procedures set
forth in an examiners' handbook adopted by a national organization.
(b) Every licensee or person from whom information is sought, its
officers, directors, and agents shall provide to the examiners timely,
convenient, and free access at all reasonable hours at its offices to
all books, records, accounts, papers, documents, assets, and computer
or other recordings relating to the property, assets, business, and
affairs of the licensee being examined. The officers, directors,
employees, and agents of the licensee or person shall facilitate the
examination and aid in the examination so far as it is in their power
to do so. The refusal of a licensee, by its officers, directors,
employees, or agents to submit to examination or to comply with any
reasonable written request of the commissioner shall be grounds for
suspension or refusal of, or nonrenewal of any license or authority
held by the licensee to engage in the life settlement business or other
business subject to the commissioner's jurisdiction. Any proceedings
for suspension, revocation, or refusal to renew any license or
authority shall be conducted under RCW 48.17.540.
(c) The commissioner shall have the power to issue subpoenas, to
administer oaths, and to examine under oath any person as to any matter
pertinent to the examination. Upon the failure or refusal of a person
to obey a subpoena, the commissioner may petition a court of competent
jurisdiction, and upon proper showing, the court may enter an order
compelling the witness to appear and testify or produce documentary
evidence.
(d) When making an examination under this chapter, the commissioner
may retain attorneys, appraisers, independent actuaries, independent
certified public accountants, or other professionals and specialists as
examiners, the reasonable cost of which shall be borne by the licensee
that is the subject of the examination.
(e) This chapter does not limit the commissioner's authority to
terminate or suspend an examination in order to pursue other legal or
regulatory action pursuant to the insurance laws of this state.
Findings of fact and conclusions made pursuant to any examination shall
be prima facie evidence in any legal or regulatory action.
(f) This chapter does not limit the commissioner's authority to use
and, if appropriate, to make public any final or preliminary
examination report, any examiner or licensee work papers or other
documents, or any other information discovered or developed during the
course of any examination in the furtherance of any legal or regulatory
action which the commissioner may, in his or her sole discretion, deem
appropriate.
(6)(a) Examination reports shall be comprised of only facts
appearing upon the books, from the testimony of its officers or agents
or other persons examined concerning its affairs, and such conclusions
and recommendations as the examiners find reasonably warranted from the
facts.
(b) No later than sixty days following completion of the
examination, the examiner in charge shall file with the commissioner a
verified written report of examination under oath. Upon receipt of the
verified report, the commissioner shall transmit the report to the
licensee examined, together with a notice that shall afford the
licensee examined a reasonable opportunity of not more than thirty days
(i) to make a written submission or rebuttal with respect to any
matters contained in the examination report and which shall become part
of the report, or (ii) to request a hearing on any matter in dispute.
(c) In the event the commissioner determines that regulatory action
is appropriate as a result of an examination, the commissioner may
initiate any proceedings or actions provided by law.
(7)(a) Names and individual identification data for all owners,
purchasers, and insureds shall be considered private and confidential
information and shall not be disclosed by the commissioner, unless the
disclosure is to another regulator or is required by law.
(b) Except as otherwise provided in this chapter, all examination
reports, working papers, recorded information, documents, and copies
thereof produced by, obtained by, or disclosed to the commissioner or
any other person in the course of an examination made under this
chapter, or in the course of analysis or investigation by the
commissioner of the financial condition or market conduct of a licensee
shall be confidential by law and privileged, shall not be subject to
chapter 42.56 RCW, subpoena, and discovery, or admissible in evidence
in any private civil action. The commissioner is authorized to use the
documents, materials, or other information in the furtherance of any
regulatory or legal action brought as part of the commissioner's
official duties. The licensee being examined may have access to all
documents used to make the report.
(8)(a) An examiner may not be appointed by the commissioner if the
examiner, either directly or indirectly, has a conflict of interest or
is affiliated with the management of or owns a pecuniary interest in
any person subject to examination under this chapter. This section
does not automatically preclude an examiner from being:
(i) An owner;
(ii) An insured in a life settlement contract or insurance policy;
or
(iii) A beneficiary in an insurance policy that is proposed for a
life settlement contract.
(b) Notwithstanding the requirements of this subsection, the
commissioner may retain from time to time, on an individual basis,
qualified actuaries, certified public accountants, or other similar
individuals who are independently practicing their professions, even
though these persons may from time to time be similarly employed or
retained by persons subject to examination under this chapter.
(9)(a) A cause of action shall not arise nor shall any liability be
imposed against the commissioner, the commissioner's authorized
representatives, or any examiner appointed by the commissioner for any
statements made or conduct performed in good faith while carrying out
the provisions of this chapter.
(b) A cause of action shall not arise, nor shall any liability be
imposed against any person for the act of communicating or delivering
information or data to the commissioner or the commissioner's
authorized representative or examiner pursuant to an examination made
under this chapter, if the act of communication or delivery was
performed in good faith and without fraudulent intent or the intent to
deceive. This subsection (9)(b) does not abrogate or modify in any way
any common law or statutory privilege or immunity existing prior to the
effective date of this section enjoyed by any person identified in (a)
of this subsection.
(c) A person identified in (a) or (b) 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.
(10) The commissioner may investigate suspected fraudulent life
settlement acts and persons engaged in the business of life
settlements.
(11) The cost of examinations under this chapter shall be the same
as for a person under RCW 48.03.060.
NEW SECTION. Sec. 8
(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 for the sole purpose of, or
with an 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. 9
(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 or certificate of
a group policy to be forfeited by the owner and that assistance should
be sought from a professional financial advisor;
(h) The amount and method of calculating the compensation paid or
to be paid to the broker, or any other person acting for the owner in
connection with the transaction, wherein the term compensation includes
anything of value paid or given;
(i) The date by which the funds will be available to the owner and
the transmitter of the funds;
(j) The fact that the commissioner shall require delivery of a
buyer's guide or a similar consumer advisory package in the form
prescribed by the commissioner to owners during the solicitation
process;
(k) 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.";
(1) The fact that the commissioner shall require providers and
brokers to print separate signed fraud warnings on their applications
and on their life settlement contracts is as follows:
"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.";
(m) 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;
(n) The affiliation, if any, between the provider and the issuer of
the insurance policy to be settled;
(o) 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;
(p) The document shall include the name, address, and telephone
number of the provider;
(q) 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
(r) 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 17 of this
act.
NEW SECTION. Sec. 10
(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 13 of this act.
(2) If the financing does not violate section 13 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. 11
(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, 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 9(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 10(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. 12
(2)(a) If there is more than one owner on a single policy, and the
owners are residents of different states, the life settlement contract
shall be governed by the law of the state in which the owner having the
largest percentage ownership resides or, if the owners hold equal
ownership, the state of residence of one owner agreed upon in writing
by all of the owners. The law of the state of the insured shall govern
in the event that equal owners fail to agree in writing upon a state of
residence for jurisdictional purposes.
(b) A provider from this state who enters into a life settlement
contract with an owner who is a resident of another state that has
enacted statutes or adopted regulations governing life settlement
contracts, shall be governed in the effectuation of that life
settlement contract by the statutes and regulations of the owner's
state of residence. If the state in which the owner is a resident has
not enacted statutes or regulations governing life settlement
contracts, the provider shall give the owner notice that neither state
regulates the transaction upon which 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.
(c) If there is a conflict in the laws that apply to an owner and
a purchaser in any individual transaction, the laws of the state that
apply to the owner shall take precedence and the provider shall comply
with those laws.
NEW SECTION. Sec. 13
(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 for the purpose of or with an emphasis on settling the
policy;
(e) Enter into a premium finance agreement with any person or
agency, or any person affiliated with such person or agency, pursuant
to which such person shall receive any proceeds, fees, or other
consideration, directly or indirectly, from the policy or owner of the
policy or any other person with respect to the premium finance
agreement or any settlement contract or other transaction related to
such policy that are in addition to the amounts required to pay the
principal, interest, and service charges related to policy premiums
pursuant to the premium finance agreement or subsequent sale of such
agreement. However, any payments, charges, fees, or other amounts in
addition to the amounts required to pay the principal, interest, and
service charges related to policy premiums paid under the premium
finance agreement shall be remitted to the original owner of the policy
or to his or her estate if he or she is not living at the time of the
determination of the 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;
(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;
(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; or
(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.
(2) A violation of this section constitutes a fraudulent life
settlement act.
NEW SECTION. Sec. 14
(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) The licensee 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 (c) 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 any state
securities law 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 insurance department; 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 a licensee may request and
the commissioner may grant, such modifications of the following
required initiatives as necessary to ensure an effective antifraud
program. The modifications may be more or less restrictive than the
required initiatives so long as the modifications may reasonably be
expected to accomplish the purpose of this section. Antifraud
initiatives shall include:
(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. 15
(2) Any person damaged by the acts of another person in violation
of this chapter or any rule implementing this chapter, may bring a
civil action for damages against the person committing the violation in
a court of competent jurisdiction.
(3) The commissioner may issue a cease and desist order upon a
person who violates any provision of this chapter, any rule or order
adopted by the commissioner, or any written agreement entered into with
the commissioner, in accordance with chapter 34.05 RCW.
(4) When the commissioner finds that such an action presents an
immediate danger to the public and requires an immediate final order,
he or she may issue an emergency cease and desist order reciting with
particularity the facts underlying such findings. The emergency cease
and desist order is effective immediately upon service of a copy of the
order on the respondent and remains effective for ninety days. If the
commissioner begins nonemergency cease and desist proceedings under
subsection (1) of this section, the emergency cease and desist order
remains effective, absent an order by a court of competent
jurisdiction. In the event of a willful violation of this chapter, the
trial court may award statutory damages in addition to actual damages
in an additional amount up to three times the actual damage award.
This chapter may not be waived by agreement. No choice of law
provision may be utilized to prevent the application of this chapter to
any settlement in which a party to the settlement is a resident of this
state.
NEW SECTION. Sec. 16
(2) For criminal liability purposes, a person that commits a
fraudulent life settlement act is guilty of committing insurance fraud
and shall be subject to additional penalties under law.
(3) The commissioner shall be empowered to levy a civil penalty not
exceeding one thousand dollars and the amount of the claim for each
violation upon any person, including those persons and their employees
licensed pursuant to this chapter, who is found to have committed a
fraudulent life settlement act or violated any other provision of this
chapter.
(4) The license of a person licensed under this chapter that
commits a fraudulent life settlement act shall be revoked as provided
in RCW 48.17.530.
NEW SECTION. Sec. 17
NEW SECTION. Sec. 18
(2) A person who has lawfully negotiated life settlement contracts
between any owner residing in this state and one or more providers for
at least one year immediately prior to the effective date of this act
may continue to do so pending approval or disapproval of that person's
application for a license as long as the application is filed with the
commissioner not later than thirty days after publication by the
commissioner of an application form and instructions for licensure of
brokers. If the publication of the application form and instructions
is prior to the effective date of this act, then the filing of the
application shall not be later than thirty days after the effective
date of this act. Any person transacting business in this state under
this subsection shall be obligated to comply with all other
requirements of this chapter.
NEW SECTION. Sec. 19 Captions used in this act are not any part
of the law.
NEW SECTION. Sec. 20 Sections 1 through 19 of this act
constitute a new chapter in Title