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