THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY FRANKEL, DeLUCA, MUSTIO, McILVAINE SMITH, BELFANTI, BRADFORD, D. COSTA, GERGELY, HALUSKA, JOSEPHS, KORTZ, MATZIE, MUNDY, PASHINSKI, PAYTON, SIPTROTH, M. SMITH, STABACK AND YOUNGBLOOD, JANUARY 5, 2010

REFERRED TO COMMITTEE ON INSURANCE, JANUARY 5, 2010  

AN ACT

Amending the act of July 4, 2002 (P.L.699, No.107), entitled "An

act providing for the regulation of viatical settlements and

for powers and duties of the Insurance Department," further

providing for definitions, for reporting requirements and

confidentiality and for disclosure; providing for disclosure

to insurer; further providing for general rules and for

prohibited practices; and providing for additional prohibited

practices and conflicts of interest.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  The definitions of "advertising," "fraudulent

viatical settlement act," "special purpose entity," "viatical

settlement broker," "viatical settlement contract," "viatical

settlement provider" and "viator" in section 2 of the act of

July 4, 2002 (P.L.699, No.107), known as the Viatical

Settlements Act, are amended and the section is amended by

adding definitions to read:

Section 2.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Advertising."  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 sell,

assign, devise, bequest or transfer the death benefit or

ownership of a life insurance policy pursuant to a viatical

settlement contract.

* * *

"Fraudulent viatical settlement act."  [An act or omission

committed by any person who, knowingly or 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

commit any of the following acts:

(1)  Presenting, causing to be presented or preparing

with knowledge or belief that it will be presented to or by a

viatical settlement provider, viatical settlement broker,

viatical settlement purchaser, financing entity, insurer,

insurance broker, insurance agent 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:

(i)  An application for the issuance of a viatical

settlement contract or insurance policy.

(ii)  The underwriting of a viatical settlement

contract or insurance policy.

(iii)  A claim for payment or benefit pursuant to a

viatical settlement contract or insurance policy.

(iv)  Premiums paid on an insurance policy.

(v)  Payments and changes in ownership or beneficiary

made in accordance with the terms of a viatical

settlement contract or insurance policy.

(vi)  The reinstatement or conversion of an insurance

policy.

(vii)  The solicitation, offer, effectuation or sale

of a viatical settlement contract or insurance policy.

(viii)  The issuance of written evidence of a

viatical settlement contract or insurance.

(ix)  A financing transaction.

(2)  In the furtherance of a fraud or to prevent the

detection of a fraud:

(i)  destroys, removes, conceals or alters the assets

or records of a licensee or other person engaged in the

business of viatical settlements;

(ii)  misrepresents or conceals the financial

condition of a licensee or insurer;

(iii)  transacts the business of viatical settlements

in violation of laws requiring a license, certificate of

authority or other legal authority for the transaction of

the business of viatical settlements; or

(iv)  files with the Insurance Commissioner, the

Insurance Department or the chief insurance regulatory

official or agency of another jurisdiction a document

containing false information or otherwise conceals

information about a material fact.

(3)  Presenting, causing to be presented or preparing

with knowledge or reason to believe that it will be presented

to or by a viatical settlement provider, viatical settlement

broker, insurer, insurance agent, financing entity, viatical

settlement purchaser or any other person, in connection with

a viatical settlement transaction or insurance transaction,

an insurance policy, knowing the policy was fraudulently

obtained by the insured, owner or any agent thereof.

(4)  Embezzlement, theft, misappropriation or conversion

of moneys, funds, premiums, credits or other property of a

viatical settlement provider, insurer, insured, viator,

insurance policy owner or any other person engaged in the

business of viatical settlements or insurance.

(5)  Attempting to commit, assisting, aiding or abetting

in the commission of or the conspiracy to commit the acts or

omissions specified in this subsection.] Includes:

(1)  acts or omissions committed by a person who

knowingly or 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:

(i)  presenting, causing to be presented or preparing

with knowledge or belief it will be presented to or by a

viatical settlement provider, viatical settlement broker,

viatical settlement purchaser, financing entity, insurer,

insurance producer or another 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

viatical settlement contract or insurance policy;

(B)  the underwriting of a viatical settlement

contract or insurance policy;

(C)  a claim for payment or benefit pursuant to a

viatical 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

viatical settlement contract or insurance policy;

(F)  the reinstatement or conversion of an

insurance policy;

(G)  in the solicitation, offer, effectuation or

sale of a viatical settlement contract or insurance

policy;

(H)  the issuance of written evidence of viatical

settlement contract or insurance;

(I)  a financing transaction; or

(J)  enter into any practice or plan which

involves STOLI; or

(ii)  employing a plan, financial structure, device,

scheme or artifice to defraud related to viaticated

policies; or

(2)  in the furtherance of a fraud or to prevent the

detection of a fraud, a person commits or permits his

employees or 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 viatical

settlements;

(ii)  misrepresent or conceal the financial condition

of a licensee, financing entity, insurer or other person;

(iii)  transact the business of viatical settlements

in violation of laws requiring a license, certificate of

authority or other legal authority for the transaction of

the business of viatical settlements; or

(iv)  file with the commissioner or the equivalent

chief insurance regulatory official of another

jurisdiction a document containing false information or

otherwise concealing information about a material fact

from the commissioner;

(3)  embezzlement, theft, misappropriation or conversion

of moneys, funds, premiums, credits or other property of a

viatical settlement provider, insurer, insured, viator,

insurance policy owner or any other person engaged in the

business of viatical settlements or insurance;

(4)  recklessly entering into, negotiating, brokering or

otherwise dealing in a viatical settlement contract, the

subject of which is a life insurance policy obtained by

presenting false information concerning a fact material to

the policy or by concealing, for the purpose of misleading

another, information concerning a fact material to the

policy, where the person or the persons intended to defraud

the policy's issuer, the viatical settlement provider or the

viator;

(5)  facilitating the change of state of ownership of a

policy or certificate or the state of residency of a viator

to a state or jurisdiction that does not have a law similar

to this act for the express purposes of evading or avoiding

the provisions of this act; or

(6)  attempting to commit, assisting, aiding or abetting

in the commission of or conspiracy to commit the acts or

omissions specified in this definition.

* * *

"Life insurance producer."  A person licensed in this

Commonwealth as a resident or nonresident insurance producer who

has received qualification or authority for life insurance

coverage or a life line of coverage under Article VI-A of the

act of May 17, 1921 (P.L.789, No.285), known as The Insurance

Department Act of 1921.

* * *

"Premium finance loan."  A loan made primarily for the

purposes of making premium payments on a life insurance policy

which is secured by an interest in the life insurance policy.

"Recklessly."  Consciously engaging in conduct in clear,

unjustifiable disregard of a substantial likelihood of the

existence of the relevant facts or risks with the disregard

involving a gross deviation from acceptable standards of

conduct.

* * *

"Special purpose entity."  [A corporation, partnership,

trust, limited liability company or other similar entity other

than a natural person formed solely to provide, either directly

or indirectly, access to institutional capital markets for a

financing entity or licensed viatical settlement provider.] A

corporation, partnership, trust, limited liability company or

other similar entity formed solely to provide either direct or

indirect access to institutional capital markets:

(1)  for a financing entity or licensed viatical

settlement provider; or

(2)  (i)  in connection with a transaction in which the

securities in the special purposes entity are acquired by

the viator or by qualified institutional buyers as

defined in 17 CFR § 230.144 (relating to persons deemed

not to be engaged in a distribution and therefore not

underwriters); or

(ii)  the securities pay a fixed rate of return

commensurate with established asset-backed institutional

capital markets.

"Stanger-originated life insurance" or "STOLI."  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. STOLI practices include,

but are not limited to:

(1)  Cases in which life insurance is purchased with

resources or guarantees from or through a person or entity

who, at the time of inception, has a verbal or written

arrangement or agreement to directly or indirectly transfer

the ownership of the policy or the policy benefits to a third

party.

(2)  Trusts created to give the appearance of insurable

interest which are used to initiate policies for investors,

violate or evade insurable interest laws and the prohibition

against wagering on life.

* * *

"Viatical settlement broker."  [A person that on behalf of a

viator and for a fee, commission or other valuable consideration

offers to negotiate or attempts to negotiate viatical

settlements between a viator and one or more viatical settlement

providers. The term does not include an attorney, certified

public accountant or financial planner accredited by a

nationally recognized accreditation agency who is retained to

represent the viator and whose compensation is not paid directly

or indirectly by the viatical settlement provider or purchaser.

The term also does not include an investment advisor registered

under the Investment Advisers Act of 1940 (15 U.S.C. § 80b-1 et

seq.) or the act of December 5, 1972 (P.L.1280, No.284), known

as the Pennsylvania Securities Act of 1972, possessing a

designation recognized by the Pennsylvania Securities Commission

for the purposes of waiving any examination requirement under

the Pennsylvania Securities Act of 1972, who is retained to

represent the viator and whose compensation is not paid directly

or indirectly by the viatical settlement provider or purchaser.]

A person, including a life insurance producer working

exclusively on behalf of a viator and for a fee, commission or

other valuable consideration, who offers or attempts to

negotiate viatical settlement contracts between a viator and one

or more viatical settlement providers or one or more viatical

settlement brokers. Notwithstanding the manner in which the

viatical settlement broker is compensated, a viatical settlement

broker is deemed to represent only the viator and not the

insurer or the viatical settlement provider and owes a fiduciary

duty to the viator to act according to the viator's instructions

and in the best interest of the viator. The term does not

include an attorney, certified public accountant or a financial

planner accredited by a nationally recognized accreditation

agency retained to represent the viator whose compensation is

not paid directly or indirectly by the viatical settlement

provider or purchaser.

"Viatical settlement contract."  [A written agreement entered

into between a viatical settlement provider and a person owning

a policy or group policy establishing the terms under which

compensation or anything of value will be paid, 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 any portion of the insurance policy or

certificate of insurance. The term also includes a contract for

a loan or other financing transaction secured primarily by an

individual or group life insurance policy, other than a loan by

a life insurance company pursuant to the terms of the life

insurance contract, or a loan secured by the cash value of a

policy. A viatical settlement contract includes an agreement to

transfer ownership or change the beneficiary designation at a

later date regardless of the date that compensation is paid to

the viator. This term shall not include a written agreement

entered into between a viator and a person having an insurable

interest in the viator's life.]

(1)  A written agreement between a viator and a viatical

settlement provider or affiliate of the viatical settlement

provider establishing the terms under which compensation or

anything of value is or will be paid, which compensation or

value is less than the expected death benefits of the policy,

in return for the viator's present or future assignment,

transfer, sale, devise or bequest of the death benefit or

ownership of a portion of the insurance policy or certificate

of insurance. The term also includes the transfer of

ownership or beneficial interest in a trust or other entity

owning a life insurance policy for compensation or value if

the trust or other entity was formed or availed of for the

principal purpose of acquiring one or more life insurance

contracts which insure the life of a person residing in this

Commonwealth.

(2)  A premium finance loan made for a life insurance

policy by a lender to the viator on, before or after the date

of issuance of the policy where:

(i)  the viator or the insured receives on or before

the date of the premium finance loan a guarantee of a

future viatical settlement value of the policy; or

(ii)  the viator or the insured agrees on the date of

the premium finance loan to sell the policy or a portion

of its death benefit on a date following the issuance of

the policy.

(3)  The term does not include:

(i)  a policy loan or accelerated death benefit made

by the insurer under the policy's terms;

(ii)  loan proceeds used solely to pay:

(A)  premiums for the policy; or

(B)  the costs of the loan, including, but not

limited to, interest, arrangement fees, utilization

fees and similar fees, closing costs, legal fees and

expenses, trustee fees and expenses, and third-party

collateral provider fees and expenses, including fees

payable to letter of credit issuers;

(iii)  a loan made by a bank or other licensed

financial institution in which the lender takes an

interest in a life insurance policy solely to secure

repayment of a loan or, if there is a default on the loan

and the policy is transferred, the transfer of the policy

by the lender, provided the default itself is not under

an agreement or understanding with another person for the

purpose of evading regulation under this act;

(iv)  an agreement where all the parties are closely

related to the insured by blood or law or have a lawful

substantial economic interest in the continued life,

health and bodily safety of the person insured or trusts

established primarily for the benefit of the parties;

(v)  a 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;

(vi)  a bona fide business succession planning

arrangement:

(A)  between one or more shareholders in a

corporation or between a corporation and one or more

of its shareholders or one or more trusts established

by its shareholders;

(B)  between one or more partners in a

partnership or between a partnership and one or more

of its partners or one or more trusts established by

its partners; or

(C)  between one or more members in a limited

liability company or between a limited liability

company and one or more of its members or one or more

trusts established by its members;

(vii)  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

(viii)  another contract, transaction or arrangement

exempted from the definition of viatical settlement

contract by the commissioner based on a determination

that the contract, transaction or arrangement is not of

the type intended to be regulated by this act.

["Viatical settlement provider."  A person other than a

viator that enters into or effectuates a viatical settlement

contract. The term does not include:

(1)  a bank, bank and trust, savings bank, savings and

loan 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 pursuant to the contract;

(3)  an authorized or eligible insurer that provides stop

loss coverage to a viatical settlement provider, purchaser,

financing entity, special purpose entity or related provider

trust;

(4)  a natural person who enters into or effectuates 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;

(5)  a financing entity;

(6)  a special purpose entity;

(7)  a related provider trust;

(8)  a viatical settlement purchaser; or

(9)  an accredited investor, qualified institutional

buyer or qualified purchaser as defined respectively in 17

CFR § 230.501 (relating to definitions and terms used in

Regulation D), 17 CFR § 230.144A (relating to private resales

of securities to institutions), section 18(b)(3) of the

Securities Act of 1933 (48 Stat. 74, 15 U.S.C. § 77c et seq.)

and who purchases a viaticated policy from a licensed

viatical settlement provider.]

"Viatical settlement provider."  A person other than a viator

entering into or effectuating a viatical settlement contract

with a viator residing in this Commonwealth. The term does not

include:

(1)  a bank, savings bank, savings and loan association,

credit union or other licensed lending institution that takes

an assignment of a life insurance policy solely as collateral

for a loan;

(2)  a premium finance company that takes an assignment

of a life insurance policy solely as collateral for a loan;

(3)  the issuer of the life insurance policy;

(4)  an authorized or eligible insurer that provides stop

loss coverage or financial guaranty insurance to a viatical

settlement provider, purchaser, financing entity, special

purpose entity or related provider trust;

(5)  a natural person who enters into or effectuates no

more than one agreement in a calendar year for the transfer

of life insurance policies for a value less than the expected

death benefit;

(6)  a financing entity;

(7)  a special purpose entity;

(8)  a related provider trust;

(9)  a viatical settlement purchaser; or

(10)  another person the commissioner determines is not

the type of person intended to be covered by the definition

of viatical settlement provider.

* * *

["Viator."  The owner of a life insurance policy or a

certificate holder under a group policy who enters or seeks to

enter into a viatical settlement contract. For the purposes of

this act, a viator shall not be limited to an owner of a life

insurance policy or a certificate holder under a group policy

insuring the life of an individual with a terminal or chronic

illness or condition except where specifically addressed in this

act. The term does not include:

(1)  a licensee under this act;

(2)  an accredited investor or qualified institutional

buyer as defined respectively in 17 CFR § 230.501 (relating

to definitions and terms used in Regulation D), 17 CFR §

230.144A (relating to private resales of securities to

institutions);

(3)  a financing entity;

(4)  a special purpose entity; or

(5)  a related provider trust.]

"Viator."  The owner of a life insurance policy or a

certificate holder under a group policy who resides in this

Commonwealth and enters or seeks to enter into a viatical

settlement contract. For the purposes of this act, a viator

shall not be limited to an owner of a life insurance policy or a

certificate holder under a group policy insuring the life of an

individual with a terminal or chronic illness or condition

except where specifically addressed. If there is more than one

viator on a single policy and the viators are residents of

different states, the transaction shall be governed by the law

of the state in which the viator having the largest percentage

ownership resides or, if the viators hold equal ownership, the

state of residence of one viator agreed upon in writing by all

the viators. The term does not include:

(1)  a licensee under this act, including a life

insurance producer acting as a viatical settlement broker

pursuant to this act;

(2)  a qualified institutional buyer as defined in 17 CFR

§ 230.144A (relating to private resales of securities to

institutions);

(3)  a financing entity;

(4)  a special purpose entity; or

(5)  a related provider trust.

Section 2.  Section 6(b)(2) of the act is amended to read:

Section 6.  Reporting requirements and confidentiality.

* * *

(b)  Confidentiality.--Except as otherwise allowed or

required by law, a viatical settlement provider, viatical

settlement broker, insurance company, insurance agent, insurance

broker, information bureau, rating agency or company or any

other person with actual knowledge of an insured's identity,

health information or financial information may not disclose

that information as an insured to any other person unless the

disclosure is:

* * *

(2)  [necessary to effect a viatical settlement purchase

agreement between the viatical settlement purchaser and a

viatical settlement provider, and the viator and insured have

provided prior written consent to the disclosure] (Reserved);

* * *

Section 3.  Section 7(a)(5), (8) and (9) of the act are

amended and the subsection is amended by adding paragraphs to

read:

Section 7.  Disclosure.

(a)  General rule.--With each application for a viatical

settlement, a viatical settlement provider or viatical

settlement broker shall provide the viator with at least the

following disclosures no later than the time the application for

the viatical settlement contract is signed by all parties. The

disclosures shall be provided in a separate document that is

signed by the viator and the viatical settlement provider or

viatical settlement broker and shall provide the following

information:

* * *

(5)  [the viator has the right to rescind a viatical

settlement contract for 15 calendar days from the receipt of

the viatical settlement proceeds by the viator as provided in

section 8(g). If the insured dies during the rescission

period, the settlement contract shall be deemed to have been

rescinded, subject to repayment of all viatical settlement

proceeds and other payments made by the viatical settlement

provider on behalf of the viator or insured to the viatical

settlement provider;] the viator has the right to rescind a

viatical settlement contract before the earlier of 60

calendar days after the date upon which the viatical

settlement contract is executed by all parties or 30 calendar

days after the viatical settlement proceeds have been paid to

the viator. Rescission, if exercised by the viator, is

effective only if both notice of the rescission is given and

the viator repays the proceeds and premiums, loans and loan

interest paid on account of the viatical settlement within

the rescission period. If the insured dies during the

rescission period, the viatical settlement contract shall be

deemed to have been rescinded, subject to repayment by the

viator or the viator's estate of all viatical settlement

proceeds and premiums, loans and loan interest on the

viatical settlement within 60 days of the insured's death;

* * *

(8)  all medical, financial or personal information

solicited or obtained by a viatical settlement provider or

viatical settlement 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 viatical settlement between the viator and the

viatical settlement provider and/or financing entities. If a

viator is asked to provide this information, the viator must

consent to the disclosure, and failure to consent may affect

the viator's ability to viaticate a life insurance policy.

The information may be provided to viatical settlement

purchasers, financing entities, special purpose entities or

related provider trusts; [and]

(9)  all information provided by a viator or insured to a

viatical settlement provider or viatical settlement broker

will be shared with the insurer that issued the life

insurance policy that is the subject of the viatical

transaction[.];

(10)  following the execution of a viatical contract, the

insured may be contacted for the purpose of determining the

insured's health status and to confirm the insured's

residential or business street address and telephone number

or as otherwise provided in this act. This contact shall be

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. The contacts shall be made only by a viatical

settlement provider licensed in this Commonwealth in which

the viator resided at the time of the viatical settlement or

by the authorized representative of a duly licensed viatical

settlement provider; and

(11)  the fact that a future change of ownership could

limit the insured's ability to purchase additional life

insurance because there is a limit to how much coverage

insurers may issue on one life.

Section 4.  The act is amended by adding a section to read:

Section 7.1.  Disclosure to insurer.

Prior to the initiation of a plan, transaction or series of

transactions, a viatical settlement broker or viatical

settlement provider shall fully disclose to an insurer a plan,

transaction or series of transactions to which the viatical

settlement broker or viatical settlement provider is a party, to

originate, renew, continue or finance a life insurance policy

with the insurer for the purpose of engaging in the business of

viatical settlements prior to or during the first five years

after the issuance of the policy.

Section 5.  Section 8(e) of the act is amended by adding a

paragraph to read:

Section 8.  General rules.

* * *

(e)  Verification of coverage.--

* * *

(4)  The insurer shall not unreasonably delay effecting

change of ownership or beneficiary with a viatical settlement

contract lawfully entered into in this Commonwealth or with a

resident of this Commonwealth.

* * *

Section 6.  Section 9 of the act is amended to read:

Section 9.  Prohibited practices.

[It is a violation of this act for any person to:

(1)  Enter into a viatical settlement contract the

subject of which is a life insurance policy that the licensee

knew or should have known was obtained by means of a false,

deceptive or misleading application for the life insurance

policy.

(2)  Enter into a viatical settlement contract within a

two-year period commencing with the date of issuance of the

insurance policy or certificate unless the viator certifies

to the viatical settlement provider that one of the following

conditions has been met within the two-year period:

(i)  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 group

policy is at least 24 months. The time covered under the

group or individual policy shall be calculated without

regard to any change in insurance carriers, provided the

coverage has been continuous and under the same group

sponsorship.

(ii)  The viator is not a natural person (e.g., the

viator is a corporation, limited liability company,

partnership, etc.).

(iii)  A sworn statement by the viator and insured is

submitted to the viatical settlement provider, certifying

that one or more of the following conditions have been

met within the two-year period:

(A)  The viator or insured is terminally or

chronically ill.

(B)  The viator's or insured's spouse dies.

(C)  The viator or insured divorces his or her

spouse.

(D)  The viator was the insured's employer at the

time the policy or certificate was issued and the

employment relationship has terminated.

(E)  The viator experiences a significant

decrease in income that impairs the viator's

reasonable ability to pay the policy premium.

(F)  The viator or insured disposes of his or her

ownership interests in a closely held corporation.

The sworn statement shall be submitted by the viator or

insured to the insurer when the viatical settlement

provider submits a request to the insurer for

verification of coverage pursuant to section 8(d). The

documents shall be accompanied by a letter of attestation

from the viatical settlement provider that the copies are

true and correct copies received by the viatical

settlement provider.

(iv)  The viatical settlement provider submits to the

insurer a copy of the owner or insured's certification

described in subparagraph (iii) when the provider submits

a request to the insurer to effect the transfer of the

policy or certificate to the viatical settlement

provider. The certification shall be deemed to

conclusively establish that the viatical settlement

contract satisfies the requirements of this section, and

the insurer shall timely respond to the request.

(v)  A financing entity is a party to a viatical

settlement contract to which a licensed viatical

settlement provider is not a party or to a viatical

settlement purchase agreement.

(vi)  A special purpose entity enters into a viatical

settlement contract.]

(a)  Violation.--It is a violation of this act for a person

to enter into a viatical settlement contract prior to the

application or issuance of a policy which is the subject of

viatical settlement contract or within a five-year period

commencing with the date of issuance of the insurance policy or

certificate unless the viator certifies to the viatical

settlement provider that one or more of the following conditions

have been met within the five-year period:

(1)  the policy was issued upon the viator's exercise of

conversion rights arising out of group or individual policy

provided the time covered under the conversion policy plus

the time covered under the prior policy is no fewer than 60

months. The time covered under a group policy shall be

calculated without regard to a change in insurance carriers

provided the coverage has been continuous and under the same

group sponsorship;

(2)  the viator submits independent evidence to the

viatical settlement provider that one or more of the

following conditions have been met within the five-year

period:

(i)  the viator insured is terminally or chronically

ill;

(ii)  the viator's spouse dies;

(iii)  the viator divorces his or her spouse;

(iv)  the viator retires from full-time employment;

(v)  the viator becomes physically or mentally

disabled and a physician determines that the disability

prevents the viator from maintaining full-time

employment; or

(vi)  a final order, judgment or decree is entered by

a court of competent jurisdiction, on the application of

a creditor of the viator, adjudicating the viator

bankrupt or insolvent, or approving a petition seeking

reorganization of the viator or appointing a receiver,

trustee or liquidator to all or a substantial part of the

viator's assets; or

(3)  the viator enters into a viatical settlement

contract more than two years after the date of issuance of a

policy and at all times prior to the date that is two years

after policy issuance, the following conditions are met:

(i)  Policy premiums have been funded exclusively

with unencumbered assets, including an interest in the

life insurance policy being financed only to the extent

of its net cash surrender value provided by or fully

recourse liability incurred by the insured or a person

described in paragraph (3)(v) of the definition of

"viatical settlement contract" under section 2.

(ii)  There is no agreement or understanding with

another person to guarantee the liability or to purchase

or stand ready to purchase the policy, including through

an assumption or forgiveness of the loan.

(iii)  Neither the insured nor the policy has been

evaluated for settlement, disclosures, consent or waiver

form that has not been expressly approved by the

commissioner for use in connection viatical settlement

contracts in this Commonwealth.

(b)  Copies.--Copies of the independent evidence described in

subsection (a)(2) and documents required by section 8 shall be

submitted to the insurer when the viatical settlement provider

or other party entering into a viatical settlement contract with

a viator submits a request to the insurer for verification of

coverage. The copies shall be accompanied by a letter of

attestation from the viatical settlement provider stating the

copies are true and correct copies of the documents received by

the viatical settlement provider.

(c)  Submission of a copy of certification and independent

evidence.--If the viatical settlement provider submits to the

insurer a copy of the owner's or insured's certification

described in and the independent evidence required by subsection

(a)(2) when the provider submits a request to the insurer to

effect the transfer of the policy or certificate to the viatical

settlement provider, the copy shall be deemed to conclusively

establish that the viatical settlement contract satisfies the

requirements of this section and the insurer shall timely

respond to the request.

(d)  Prohibition.--No insurer may as a condition of

responding to a request for verification of coverage or

effecting the transfer of a policy pursuant to a viatical

settlement contract require the viator, insured, viatical

settlement provider or viatical settlement broker sign a form,

disclosure, consent or waiver form that has not been expressly

approved by the commissioner for use in connection with viatical

settlement contracts in this Commonwealth.

(e)  Effect of receipt of request and delay ban.--Upon

receipt of a properly completed request for change of ownership

or beneficiary of a policy, the insurer shall respond in writing

within 30 calendar days with written acknowledgment confirming

the change has been effected or specifying the reasons why the

requested change cannot be processed. The insurer shall not

unreasonably delay effecting change of ownership or beneficiary

and shall not otherwise seek to interfere with a viatical

settlement contract lawfully entered into in this Commonwealth.

Section 7.  The act is amended by adding a section to read:

Section 9.1.  Additional prohibited practices; conflicts of

interest.

(a)  Prohibitions.--

(1)  With respect to a viatical settlement contract or

insurance policy, no viatical settlement broker shall

knowingly solicit an offer from, effectuate a viatical

settlement with or make a sale to a viatical settlement

provider, viatical settlement purchaser, financing entity or

related provider trust that is controlling, controlled by or

under common control with the viatical settlement broker.

(2)  With respect to a viatical settlement contract or

insurance policy, no viatical settlement provider knowingly

may enter into a viatical settlement contract with a viator,

if, in connection with the viatical settlement contract,

anything of value will be paid to a viatical settlement

broker that is controlling, controlled by or under common

control with the viatical settlement provider or the viatical

settlement purchaser, financing entity or related provider

trust that is involved in the viatical settlement contract.

(3)  A viatical settlement provider shall not enter into

a viatical settlement contract unless the viatical settlement

promotional, advertising and marketing materials, as may be

prescribed by regulation, have been filed with the

commissioner. In no event shall marketing materials expressly

reference the insurance is free for a period of time. The

inclusion of a reference in the marketing materials that

would cause a viator to reasonably believe the insurance is

free for a period of time shall be considered a violation of

this act.

(4)  A life insurance producer, insurance company,

viatical settlement broker, viatical settlement provider or

viatical settlement investment agent shall not make a

statement or representation to the applicant or policyholder

in connection with the sale or financing of a life insurance

policy to the effect the insurance is free or without cost to

the policyholder for a period of time unless provided in the

policy.

(b)  Violations.--A violation of subsection (a)(1) or (2)

shall be deemed a fraudulent viatical settlement act.

Section 8.  This act shall take effect in 60 days.