An act relating to life settlements




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UNOFFICIAL COPY AS OF 04/10/16 08 REG. SESS. 08 RS HB 348/EN

AN ACT relating to life settlements.


Be it enacted by the General Assembly of the Commonwealth of Kentucky

:Section 1. KRS 304.15-020 is amended to read as follows:

(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 communication media, including film strips, motion pictures, and videos, published, disseminated, circulated, or placed directly before the public, for the purpose of creating an interest in or inducing a person to purchase or sell, assign, devise, bequest, or transfer the death benefit or ownership of a life insurance policy or an interest in a life insurance policy pursuant to a life settlement contract.

(2) "Business of life[viatical] settlements" means an activity involved in but not limited to the offering, solicitation, negotiation, procurement, effectuation, purchasing, investing, financing, monitoring, tracking, underwriting, selling, transferring, assigning, pledging, hypothecating, or in any other manner, of life[viatical] settlement contracts.

(3)[(2)] "Chronically ill" means:

(a) Being unable to perform at least two (2) activities of daily living, including but not limited to 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 paragraph (a) of this subsection as determined by the Secretary of Health and Human Services.

(4) "College life insurance" is that form of life insurance sold to college students, the initial premiums for which are financed by a promissory note.

(5)[(3)] "Financing entity" means an underwriter, placement agent, lender, purchaser of securities, purchaser of a policy from a life[viatical] settlement provider, credit enhancer, or any entity that has a direct ownership in a policy that is the subject of a life[viatical] settlement contract but:

(a) Whose principal activity related to the transaction is providing funds to effect the life[viatical] settlement contract or purchase of one (1) or more[ viaticated] policies or to provide credit enhancement; and

(b) Who has an agreement in writing with one (1) or more licensed life[viatical] settlement providers to finance the acquisition of life[viatical] settlement contracts or to provide stop loss insurance.

"Financing entity" does not include a nonaccredited investor or purchaser.

(6) "Financing transaction" means a transaction in which a life settlement 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.

(7)[(4)] "Fraudulent life[viatical] settlement act" includes:

(a) Acts or omissions 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 his employees or its agents to engage in acts including:

1. Presenting, causing to be presented, or preparing with knowledge or belief that it will be presented to or by a life[viatical] settlement provider, life[viatical] settlement broker, life insurance producer, financing entity, insurer, premium finance lender, or any other person, false material information, or concealing material information, as part of, in support of, or concerning a fact material to one (1) or more of the following:

a. An application for the issuance of a life[viatical] settlement contract or policy;
b. The underwriting of a life[viatical] settlement contract or policy;
c. A claim for payment or benefit pursuant to a life[viatical] settlement contract or policy;
d. Premiums paid on a policy;
e. Payments and changes in ownership or beneficiary made in accordance with the terms of a life[viatical] settlement contract or policy;
f. The reinstatement or conversion of a policy;
g. In the solicitation, offer, effectuation, or sale of a life[viatical] settlement contract or policy;
h. The issuance of written evidence of a life[viatical] settlement contract or policy;[ or]
i. A financing transaction;
j. 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
k. Stranger-originated life insurance;[ and]

2. Employing any device, scheme, or artifice to defraud related to policies acquired pursuant to a life[viatical] settlement contract;

3. 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) Any of the following acts committed by any person or permitted by a person to be committed by the person's employees or agents in the furtherance of a fraud or to prevent detection of a fraud to:

1. Remove, conceal, alter, destroy, or sequester from the executive director the assets or records of a licensee or other person engaged in the business of life[viatical] settlements;

2. Misrepresent or conceal the financial condition of a licensee, financing entity, insurer, or other person;

3. Transact the business of life[viatical] settlements in violation of laws requiring a license, certificate of authority, or other legal authority for the transaction of the business of life[viatical] settlements;[ or]

4. File with the executive director or the chief insurance regulatory official of another jurisdiction a document containing false information or which otherwise conceals information about a material fact from the executive director; or

5. Misrepresent the state of residence of an owner to be a state or jurisdiction that does not have a law substantially similar to this section and KRS 304.15-700 to 304.15-720;

(c) Embezzlement, theft, misappropriation, or conversion of moneys, funds, premiums, credits, or other property of a life[viatical] settlement provider, life[viatical] settlement broker, insurer, insured, owner[viator], insurance policyowner, or any other person engaged in the business of life[viatical] settlements or insurance;

(d) Recklessly entering into, brokering, or otherwise dealing in a life[viatical] settlement contract, the subject of which is a policy that was obtained by presenting false information concerning any fact material to the policy or by concealing, for the purpose of misleading another, information concerning any fact material to the policy, where the owner[viator] or the owner's[viator's] agent intended to defraud the policy issuer. For the purposes of this paragraph, "recklessly" means engaging in the conduct in conscious and clearly unjustifiable disregard of a substantial likelihood of the existence of the relevant facts or risks, such disregard involving a gross deviation from acceptable standards of conduct; or

(e) Attempting to commit, assisting, aiding, or abetting in the commission of, or conspiracy to commit the acts or omissions specified in this subsection.

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