| (a) Life settlement contracts. All contracts used to
effectuate life settlements must contain the provisions set forth
in paragraphs (1) - (8) of this subsection, as follows:
(1) a provision that the life settlement contract or
the contract together with the application, including any amendments
and attachments, constitute the entire contract between the parties;
(2) a provision that any change to the life settlement
contract is valid only on written approval by an executive officer
of the life settlement provider designated in the contract with authority
to bind the provider and that such approval must be endorsed in or
attached to the life settlement contract. The provision must also
state that no person, other than an executive officer of the provider,
has the authority to change the life settlement contract or to waive
any of its provisions;
(3) a provision that, in the absence of fraud, all
statements made by the owner and insured are representations and not
warranties;
(4) a provision that the owner may designate any individual
of legal age, in regular contact with the insured, as a contact for
inquiries about the insured's health status on written notice providing
the name, address, and telephone number of such individual. The provision
must include a statement that the owner may change a designation at
any time on written notice to the life settlement provider;
(5) a provision that the licensed life settlement provider
must provide to the insured the name, address, and telephone number
of the life settlement broker, provider, or authorized representative
of the provider or broker that will contact the insured or the insured's
designee for tracking purposes and must notify the insured of any
change in such information;
(6) a provision defining how any notice required or
permitted under the contract must be given and delivered;
(7) a provision disclosing what effect the life settlement
contract will have on payment of premiums and disposition of proceeds,
cash values, and dividends; and
(8) a provision disclosing that, if the policy that
is the subject of the life settlement contract is a joint policy,
or contains riders or other provisions insuring the lives of a spouse,
dependents, or anyone else other than the owner, there may be a possible
loss of coverage, and that the owner should contact the owner's insurance
company or agent to determine if the coverage may be converted to
avoid losing the coverage.
(b) Prohibited provisions. A contract used to effect
life settlement must not:
(1) contain an indemnification or a hold harmless provision
that requires the owner or insured to protect another person against
liability, loss, or damages that exceed the proceeds of the life settlement
contract received by the owner; or
(2) require any owner to condition a life settlement
contract on the exclusive dealing between the owner and the life settlement
broker or provider.
(c) Accidental death benefits. The death benefit provision
for accidental death contained within the policy must remain payable
to the beneficiary last named by the owner or to the owner's estate.
Nothing contained here requires the life settlement provider or any
subsequent owner of the policy to continue any accidental death benefits
attached to the policy by rider or endorsement.
(d) Retained ownership. If a life settlement provider
enters into a life settlement contract that allows the owner to retain
an interest in the policy, or if the policy contains a clause in the
policy or attached to the policy by rider, that provides a death benefit
for accidental death, the life settlement contract or amendment must
contain a provision that:
(1) the life settlement provider will transfer the
amount of the net death benefit only to the extent or portion of the
amount sold. The provision must also state that benefits in excess
of the amount sold will be paid by the insurance company directly
to the beneficiaries in accord with the terms of the policy;
(2) the life settlement provider will, on acknowledgment
of the perfection of the transfer, either:
(A) advise the owner in writing that the insurance
company has confirmed the owner's remaining interest in the policy;
or
(B) provide the owner with a copy of the document prepared
by the insurance company that acknowledges the owner's remaining interest
in the policy; and
(3) defines the apportionment of premiums the life
settlement provider and the owner will pay. The life settlement contract
or amendment may specify that the life settlement provider will pay
all premiums. The contract or amendment may also require the owner
to reimburse the life settlement provider for the premiums attributable
to the remaining interest, including any premiums for the accidental
death benefit, subsequent to the life settlement contract.
(e) General contract requirements. All life settlement
contracts, in addition to meeting the other requirements of this section,
must contain:
(1) consistent terminology;
(2) a section defining key terms used in the life settlement
contract;
(3) the name of the owner and insured;
(4) the number of the policy that serves as the basis
for the life settlement contract;
(5) the name of the insurance company underwriting
the policy at the time of contract;
(6) the amount of the net death benefit of the policy;
and
(7) signature lines for the life settlement provider
and the owner.
(f) Required disclosures. All life settlement contracts,
in addition to meeting the other requirements of this section, must
contain the written disclosures required by Insurance Code §1111A.012
and §1111A.014 for delivery to the owner by the life settlement
broker, or provider if there is no broker involved in the transaction,
with each application for a life settlement contract. For purposes
of Insurance Code §1111A.012(a)(8), if the amount of compensation
is not known at the time of application, the method of calculation
must be provided at the time of application, and the amount of compensation
must be provided at the date the life settlement contract is signed
by the owner.
(g) Escrow and trust. A life settlement provider that
places the proceeds of the life settlement contract into an escrow
or trust account must comply with the following:
(1) the escrow agent may not be any person under common
control with a life settlement broker or provider;
(2) the escrow or trust agreement must contain:
(A) the name of the owner;
(B) the number of the policy that serves as the basis
for the life settlement contract;
(C) the name of the insurance company underwriting
the policy at the time of contract execution;
(D) the name of the life settlement provider purchasing
the policy;
(E) the name, address, and telephone number of the
escrow agent or trustee;
(F) the amount of the owner's proceeds placed into
the escrow or trust account;
(G) all terms and conditions of the escrow or trust
agreement;
(H) the name and address of the financial institution
holding the escrow funds into which the provider will pay the funds
to the owner;
(I) a description of the purpose of the escrow or trust
account;
(J) the circumstances that will trigger disbursement
of the funds from the escrow or trust account;
(K) the limitations concerning, or time restrictions
for, the insurance company's affirmative acceptance and acknowledgement
of the assignment of the policy;
(L) if applicable, the process for required notices
for communication if the owner rescinds the life settlement contract
pursuant to Insurance Code §1111A.012(a)(5) or if the insurance
company does not accept the policy assignment or transfer of ownership;
(M) the duties of the escrow agent or trustee;
(N) the designation of the escrow agent or trustee;
(O) the limits of liability for the escrow agent or
trustee;
(P) the process for resolving any dispute arising between
the owner and the life settlement provider, the escrow agent, or the
trustee concerning the interpretation of the escrow or trust agreement;
and
(Q) a signature line for the life settlement provider,
the owner, and the escrow agent or trustee.
(h) Medical release. A medical release form must:
(1) be in writing and signed by the insured; and
Cont'd... |
