68th OREGON LEGISLATIVE ASSEMBLY--1995 Regular Session
Enrolled
House Bill 2035
Ordered printed by the Speaker pursuant to House Rule 12.00A (5).
Presession filed (at the request of Department of Consumer and
Business Services)
CHAPTER ................
AN ACT
Relating to viatical settlements.
Be It Enacted by the People of the State of Oregon:
**************************** SECTION 1. { + Sections 2 to 18
of this Act are added to and made a part of ORS chapter 744. + }
**************************** SECTION 2. { + As used in
sections 2 to 18 of this 1995 Act:
(1) 'Licensee' means either a life settlement provider or life
settlement broker.
(2) 'Life settlement broker' means a person who, for another
person and for a fee, commission or other consideration:
(a) Offers or advertises the availability of life settlement
contracts; or
(b) Introduces holders of life insurance policies or
certificates insuring the lives of persons with a terminal
illness or condition to life settlement providers or offers or
attempts to negotiate life settlement contracts between such
policyholders or certificate holders and one or more life
settlement providers.
(3) 'Life settlement contract' means an agreement between a
life settlement provider and the holder of a group or individual
life insurance policy insuring the life of a person with a
terminal illness or condition, or between a life settlement
provider and the certificate holder of such a policy, in which:
(a) The terms establish that the life settlement provider pays
something of value in return for the policyholder's or
certificate holder's assignment, transfer, sale, devise or
bequest of the death benefit or ownership of the insurance policy
or certificate to the life settlement provider; and
(b) The policyholder or certificate holder holds an irrevocable
right under the policy or certificate to name the beneficiary.
(4) 'Life settlement provider' means a person who solicits,
enters or negotiates life settlement contracts or offers to enter
or negotiate life settlement contracts. + }
**************************** SECTION 3. { + (1) A person shall
not act as a life settlement provider unless the person holds a
license of life settlement provider issued by the Director of the
Department of Consumer and Business Services.
(2) The term 'life settlement provider' does not apply to any
of the following:
(a) Any bank, 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.
The exemption in this paragraph applies only with respect to such
an assignment.
(b) An insurer issuing a life insurance policy providing
accelerated benefits pursuant to ORS 743.154 or pursuant to the
laws of the state to which the policy was subject when issued.
The exemption in this paragraph applies only with respect to the
relationship between the insurer and insured under such a policy.
(c) Any individual who enters into not more than one agreement
in a calendar year for the transfer of life insurance policies
for any value less than the expected death benefit.
(3) A life settlement provider may use the term 'viatical
settlement provider' to describe the business transacted under
the license and may use the term 'viatical settlement contract '
instead of 'life settlement contract.' + }
**************************** SECTION 4. { + (1) A person shall
not act as a life settlement broker unless the person holds a
license of life settlement broker issued by the Director of the
Department of Consumer and Business Services.
(2) The term 'life settlement broker' does not apply to an
attorney, accountant or financial planner retained to represent
the policyholder or certificate holder unless compensation paid
to the attorney, accountant or financial planner is paid by the
life settlement provider.
(3) A life settlement broker may use the term 'viatical
settlement broker' to describe the business transacted under the
license and may use the term 'viatical settlement contract '
instead of 'life settlement contract.' + }
**************************** SECTION 5. { + (1) In order to
obtain a license to transact business as a life settlement
provider or as a life settlement broker, an applicant shall apply
for the license on a form prescribed by the Director of the
Department of Consumer and Business Services, with payment of any
fee required for the application.
(2) The director may request biographical, organizational,
locational, financial, employment and any other information on
the application form that the director determines to be relevant
to the evaluation of applications and to the granting of the
license. The director may also require a statement of the
business plan or plan of operation of the applicant. The director
may also require an applicant for a life settlement provider
license to file with the application a copy of the life
settlement contract that the applicant intends to use in business
under the license.
(3) If an applicant is a corporation, the corporation must be
incorporated under the laws of this state or must be a foreign
corporation authorized to transact business in this state. + }
**************************** SECTION 6. { + (1) If the
Director of the Department of Consumer and Business Services
determines that an applicant has satisfied all requirements for
the license for which application is made, the director shall
issue the license to the applicant. The director may issue a
license if the director determines that the applicant, as
required to be set forth in the application for the license:
(a) Has not engaged in conduct that would authorize the
director to refuse to issue a license under section 10 of this
1995 Act; and
(b) Is financially responsible and has a good business
reputation.
(2) The director may refuse to issue a license in the name of
any firm, partnership or corporation if the director is not
Enrolled House Bill 2035 Page 2
satisfied that any officer, employee, stockholder or partner
thereof who may materially influence the conduct of the applicant
meets the standards of this section.
(3) The director may issue a license to a nonresident applicant
only if the nonresident applicant files with the director in
writing an appointment of the director to be the attorney of the
applicant upon whom all legal process in any action or proceeding
against the applicant may be served. In the appointment, the
applicant shall agree that any lawful process against the
applicant that is served upon the director shall be of the same
legal force and validity as if served upon the applicant, and
that the authority shall continue in force so long as any
liability remains outstanding in this state. An appointment under
this subsection becomes effective on the date that the director
issues the license to the applicant.
(4) If the director denies an application, the director shall
so inform the applicant, stating the grounds for the denial. + }
**************************** SECTION 7. { + (1) A license
issued under section 6 of this 1995 Act expires on its expiration
date unless it is renewed on or before its expiration date.
(2) Unless the Director of the Department of Consumer and
Business Services designates another date, a license expires on
the last day of the month in which the second anniversary of the
initial issuance date of the license occurs, and on the second
anniversary following each renewal.
(3) The director by rule may establish requirements for
renewing licenses. + }
**************************** SECTION 8. { + An individual may
act as a life settlement provider under the authority of the
license of a firm or corporate life settlement provider, whether
or not the individual holds a license as a life settlement
provider, if:
(1) The individual is a member or employee of the firm or is an
employee, officer or director of the corporation; and
(2) The individual is designated by the firm or corporation on
its license application or on an amendatory or supplementary form
thereto as authorized to act as a life settlement provider under
the authority of the license. + }
**************************** SECTION 9. { + A licensee shall
immediately notify the Director of the Department of Consumer and
Business Services of any material change in ownership or control
or in any other matter affecting the qualification of the
licensee for the license in this state. + }
**************************** SECTION 10. { + (1) The Director
of the Department of Consumer and Business Services may suspend,
revoke, refuse to issue or refuse to renew a license of a
licensee if the director finds one or more of the following with
respect to the licensee or applicant for a license:
(a) Dishonesty, fraud or gross negligence in the conduct of
business as a licensee, or the licensee or applicant is otherwise
shown to be untrustworthy or incompetent to act as a licensee.
(b) The life settlement provider demonstrates a pattern of
unreasonable payments to policyholders or certificate holders.
(c) Falsification by the applicant or licensee of an
application for the license or renewal thereof, or
misrepresentation or engagement in any other dishonest act in
relation to the application.
(d) Conduct resulting in a conviction of a felony under the
laws of any state or of the United States, to the extent that
such conduct may be considered under ORS 670.280.
Enrolled House Bill 2035 Page 3
(e) Conviction of any crime, an essential element of which is
dishonesty or fraud, under the laws of any state or of the United
States.
(f) Refusal to renew or cancellation, revocation or suspension
of authority to transact insurance or business as a life
settlement provider, life settlement broker or similar entity in
another state.
(g) Failure to pay a civil penalty imposed by final order of
the director or to carry out terms of probation set by the
director.
(h) Refusal by a licensee to be examined or to produce
accounts, records or files for examination, refusal by any
officers to give information with respect to the affairs of the
licensee or refusal to perform any other legal obligation as to
the examination when required by the director.
(i) Affiliation with or under the same general management or
interlocking directorate or ownership as another life settlement
provider or life settlement broker or an insurer, any of which
unlawfully transacts business in this state.
(j) Failure at any time to meet any qualification for which
issuance of the license could have been refused had the failure
then existed and been known to the director.
(k) Violation of any rule or order of the director or any
provision of the Insurance Code.
(2) The director may suspend or refuse to renew a license
immediately and without hearing if the director determines that
one or both of the following circumstances exist:
(a) The licensee is insolvent.
(b) The financial condition or business practices of the
licensee otherwise pose an imminent threat to the public health,
safety or welfare of the residents of this state.
(3) A life settlement provider or life settlement broker
holding a license that has not been renewed or has been revoked
shall surrender the license to the director at the director's
request.
(4) The director may take any other administrative action
authorized under the Insurance Code in addition to or in lieu of
the actions authorized under this section. + }
**************************** SECTION 11. { + (1) A life
settlement contract must be in writing. A life settlement
provider shall establish in the contract the terms under which
the life settlement provider will pay compensation or anything of
value in return for the policyholder's or certificate holder's
assignment, transfer, sale, devise or bequest of the death
benefit or ownership of the insurance policy or certificate to
the life settlement provider.
(2) A life settlement provider shall not use a life settlement
contract in this state unless the life settlement provider has
filed the contract form with the Director of the Department of
Consumer and Business Services and the director has approved the
contract form. The director shall disapprove a life settlement
contract form if, in the director's opinion, the contract or any
provision of the contract is unreasonable, contrary to the
interests of the public, or otherwise misleading or unfair to the
policyholder or certificate holder.
(3) Each life settlement contract entered into in this state
must contain a provision enabling the policyholder or certificate
holder to rescind the contract not later than the 30th day after
the date on which the contract is executed by all parties or not
later than the 15th day after the policyholder or certificate
Enrolled House Bill 2035 Page 4
holder receives the life settlement proceeds, whichever is the
lesser period. In order to rescind such a contract, a
policyholder or certificate holder who has received the proceeds
must return them to the life settlement provider. + }
**************************** SECTION 12. { + Each life
settlement provider shall file a report for the preceding
calendar year with the Director of the Department of Consumer and
Business Services on or before March 1 of each year, or within
such extension of time therefor as the director may grant. The
report shall be in the form and contain such information as the
director prescribes and shall be verified as follows:
(1) If the life settlement provider is a corporation, by at
least two principal officers of the life settlement provider.
(2) If the life settlement provider is a partnership, by two
partners.
(3) If the life settlement provider is neither a corporation
nor a partnership, by its president and secretary. + }
**************************** SECTION 13. { + (1) The Director
of the Department of Consumer and Business Services may examine
the business and practices of any licensee or applicant for a
license when the director determines an examination to be
necessary. The director may order a licensee or applicant to
produce any records, books, files or other information reasonably
necessary to ascertain 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 expenses incurred in
conducting any examination shall be paid by the licensee or
applicant.
(2) A life settlement provider shall maintain records of all
transactions of life settlement contracts of the life settlement
provider and must make the records available to the director for
inspection during reasonable business hours. The records must be
maintained for a period of not later than five years from the
date of their creation.
(3) The director at any time may require a licensee to fully
disclose the identity of all stockholders, partners, officers and
employees.
(4) Names of, and individual identification data for, all
policyholders and certificate holders who have entered life
settlement contracts with life settlement providers shall be
confidential and shall not be disclosed except as considered
necessary by the director in administration of the Insurance
Code. + }
**************************** SECTION 14. { + A life settlement
provider shall disclose the information specified in this section
to the policyholder or certificate holder entering the life
settlement contract, not later than the date on which the life
settlement contract is signed by all parties. The disclosure must
be in the manner prescribed by the Director of the Department of
Consumer and Business Services. The information must include the
following:
(1) Possible alternatives to life settlement contracts for
persons with terminal illnesses or conditions, including but not
limited to accelerated benefits offered by the issuer of the life
insurance policy.
(2) The fact that some or all of the proceeds of the life
settlement may be taxable, and that assistance should be sought
from a personal tax advisor.
(3) The fact that the life settlement could be subject to the
claims of creditors.
Enrolled House Bill 2035 Page 5
(4) The fact that receipt of a life settlement may adversely
affect the recipient's eligibility for Medicaid or other
government benefits or entitlements, and that advice should be
obtained from the appropriate agencies.
(5) The right of a policyholder or certificate holder to
rescind a life settlement contract as provided in section 11 of
this 1995 Act. The disclosure shall state the deadlines for
rescission and return of proceeds received.
(6) The date by which the funds will be available to the
policyholder or certificate holder and the source of the
funds. + }
**************************** SECTION 15. { + (1) Before a life
settlement provider enters into a life settlement contract with a
policyholder or certificate holder who has a terminal illness or
condition, the life settlement provider shall first obtain both
of the following:
(a) A written statement from an attending physician that the
policyholder or certificate holder is of sound mind and under no
constraint or undue influence.
(b) A witnessed document in which the policyholder or
certificate holder consents to the life settlement contract,
acknowledges the illness or condition is terminal, represents
that the policyholder or certificate holder has a full and
complete understanding of the life settlement contract, that the
policyholder or certificate holder has a full and complete
understanding of the benefits of the life insurance policy,
releases the medical records of the policyholder or certificate
holder relating to the terminal illness or condition and
acknowledges that the policyholder or certificate holder has
entered into the life settlement contract freely and voluntarily.
(2) A life settlement provider may enter a life settlement
contract only after the individual whose life would be the
subject of the life settlement contract is determined to have a
terminal illness or condition, as follows:
(a) If the individual is the policyholder or certificate
holder, an attending physician of the policyholder or certificate
holder must make the determination.
(b) If the individual is a person other than the policyholder
or certificate holder, an attending physician of the individual
or of the policyholder or certificate holder must make the
determination.
(3) For the purposes of this section, an attending physician is
a medical doctor, doctor of osteopathy or naturopathic physician
licensed in this state, who is primarily responsible for the
treatment or a portion of treatment of the individual whose life
would be the subject of the life settlement contract. + }
**************************** SECTION 16. { + (1) A licensee
shall not pay or offer to pay a finder's fee, commission or other
compensation to a person described in this subsection, in
connection with a policy insuring the life of an individual with
a terminal illness or condition. The prohibition under this
subsection applies with respect to payments or offers of payment
to:
(a) The physician, attorney or accountant of the policyholder,
of the certificate holder or of the insured individual when the
individual is other than the policyholder or certificate holder.
(b) Any person other than a physician, attorney or accountant
described in paragraph (a) of this subsection, who provides
medical, legal or financial planning services to the
policyholder, to the certificate holder or to the insured
Enrolled House Bill 2035 Page 6
individual when the individual is other than the policyholder or
certificate holder.
(c) Any person other than one described in paragraph (a) or (b)
of this subsection who acts as an agent of the policyholder,
certificate holder or insured individual.
(2) A licensee shall not solicit an investor who could
influence the treatment of the illness or condition of the
individual whose life would be the subject of a life settlement
contract.
(3) All information solicited or obtained from a policyholder
or certificate holder by a licensee shall be subject to ORS
746.600 to 746.690. For purposes of this subsection, a licensee
shall be considered an insurance-support organization within the
meaning of ORS 746.600.
(4) A licensee shall not discriminate in the making of a life
settlement contract on the basis of race, age, sex, national
origin, creed, religion, occupation, marital or family status,
sexual orientation, or discriminate between persons who have
dependents and persons who do not have dependents. + }
**************************** SECTION 17. { + (1) Immediately
upon receipt of documents from the policyholder or certificate
holder effecting the transfer of the insurance policy or
certificate, the life 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 Director of the
Department of Consumer and Business Services, pending
acknowledgment of the transfer by the issuer of the life
insurance policy. The trustee or escrow agent shall be required
to transfer the proceeds due to the policyholder or certificate
holder immediately upon receipt of acknowledgment of the transfer
from the insurer.
(2) A life settlement provider shall make payment of the
proceeds of a life settlement contract in a lump sum, except as
provided in this subsection. A life settlement provider shall not
retain any portion of the proceeds. A life settlement provider
may make installment payments only if the life settlement
provider has purchased an annuity issued by an authorized insurer
or a similar financial instrument issued by a financial
institution authorized to engage in the business of a financial
institution in this state.
(3) Failure by the life settlement provider to tender the life
settlement by the date disclosed to the policyholder or
certificate holder renders the contract void. + }
**************************** SECTION 18. { + The Director of
the Department of Consumer and Business Services may adopt rules
for the purpose of carrying out sections 2 to 18 of this 1995
Act. In addition:
(1) The director may establish standards for evaluating
reasonableness of payments under life settlement contracts. The
authority includes but is not limited to regulation of discount
rates used to determine the amount paid in exchange for
assignment, transfer, sale, devise or bequest of a benefit under
a life insurance policy. For the purpose of the standards, the
director shall consider payments made in regional and national
life settlement markets, to the extent such information is
available, as well as model standards developed by the National
Association of Insurance Commissioners.
(2) The director may require a bond or an errors and omissions
insurance policy of either or both kinds of licensees.
Enrolled House Bill 2035 Page 7
(3) The director may establish trade practice standards by rule
for the purpose of regulating advertising and solicitation of
life settlement contracts. + }
**************************** SECTION 19. { + The Director of
the Department of Consumer and Business Services may take any
action before the operative date of this Act that is necessary to
enable the director to exercise, on and after the operative date
of this Act, all the duties, functions and powers conferred on
the director by this Act. + }
**************************** SECTION 20. { + Except as
provided in section 19 of this Act, this Act becomes operative on
March 1, 1996. + }
**************************** SECTION 21. { + This Act is
repealed on December 31, 1998. + }
----------
Passed by House May 9, 1995
...........................................................
Chief Clerk of House
...........................................................
Speaker of House
Passed by Senate May 23, 1995
...........................................................
President of Senate
Enrolled House Bill 2035 Page 8
Received by Governor:
......M.,............., 1995
Approved:
......M.,............., 1995
...........................................................
Governor
Filed by Office of Secretary of State:
......M.,............., 1995
...........................................................
Secretary of State
Enrolled House Bill 2035 Page 9