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A BILL TO BE ENTITLED
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AN ACT
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relating to consumer protections in the purchase of life settlement |
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contracts; imposing penalties. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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ARTICLE 1. LIFE SETTLEMENT CONTRACTS |
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SECTION 1.01. Subtitle A, Title 7, Insurance Code, is |
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amended by adding Chapter 1111A to read as follows: |
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CHAPTER 1111A. LIFE SETTLEMENT CONTRACTS |
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Sec. 1111A.001. SHORT TITLE. This Act may be cited as the |
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Life Settlements Act. |
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Sec. 1111A.002. DEFINITIONS. In this chapter: |
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(1) "Advertisement" means a written, electronic, or |
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printed communication or a communication by means of a recorded |
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telephone message or transmitted on radio, television, the |
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Internet, or similar communications media, including film strips, |
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motion pictures, and videos, published, disseminated, circulated, |
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or placed directly before the public for the purpose of creating an |
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interest in or inducing a person to purchase or sell, assign, |
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devise, bequest, or transfer the death benefit or ownership of a |
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life insurance policy or an interest in a life insurance policy |
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under a life settlement contract. |
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(2) "Broker" means a person who, on behalf of an owner |
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and for a fee, commission, or other valuable consideration, offers |
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or attempts to negotiate a life settlement contract between an |
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owner and a provider or estimates life expectancies for a life |
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settlement contract. A broker who offers or attempts to negotiate a |
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life settlement contract represents only the owner and owes a |
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fiduciary duty to the owner to act according to the owner's |
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instructions, and in the best interest of the owner, |
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notwithstanding the manner in which the broker is compensated. A |
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broker does not include an attorney, certified public accountant, |
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or financial planner retained in the type of practice customarily |
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performed in a professional capacity to represent the owner whose |
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compensation is not paid directly or indirectly by the provider or |
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any other person, except the owner. |
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(3) "Business of life settlements" means an activity |
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involved in, but not limited to, offering to enter into, |
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soliciting, negotiating, procuring, effectuating, monitoring, or |
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tracking, of life settlement contracts. |
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(4) "Chronically ill" means: |
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(A) being unable to perform at least two |
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activities of daily living such as eating, toileting, transferring, |
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bathing, dressing, or continence; |
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(B) requiring substantial supervision to protect |
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the individual from threats to health and safety due to severe |
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cognitive impairment; or |
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(C) having a level of disability similar to that |
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described in Paragraph (A) as determined under rules adopted by the |
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commissioner after consideration of any applicable regulation, |
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guideline, or determination of the United States Secretary of |
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Health and Human Services. |
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(5) "Financing entity" means an underwriter, |
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placement agent, lender, purchaser of securities, purchaser of a |
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policy or certificate from a provider, credit enhancer, or any |
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entity that has a direct ownership in a policy or certificate that |
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is the subject of a life settlement contract whose principal |
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activity related to the transaction is providing funds to effect |
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the life settlement contract or purchase of a policy, and who has an |
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agreement in writing with a provider to finance the acquisition of a |
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life settlement contract. The term does not include a |
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non-accredited investor or purchaser. |
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(6) "Financing transaction" means a transaction in |
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which a licensed provider obtains financing from a financing entity |
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including secured or unsecured financing, a securitization |
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transaction, or a securities offering that is either registered or |
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exempt from registration under federal and state securities law. |
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(7) "Fraudulent life settlement act" includes: |
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(A) an act or omission committed by a person who, |
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knowingly and with intent to defraud, for the purpose of depriving |
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another of property or for pecuniary gain, commits, or permits an |
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employee or an agent to engage in, acts including: |
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(i) presenting, causing to be presented, or |
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preparing with knowledge and belief that it will be presented to or |
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by a provider, premium finance lender, broker, insurer, insurance |
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agent, or any other person, false material information, or |
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concealing material information, as part of, in support of, or |
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concerning a fact material to one or more of the following: |
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(a) an application for the issuance of |
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a life settlement contract or an insurance policy; |
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(b) the underwriting of a life |
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settlement contract or an insurance policy; |
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(c) a claim for payment or benefit |
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pursuant to a life settlement contract or an insurance policy; |
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(d) premium paid on an insurance |
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policy; |
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(e) payment for and changes in |
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ownership or beneficiary made in accordance with the terms of a life |
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settlement contract or an insurance policy; |
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(f) the reinstatement or conversion |
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of an insurance policy; |
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(g) in the solicitation, offer to |
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enter into, or effectuation of a life settlement contract, or an |
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insurance policy; |
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(h) the issuance of written evidence |
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of life settlement contracts or insurance; or |
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(i) an application for or the |
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existence of or any payment related to a loan secured directly or |
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indirectly by an interest in a life insurance policy; |
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(ii) failing to disclose to the insurer, if |
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the insurer has requested the disclosure, that the prospective |
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insured has undergone a life expectancy evaluation by any person or |
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entity other than the insurer or its authorized representatives in |
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connection with the issuance of the policy; or |
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(iii) employing a device, scheme, or |
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artifice to defraud in the business of life settlements; and |
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(B) acts or omissions in the furtherance of a |
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fraud or to prevent the detection of a fraud, or acts or omissions |
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that permit an employee or an agent to: |
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(i) remove, conceal, alter, destroy, or |
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sequester from the commissioner the assets or records of a license |
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holder or another person engaged in the business of life |
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settlements; |
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(ii) misrepresent or conceal the financial |
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condition of a license holder, financing entity, insurer, or other |
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person; |
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(iii) transact the business of life |
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settlements in violation of laws requiring a license, certificate |
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of authority, or other legal authority for the transaction of the |
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business of life settlements; |
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(iv) file with the commissioner or the |
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chief insurance regulatory official of another jurisdiction a |
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document containing false information or concealing information |
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about a material fact; |
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(v) engage in embezzlement, theft, |
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misappropriation, or conversion of monies, funds, premiums, |
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credits, or other property of a provider, insurer, insured, owner, |
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insurance policy owner, or any other person engaged in the business |
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of life settlements or insurance; |
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(vi) knowingly and with intent to defraud, |
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enter into, broker, or otherwise deal in a life settlement |
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contract, the subject of which is a life insurance policy that was |
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obtained by presenting false information concerning any fact |
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material to the policy or by concealing that fact, for the purpose |
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of misleading another, or providing information concerning any fact |
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material to the policy, if the owner or the owner's agent intended |
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to defraud the policy's issuer; |
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(vii) attempt to commit, assist, aid or |
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abet in the commission of, or engage in conspiracy to commit the |
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acts or omissions specified in this paragraph; or |
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(viii) misrepresent the state of residence |
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of an owner to be a state or jurisdiction that does not have a law |
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substantially similar to this chapter for the purpose of evading or |
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avoiding the provisions of this chapter. |
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(8) "Insured" means a person covered under the policy |
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being considered for sale in a life settlement contract. |
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(9) "Life expectancy" means the arithmetic mean of the |
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number of months the insured under the life insurance policy to be |
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settled can be expected to live as determined by a life expectancy |
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company or provider considering medical records and appropriate |
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experiential data. |
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(10) "Life insurance agent" means a person licensed in |
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this state as a resident or nonresident insurance agent who has |
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received qualification or authority to write life insurance |
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coverage under this code. |
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(11) "Life settlement contract" means a written |
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agreement entered into between a provider and an owner establishing |
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the terms under which compensation or anything of value will be paid |
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and is less than the expected death benefit of the insurance policy |
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or certificate, in return for the owner's assignment, transfer, |
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sale, devise, or bequest of the death benefit or a portion of an |
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insurance policy or certificate of insurance for compensation; |
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provided, however, that the minimum value for a life settlement |
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contract must be greater than a cash surrender value or accelerated |
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death benefit available at the time of an application for a life |
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settlement contract. The term also includes the transfer for |
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compensation or value of ownership or beneficial interest in a |
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trust or other entity that owns the policy if the trust or other |
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entity was formed or used for the principal purpose of acquiring one |
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or more life insurance contracts that insure the life of an |
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individual residing in this state. The term also includes: |
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(A) a written agreement for a loan or other |
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lending transaction, secured primarily by an individual or group |
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life insurance policy; and |
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(B) a premium finance loan made for a policy on or |
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before the date of issuance of the policy if: |
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(i) the loan proceeds are not used solely to |
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pay premiums for the policy and any costs or expenses incurred by |
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the lender or the borrower in connection with the financing; |
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(ii) the owner receives on the date of the |
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premium finance loan a guarantee of the future life settlement |
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value of the policy; or |
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(iii) the owner agrees on the date of the |
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premium finance loan to sell the policy or any portion of its death |
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benefit on a date following the issuance of the policy. |
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(11-A) "Life settlement contract" does not include: |
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(A) a policy loan by a life insurance company |
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under the terms of a life insurance policy or accelerated death |
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provision contained in the life insurance policy, whether issued |
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with the original policy or as a rider; |
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(B) a premium finance loan or any loan made by a |
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bank or other licensed financial institution, provided that neither |
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default on the loan nor the transfer of the policy in connection |
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with the default is under an agreement or understanding with any |
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other person for the purpose of evading regulation under this |
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chapter; |
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(C) a collateral assignment of a life insurance |
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policy by an owner; |
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(D) a loan made by a lender that does not violate |
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Chapter 651, provided that the loan is not described in Subdivision |
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(11) and is not otherwise within the definition of life settlement |
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contract; |
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(E) an agreement with respect to which all the |
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parties are closely related to the insured by blood or law or have a |
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lawful substantial economic interest in the continued life, health, |
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and bodily safety of the person insured, or are trusts established |
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primarily for the benefit of the parties; |
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(F) a designation, consent, or agreement by an |
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insured who is an employee of an employer in connection with the |
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purchase by the employer, or trust established by the employer, of |
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life insurance on the life of the employee; |
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(G) a bona fide business succession planning |
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arrangement: |
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(i) between one or more shareholders in a |
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corporation or between a corporation and one or more of its |
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shareholders or one or more trusts established by its shareholders; |
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(ii) between one or more partners in a |
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partnership or between a partnership and one or more of its partners |
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or one or more trusts established by its partners; or |
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(iii) between one or more members in a |
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limited liability company or between a limited liability company |
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and one or more of its members or one or more trusts established by |
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its members; |
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(H) an agreement entered into by a service |
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recipient, or a trust established by the service recipient, and a |
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service provider, or a trust established by the service provider, |
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who performs significant services for the service recipient's trade |
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or business; or |
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(I) any other contract, transaction, or |
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arrangement from the definition of life settlement contract that |
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the commissioner determines is not of the type intended to be |
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regulated by this chapter. |
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(12) "Net death benefit" means the amount of the life |
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insurance policy or certificate to be settled less any outstanding |
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debts or liens. |
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(13) "Owner" means the owner of a life insurance |
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policy or a certificate holder under a group policy, with or without |
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a terminal illness, who enters or seeks to enter into a life |
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settlement contract. In this chapter, the term "owner" is not |
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limited to an owner of a life insurance policy or a certificate |
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holder under a group policy that insures the life of an individual |
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with a terminal or chronic illness or condition except as |
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specifically provided. The term does not include: |
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(A) a provider or other license holder under this |
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chapter; |
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(B) a qualified institutional buyer as defined by |
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17 C.F.R. Section 230.144A, as amended; |
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(C) a financing entity; |
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(D) a special purpose entity; or |
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(E) a related provider trust. |
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(14) "Patient identifying information" means an |
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insured's address, telephone number, facsimile number, e-mail |
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address, photograph or likeness, employer, employment status, |
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social security number, or any other information that is likely to |
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lead to the identification of the insured. |
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(15) "Policy" means an individual or group policy, |
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group certificate, contract, or arrangement of life insurance owned |
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by a resident of this state, regardless of whether delivered or |
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issued for delivery in this state. |
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(16) "Premium finance loan" is a loan made primarily |
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for the purposes of making premium payments on a life insurance |
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policy that is secured by an interest in the life insurance policy. |
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(17) "Person" means an individual or legal entity, |
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including a partnership, limited liability company, association, |
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trust, or corporation. |
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(18) "Provider" means a person, other than an owner, |
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who enters into or effectuates a life settlement contract with an |
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owner. The term does not include: |
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(A) a bank, savings bank, savings and loan |
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association, or credit union; |
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(B) a licensed lending institution or creditor or |
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secured party pursuant to a premium finance loan agreement that |
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takes an assignment of a life insurance policy or certificate |
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issued pursuant to a group life insurance policy as collateral for a |
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loan; |
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(C) the insurer of a life insurance policy or |
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rider to the extent of providing accelerated death benefits or |
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riders under Subchapter B, Chapter 1111, or cash surrender value; |
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(D) an individual who enters into or effectuates |
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not more than one agreement in a calendar year for the transfer of a |
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life insurance policy or certificate issued pursuant to a group |
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life insurance policy, for compensation or anything of value less |
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than the expected death benefit payable under the policy; |
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(E) a purchaser; |
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(F) any authorized or eligible insurer that |
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provides stop loss coverage to a provider, purchaser, financing |
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entity, special purpose entity, or related provider trust; |
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(G) a financing entity; |
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(H) a special purpose entity; |
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(I) a related provider trust; |
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(J) a broker; or |
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(K) an accredited investor or qualified |
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institutional buyer as those terms are defined by 17 C.F.R. Section |
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230.144A, as amended, who purchases a life settlement policy from a |
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provider. |
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(19) "Purchased policy" means a policy or group |
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certificate that has been acquired by a provider pursuant to a life |
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settlement contract. |
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(20) "Purchaser" means a person who pays compensation |
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or anything of value as consideration for a beneficial interest in a |
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trust that is vested with, or for the assignment, transfer, or sale |
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of, an ownership or other interest in a life insurance policy or a |
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certificate issued pursuant to a group life insurance policy that |
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has been the subject of a life settlement contract. |
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(21) "Related provider trust" means a titling trust or |
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other trust established by a licensed provider or a financing |
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entity for the sole purpose of holding the ownership or beneficial |
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interest in purchased policies in connection with a financing |
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transaction. In order to qualify as a related provider trust, the |
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trust must have a written agreement with the licensed provider |
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under which the licensed provider is responsible for ensuring |
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compliance with all statutory and regulatory requirements and under |
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which the trust agrees to make all records and files relating to |
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life settlement transactions available to the department as if |
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those records and files were maintained directly by the licensed |
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provider. |
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(22) "Settled policy" means a life insurance policy or |
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certificate that has been acquired by a provider pursuant to a life |
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settlement contract. |
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(23) "Special purpose entity" means a corporation, |
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partnership, trust, limited liability company, or other legal |
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entity formed solely to provide either directly or indirectly |
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access to institutional capital markets: |
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(A) for a financing entity or provider; or |
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(B) in connection with a transaction in which: |
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(i) the securities in the special purpose |
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entity are acquired by the owner or by a qualified institutional |
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buyer as defined by 17 C.F.R. Section 230.144A, as amended; or |
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(ii) the securities pay a fixed rate of |
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return commensurate with established asset-backed institutional |
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capital markets. |
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(24) "Terminally ill" means having an illness or |
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sickness that can reasonably be expected to result in death not |
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later than 24 months after the date of diagnosis. |
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Sec. 1111A.003. LICENSING REQUIREMENTS; EXEMPTION. (a) A |
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person, wherever located, may not act as a provider or broker with |
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an owner who is a resident of this state, unless the person holds a |
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license from the department. |
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(b) An application for a provider or broker license must be |
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made to the department by the applicant on a form prescribed by the |
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commissioner. The application must be accompanied by a fee in an |
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amount established by the commissioner by rule. The license and |
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renewal fees for a provider license must be reasonable and the |
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license and renewal fees for a broker license may not exceed those |
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established for an insurance agent, as otherwise provided by this |
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chapter. |
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(c) A person who has been licensed as a life insurance agent |
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in this state or the person's home state for at least one year and is |
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licensed as a nonresident agent in this state meets the licensing |
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requirements of this section and may operate as a broker. |
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(d) Not later than the 30th day after the first date of |
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operating as a broker, a life insurance agent shall notify the |
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commissioner on a form prescribed by the commissioner that the |
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agent is acting as a broker and shall pay any applicable fee to be |
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determined by the commissioner by rule. Notification must include |
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an acknowledgement by the life insurance agent that the agent will |
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operate as a broker in accordance with this chapter. |
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(e) An insurer that issued a policy that is the subject of a |
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life settlement contract is not responsible for any act or omission |
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of a broker or provider or purchaser arising out of or in connection |
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with the life settlement transaction, unless the insurer receives |
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compensation for the placement of a life settlement contract from |
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the provider, purchaser, or broker in connection with the life |
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settlement contract. |
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(f) A person licensed as an attorney, certified public |
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accountant, or financial planner accredited by a nationally |
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recognized accreditation agency, who is retained to represent the |
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owner and whose compensation is not paid directly or indirectly by |
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the provider or purchaser, may negotiate life settlement contracts |
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for the owner without having to obtain a license as a broker. |
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(g) A license expires on the second anniversary of the date |
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of issuance. A license holder may renew the license on payment of a |
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renewal fee. As specified by Subsection (b), the renewal fee for a |
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provider license may not exceed a reasonable fee. |
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(h) An applicant shall provide the information that the |
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commissioner requires on forms adopted by the commissioner. The |
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commissioner may, at any time, require an applicant to fully |
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disclose the identity of the applicant's stockholders that own at |
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least 10 percent of the shares of an applicant the shares of which |
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are publicly traded, partners, officers and employees, and the |
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commissioner may, in the exercise of the commissioner's sole |
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discretion, refuse to issue a license in the name of any person if |
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the commissioner is not satisfied that an officer, an employee, a |
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stockholder, or a partner of the applicant who may materially |
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influence the applicant's conduct meets the standards of Sections |
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1111A.001 to 1111A.018. |
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(i) A license issued to a partnership, corporation, or other |
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entity authorizes each member, officer, and designated employee |
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named in the application and any supplement to the application to |
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act as a license holder under the license. |
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(j) After the filing of an application and the payment of |
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the license fee, the commissioner shall investigate each applicant |
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and may issue a license if the commissioner finds that the |
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applicant: |
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(1) if a provider, has provided a detailed plan of |
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operation; |
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(2) is competent and trustworthy and intends to |
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transact business in good faith; |
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(3) has a good business reputation and has had |
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experience, training, or education to qualify in the business for |
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which the license is applied; |
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(4) if the applicant is a legal entity, is formed or |
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organized under the laws of this state or is a foreign legal entity |
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authorized to transact business in this state, or provides a |
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certificate of good standing from the state of its domicile; and |
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(5) has provided to the commissioner an antifraud plan |
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that meets the requirements of Section 1111A.022 and includes: |
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(A) a description of the procedures for detecting |
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and investigating possible fraudulent acts and procedures for |
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resolving material inconsistencies between medical records and |
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insurance applications; |
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(B) a description of the procedures for reporting |
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fraudulent insurance acts to the commissioner; |
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(C) a description of the plan for antifraud |
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education and training of its underwriters and other personnel; and |
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(D) a written description or chart outlining the |
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arrangement of the antifraud personnel who are responsible for the |
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investigation and reporting of possible fraudulent insurance acts |
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and the investigation of unresolved material inconsistencies |
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between medical records and insurance applications. |
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(k) The commissioner may not issue a license to a |
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nonresident applicant unless a written designation of an agent for |
|
service of process is filed and maintained with the department or |
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unless the applicant has filed with the department the applicant's |
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written irrevocable consent that any action against the applicant |
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may be commenced by service of process on the commissioner. |
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(l) A license holder shall file with the department not |
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later than March 1 of each year an annual statement containing the |
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information as the commissioner by rule prescribes. |
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(m) A provider may not allow any person to perform the |
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functions of a broker unless the person holds a current, valid |
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license as a broker, and as provided in this section. |
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(n) A broker may not allow any person to perform the |
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functions of a provider unless the person holds a current, valid |
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license as a provider, and as provided in this section. |
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(o) A provider or broker shall provide to the commissioner |
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new or revised information about officers, stockholders described |
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by Subsection (h), partners, directors, members, or designated |
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employees within 30 days of the change. |
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(p) An individual licensed as a broker shall complete on a |
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biennial basis 15 hours of training related to life settlements and |
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life settlement transactions, as required by the commissioner. A |
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life insurance agent who is operating as a broker under this section |
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is not subject to the requirements of this subsection. |
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(q) The business of life settlements constitutes the |
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business of insurance. |
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Sec. 1111A.004. LICENSE SUSPENSION, REVOCATION, OR REFUSAL |
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TO RENEW. (a) The commissioner may suspend, revoke, or refuse to |
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renew the license of a license holder if the commissioner finds |
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that: |
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(1) there was a material misrepresentation in the |
|
application for the license; |
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(2) the license holder or an officer, partner, member, |
|
or director of the license holder has been 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 |
|
license holder; |
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(3) the license holder is a provider and demonstrates |
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a pattern of unreasonably withholding payments to policy owners; |
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(4) the license holder no longer meets the |
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requirements for initial licensure; |
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(5) the license holder or any officer, partner, |
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member, or director of the license holder has been convicted of a |
|
felony, or of any misdemeanor with respect to which criminal fraud |
|
is an element, or has pleaded guilty or nolo contendere with respect |
|
to a felony or a misdemeanor with respect to which criminal fraud or |
|
moral turpitude is an element, regardless of whether a judgment of |
|
conviction has been entered by the court; |
|
(6) the license holder is a provider and has entered |
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into a life settlement contract using a form that has not been |
|
approved under this chapter; |
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(7) the license holder is a provider and has failed to |
|
honor contractual obligations in a life settlement contract; |
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(8) the license holder is a provider and has assigned, |
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transferred, or pledged a settled policy to a person other than a |
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provider licensed in this state, a purchaser, an accredited |
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investor or qualified institutional buyer as defined respectively |
|
in 17 C.F.R. Section 230.144A, as amended, a financing entity, a |
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special purpose entity, or a related provider trust; or |
|
(9) the license holder or any officer, partner, |
|
member, or key management personnel of the license holder has |
|
violated this chapter. |
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(b) The commissioner may deny a license application or |
|
suspend, revoke, or refuse to renew the license of a license holder |
|
in accordance with Chapter 2001, Government Code. |
|
Sec. 1111A.005. REQUIREMENTS FOR CONTRACT FORMS, |
|
DISCLOSURE FORMS, AND ADVERTISEMENTS. (a) A person may not use |
|
any form of life settlement contract in this state unless the form |
|
has been filed with and approved, if required, by the commissioner |
|
in a manner that conforms with the filing procedures and any time |
|
restrictions or deeming provisions for life insurance forms, |
|
policies, and contracts. |
|
(b) An insurer may not, as a condition of responding to a |
|
request for verification of coverage or in connection with the |
|
transfer of a policy pursuant to a life settlement contract, |
|
require that the owner, insured, provider, or broker sign any form, |
|
disclosure, consent, waiver, or acknowledgment that has not been |
|
expressly approved by the commissioner for use in connection with |
|
life settlement contracts. |
|
(c) A person may not use a life settlement contract form or |
|
provide to an owner a disclosure statement form unless the form is |
|
first filed with and approved by the commissioner. The |
|
commissioner shall disapprove a life settlement contract form or |
|
disclosure statement form if, in the commissioner's opinion, the |
|
contract or contract provisions fail to meet the requirements of |
|
Sections 1111A.011, 1111A.012, 1111A.014, and 1111A.023(b), or are |
|
unreasonable, contrary to the interests of the public, or otherwise |
|
misleading or unfair to the owner. |
|
(d) At the commissioner's discretion, the commissioner may |
|
require the submission of advertisements. |
|
Sec. 1111A.006. REPORTING REQUIREMENTS AND PRIVACY. |
|
(a) For a policy settled not later than the fifth anniversary of |
|
the date of policy issuance, each provider shall file with the |
|
commissioner not later than March 1 of each year an annual statement |
|
containing the information that the commissioner prescribes by |
|
rule. In addition to any other requirements, the annual statement |
|
must specify the total number, aggregate face amount, and life |
|
settlement proceeds of policies settled during the immediately |
|
preceding calendar year, together with a breakdown of the |
|
information by policy issue year. The annual statement must also |
|
include the names of each insurance company whose policies have |
|
been settled and the brokers that have settled the policies. |
|
(b) The information required under Subsection (a) is |
|
limited to only those transactions in which the insured is a |
|
resident of this state and may not include individual transaction |
|
data regarding the business of life settlements or information if |
|
there is a reasonable basis to find that the information could be |
|
used to identify the owner or the insured. |
|
(c) A provider that wilfully fails to file an annual |
|
statement as required in this section, or wilfully fails to reply |
|
not later than the 30th day after the date the provider receives a |
|
written inquiry from the department about the filing of the annual |
|
statement, shall, in addition to other penalties provided by this |
|
chapter, after notice and opportunity for hearing be subject to a |
|
penalty of up to $250 for each day of delay, not to exceed $25,000 in |
|
the aggregate, for the failure to file or respond. |
|
(d) Except as otherwise allowed or required by law, a |
|
provider, broker, insurance company, insurance agent, information |
|
bureau, rating agency or company, or any other person with actual |
|
knowledge of an insured's identity, may not disclose the identity |
|
of an insured or information that there is a reasonable basis to |
|
believe could be used to identify the insured or the insured's |
|
financial or medical information to any other person unless the |
|
disclosure is: |
|
(1) necessary to effect a life settlement contract |
|
between the owner and a provider and the owner and insured have |
|
provided prior written consent to the disclosure; |
|
(2) necessary to effectuate the sale of a life |
|
settlement contract, or interests in the contract, as an |
|
investment, provided the sale is conducted in accordance with |
|
applicable state and federal securities law and provided further |
|
that the owner and the insured have both provided prior written |
|
consent to the disclosure; |
|
(3) provided in response to an investigation or |
|
examination by the commissioner or another governmental officer or |
|
agency or under Section 1111A.018; |
|
(4) a term or condition of the transfer of a policy by |
|
one provider to another licensed provider, in which case the |
|
receiving provider shall comply with the confidentiality |
|
requirements of this subsection; |
|
(5) necessary to allow the provider or broker or the |
|
provider's or broker's authorized representative to make contact |
|
for the purpose of determining health status provided that in this |
|
subdivision, authorized representative does not include a person |
|
who has or may have a financial interest in the settlement contract |
|
other than a provider, licensed broker, financing entity, related |
|
provider trust, or special purpose entity and that the provider or |
|
broker requires the authorized representative to agree in writing |
|
to adhere to the privacy provisions of this chapter; or |
|
(6) required to purchase stop loss coverage. |
|
(e) Nonpublic personal information solicited or obtained in |
|
connection with a proposed or actual life settlement contract is |
|
subject to the provisions applicable to financial institutions |
|
under the federal Gramm-Leach-Bliley Act (Pub. L. No. 106-102), and |
|
any other state and federal laws relating to confidentiality of |
|
nonpublic personal information. |
|
Sec. 1111A.007. EXAMINATION. Subchapter B, Chapter 401, |
|
applies to a person engaged in the business of life settlements. |
|
Sec. 1111A.008. IMMUNITY FROM LIABILITY. (a) No cause of |
|
action shall arise nor shall any liability be imposed against the |
|
commissioner, the commissioner's authorized representatives, or |
|
any examiner appointed by the commissioner for a statement made or |
|
conduct performed in good faith while carrying out this chapter. |
|
(b) No cause of action shall arise, nor shall any liability |
|
be imposed against any person for the act of communicating or |
|
delivering information to the commissioner or the commissioner's |
|
authorized representative or examiner pursuant to an examination |
|
made under this chapter, if the act of communication or delivery was |
|
performed in good faith and without fraudulent intent or the intent |
|
to deceive. This subsection does not abrogate or modify in any way |
|
any common law or statutory privilege or immunity enjoyed by any |
|
person identified in Subsection (a). |
|
Sec. 1111A.009. INVESTIGATIVE AUTHORITY OF THE |
|
COMMISSIONER. The commissioner may investigate a suspected |
|
fraudulent life settlement act and a person engaged in the business |
|
of life settlements. |
|
Sec. 1111A.010. COST OF EXAMINATIONS. The reasonable and |
|
necessary cost of an examination under this chapter is to be |
|
assessed against the person being examined in accordance with |
|
Section 751.208. |
|
Sec. 1111A.011. ADVERTISING. (a) A broker or provider |
|
licensed pursuant to this chapter may conduct or participate in an |
|
advertisement in this state. The advertisement must comply with |
|
all advertising and marketing laws under Chapter 541 and rules |
|
adopted by the commissioner that are applicable to life insurers or |
|
to license holders under this chapter. |
|
(b) Advertisements shall be accurate, truthful, and not |
|
misleading in fact or by implication. |
|
(c) A person may not: |
|
(1) market, advertise, solicit, or otherwise promote |
|
the purchase of a policy for the sole purpose of or with an emphasis |
|
on settling the policy; or |
|
(2) use the words "free," "no cost," or words of |
|
similar import in the marketing, advertising, or soliciting of, or |
|
otherwise promoting, the purchase of a policy. |
|
Sec. 1111A.012. DISCLOSURES TO OWNERS. (a) Not later than |
|
the fifth day after the date a provider receives the application for |
|
a life settlement contract, the provider shall provide, in a |
|
separate written document, the following information to the owner: |
|
(1) the fact that possible alternatives to life |
|
settlement contracts exist, including accelerated benefits offered |
|
by the issuer of the life insurance policy; |
|
(2) the fact that some or all of the proceeds of a life |
|
settlement contract may be taxable and that assistance should be |
|
sought from a professional tax advisor; |
|
(3) the fact that the proceeds from a life settlement |
|
contract could be subject to the claims of creditors; |
|
(4) the fact that receipt of proceeds from a life |
|
settlement contract may adversely affect the recipients' |
|
eligibility for public assistance or other government benefits or |
|
entitlements and that advice should be obtained from the |
|
appropriate agency; |
|
(5) the fact that the owner has a right to terminate a |
|
life settlement contract within 15 days of the date the contract is |
|
executed by all parties and the owner has received the disclosures |
|
described in this section, that rescission, if exercised by the |
|
owner, is effective only if both notice of the rescission is given |
|
and the owner repays all proceeds and any premiums, loans, and loan |
|
interest paid on account of the provider during the rescission |
|
period, and that if the insured dies during the rescission period, |
|
the contract is considered rescinded subject to repayment by the |
|
owner or the owner's estate of all proceeds and any premiums, loans, |
|
and loan interest to the provider; |
|
(6) the fact that proceeds will be sent to the owner |
|
within three business days after the provider has received the |
|
insurer or group administrator's acknowledgement that ownership of |
|
the policy or interest in the certificate has been transferred and |
|
the beneficiary has been designated in accordance with the terms of |
|
the life settlement contract; |
|
(7) the fact that entering into a life settlement |
|
contract may cause the owner to forfeit other rights or benefits, |
|
including conversion rights and waiver of premium benefits that may |
|
exist under the policy or certificate of a group policy, and that |
|
assistance should be sought from a professional financial advisor; |
|
(8) the amount and method of calculating the |
|
compensation, including anything of value, paid or given, or to be |
|
paid or given, to the broker, or any other person acting for the |
|
owner in connection with the transaction; |
|
(9) the date by which the funds will be available to |
|
the owner and the identity of the transmitter of the funds; |
|
(10) the fact that the commissioner requires delivery |
|
of a buyer's guide or a similar consumer advisory package in the |
|
form prescribed by the commissioner to owners during the |
|
solicitation process; |
|
(11) the following language: "All medical, financial, |
|
or personal information solicited or obtained by a provider or |
|
broker about an insured, including the insured's identity or the |
|
identity of family members or a spouse or a significant other, may |
|
be disclosed as necessary to effect the life settlement contract |
|
between the owner and provider. If you are asked to provide this |
|
information, you will be asked to consent to the disclosure. The |
|
information may be provided to someone who buys the policy or |
|
provides funds for the purchase. You may be asked to renew your |
|
permission to share information every two years."; |
|
(12) the fact that the commissioner requires providers |
|
and brokers to print separate signed fraud warnings on the |
|
applications and on the life settlement contracts as follows: "Any |
|
person who knowingly presents false information in an application |
|
for insurance or a life settlement contract is guilty of a crime and |
|
may be subject to fines and confinement in prison."; |
|
(13) the fact that the insured may be contacted by |
|
either the provider or broker or an authorized representative of |
|
the provider or broker for the purpose of determining the insured's |
|
health status or to verify the insured's address and that this |
|
contact is limited to once every three months if the insured has a |
|
life expectancy of more than one year, and not more than once per |
|
month if the insured has a life expectancy of one year or less; |
|
(14) the affiliation, if any, between the provider and |
|
the issuer of the insurance policy to be settled; |
|
(15) that a broker represents exclusively the owner, |
|
and not the insurer or the provider or any other person, and owes a |
|
fiduciary duty to the owner, including a duty to act according to |
|
the owner's instructions and in the best interest of the owner; |
|
(16) the name, address, and telephone number of the |
|
provider; |
|
(17) the name, business address, and telephone number |
|
of the independent third party escrow agent, and the fact that the |
|
owner may inspect or receive copies of the relevant escrow or trust |
|
agreements or documents; and |
|
(18) the fact that a change of ownership could in the |
|
future limit the insured's ability to purchase future insurance on |
|
the insured's life because there is a limit to how much coverage |
|
insurers will issue on one life. |
|
(b) The written disclosures described by Subsection (a) |
|
must be conspicuously displayed in a life settlement contract |
|
furnished to the owner by a provider, including any affiliations or |
|
contractual arrangements between the provider and the broker. |
|
(c) A broker shall provide the owner and the provider with |
|
at least the following disclosures not later than the date on which |
|
the life settlement contract is signed by all parties and which must |
|
be conspicuously displayed in the life settlement contract or in a |
|
separate document signed by the owner: |
|
(1) the name, business address, and telephone number |
|
of the broker; |
|
(2) a full, complete, and accurate description of all |
|
the offers, counter-offers, acceptances, and rejections relating |
|
to the proposed life settlement contract; |
|
(3) a written disclosure of any affiliations or |
|
contractual arrangements between the broker and any person making |
|
an offer in connection with the proposed life settlement contract; |
|
(4) the name of each broker who receives compensation |
|
and the amount of compensation, including anything of value, paid |
|
or given to the broker in connection with the life settlement |
|
contract; and |
|
(5) a complete reconciliation of the gross offer or |
|
bid by the provider to the net amount of proceeds or value to be |
|
received by the owner. |
|
(d) For the purpose of this section, "gross offer or bid" |
|
means the total amount or value offered by the provider for the |
|
purchase of one or more life insurance policies, inclusive of |
|
commissions and fees. |
|
(e) The failure to provide the disclosures or rights |
|
described in this section is an unfair method of competition or an |
|
unfair or deceptive act or practice. |
|
Sec. 1111A.013. DISCLOSURE TO INSURER. (a) Without |
|
limiting the ability of an insurer to assess the insurability of a |
|
policy applicant and to determine whether to issue the policy, and |
|
in addition to other questions an insurance carrier may lawfully |
|
pose to a life insurance applicant, an insurer may inquire in the |
|
application for insurance whether the proposed owner intends to pay |
|
premiums with the assistance of financing from a lender that will |
|
use the policy as collateral to support the financing. |
|
(b) If, as described in Sections 1111A.002(11) and (11-A), |
|
the loan provides funds that can be used for a purpose other than |
|
paying for the premiums, costs, and expenses associated with |
|
obtaining and maintaining the life insurance policy and loan, and |
|
notwithstanding any other law, the application must be rejected as |
|
a violation of Section 1111A.017. |
|
(c) If the financing does not violate Section 1111A.017, the |
|
insurance carrier: |
|
(1) may make disclosures, not later than the date of |
|
the delivery of the policy, to the applicant and the insured, either |
|
on the application or on an amendment to the application that |
|
include the following or substantially similar statements: |
|
"If you have entered into a loan arrangement in which the policy is |
|
used as collateral, and the policy does change ownership at some |
|
point in the future in satisfaction of the loan, the following may |
|
be true: |
|
(A) a change of ownership could lead to a |
|
stranger owning an interest in the insured's life; |
|
(B) a change of ownership could in the future |
|
limit your ability to purchase future insurance on the insured's |
|
life because there is a limit to how much coverage insurers will |
|
issue on one life; |
|
(C) should there be a change of ownership and you |
|
wish to obtain more insurance coverage on the insured's life in the |
|
future, the insured's higher issue age, a change in health status, |
|
or other factors may reduce the ability to obtain coverage or may |
|
result in significantly higher premiums; and |
|
(D) you should consult a professional advisor, |
|
since a change in ownership in satisfaction of the loan may result |
|
in tax consequences to the owner, depending on the structure of the |
|
loan."; |
|
(2) may require certifications, such as the following, |
|
from the applicant or the insured: |
|
(A) "I have not entered into any agreement or |
|
arrangement providing for the future sale of this life insurance |
|
policy"; |
|
(B) "My loan arrangement for this policy provides |
|
funds sufficient to pay for some or all of the premiums, costs, and |
|
expenses associated with obtaining and maintaining my life |
|
insurance policy, but I have not entered into any agreement by which |
|
I am to receive consideration in exchange for procuring this |
|
policy"; and |
|
(C) "The borrower has an insurable interest in |
|
the insured." |
|
Sec. 1111A.014. GENERAL RULES. (a) Before entering into a |
|
life settlement contract with an owner of a policy with respect to |
|
which the insured is terminally or chronically ill, the provider |
|
must obtain: |
|
(1) if the owner is the insured, a written statement |
|
from a licensed attending physician that the owner is of sound mind |
|
and under no constraint or undue influence to enter into a |
|
settlement contract; and |
|
(2) a document in which the insured consents to the |
|
release of medical records to a provider, settlement broker, or |
|
insurance agent and, if the policy was issued less than two years |
|
after the date of application for a settlement contract, to the |
|
insurance company that issued the policy. |
|
(b) An insurer shall respond to a request for verification |
|
of coverage submitted by a provider, settlement broker, or life |
|
insurance agent not later than the 30th calendar day after the date |
|
the request is received. The request for verification of coverage |
|
must be made on a form approved by the commissioner. The insurer |
|
shall complete and issue the verification of coverage or indicate |
|
in which respects the insurer is unable to respond. In the |
|
response, the insurer shall indicate whether at the time of the |
|
response, based on the medical evidence and documents provided, the |
|
insurer intends to pursue an investigation about the validity of |
|
the insurance contract. |
|
(c) On or before the date of execution of the life |
|
settlement contract, the provider shall obtain a witnessed document |
|
in which the owner consents to the settlement contract, represents |
|
that the owner has a full and complete understanding of the |
|
settlement contract and of the benefits of the policy, acknowledges |
|
that the owner is entering into the settlement contract freely and |
|
voluntarily, and, for persons with a terminal or chronic illness or |
|
condition, acknowledges that the insured has a terminal or chronic |
|
illness and that the terminal or chronic illness or condition was |
|
diagnosed after the policy was issued. |
|
(d) The insurer may not unreasonably delay effecting change |
|
of ownership or beneficiary with any life settlement contract |
|
lawfully entered into in this state or with a resident of this |
|
state. |
|
(e) If a settlement broker or life insurance agent performs |
|
any of these activities required of the provider, the provider is |
|
deemed to have fulfilled the requirements of this section. |
|
(f) If a broker performs the verification of coverage |
|
activities required of the provider, the provider is deemed to have |
|
fulfilled the requirements of Section 1111A.012. |
|
(g) Not later than the 20th day after the date that an owner |
|
executes the life settlement contract, the provider shall give |
|
written notice to the insurer that issued that insurance policy |
|
that the policy has become subject to a life settlement contract. |
|
The notice shall be accompanied by the documents required by |
|
Section 1111A.013(c). |
|
(h) Medical information solicited or obtained by a license |
|
holder is subject to the applicable provision of state law relating |
|
to confidentiality of medical information, if not otherwise |
|
provided in this chapter. |
|
(i) A life settlement contract entered into in this state |
|
must provide that the owner may rescind the contract on or before 15 |
|
days after the date the contract is executed by all parties to the |
|
contract. Rescission, if exercised by the owner, is effective only |
|
if notice of the rescission is given and the owner repays all |
|
proceeds and any premiums, loans, and loan interest paid on account |
|
of the provider within the rescission period. If the insured dies |
|
during the rescission period, the contract is rescinded subject to |
|
repayment by the owner or the owner's estate of all proceeds and any |
|
premiums, loans, and loan interest to the provider. |
|
(j) Not later than the third business day after the date the |
|
provider receives from the owner the documents to effect the |
|
transfer of the insurance policy, the provider shall pay the |
|
proceeds of the settlement into an escrow or trust account managed |
|
by a trustee or escrow agent in a state or federally chartered |
|
financial institution pending acknowledgement of the transfer by |
|
the issuer of the policy. The trustee or escrow agent shall |
|
transfer to the owner the proceeds due to the owner not later than |
|
the third business day after the date the trustee or escrow officer |
|
receives from the insurer acknowledgment of the transfer of the |
|
insurance policy. |
|
(k) Failure to tender the life settlement contract proceeds |
|
to the owner on or before the date disclosed to the owner renders |
|
the contract voidable by the owner for lack of consideration until |
|
the time the proceeds are tendered to and accepted by the owner. A |
|
failure to give written notice of the right of rescission under this |
|
subsection tolls the right of rescission for 30 days after the date |
|
the written notice of the right of rescission has been given. |
|
(l) A fee paid by a provider, an owner, or other person to a |
|
broker in exchange for services provided to the owner pertaining to |
|
a life settlement contract must be computed as a percentage of the |
|
offer obtained, not the face value of the policy. Nothing in this |
|
section prohibits a broker from voluntarily reducing the broker's |
|
fee to less than a percentage of the offer obtained. |
|
(m) A broker shall disclose to the owner anything of value |
|
paid or given to a broker that relates to a life settlement |
|
contract. |
|
(n) A person, at any time prior to or at the time of the |
|
application for, or issuance of, a policy, or during a two-year |
|
period beginning on the date of issuance of the policy, may not |
|
enter into a life settlement contract regardless of the date the |
|
compensation is to be provided and regardless of the date the |
|
assignment, transfer, sale, devise, bequest, or surrender of the |
|
policy is to occur. This prohibition does not apply if: |
|
(1) the owner certifies to the provider that the |
|
policy was issued on 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 prior policy is at least 24 months; or |
|
(2) the owner submits independent evidence to the |
|
provider that one or more of the following conditions have been met |
|
during the two-year period described by this subsection: |
|
(A) the owner or insured is terminally or |
|
chronically ill; |
|
(B) the owner or insured disposes of the owner's |
|
or insured's ownership interests in a closely held corporation, |
|
pursuant to the terms of a buyout or other similar agreement in |
|
effect at the time the insurance policy was initially issued; |
|
(C) the owner's spouse dies; |
|
(D) the owner divorces the owner's spouse; |
|
(E) the owner retires from full-time employment; |
|
(F) the owner becomes physically or mentally |
|
disabled and a physician determines that the disability prevents |
|
the owner from maintaining full-time employment; or |
|
(G) a final order, judgment, or decree is entered |
|
by a court of competent jurisdiction, on the application of a |
|
creditor of the owner, adjudicating the owner bankrupt or |
|
insolvent, or approving a petition seeking reorganization of the |
|
owner or appointing a receiver, trustee, or liquidator to all or a |
|
substantial part of the owner's assets. |
|
(o) For the purposes of Subsection (n)(1), time covered |
|
under a group policy must be calculated without regard to a change |
|
in insurance carriers, provided the coverage has been continuous |
|
and under the same group sponsorship. |
|
(p) Copies of the independent evidence described by |
|
Subsection (n)(2) must be submitted to the insurer at the time the |
|
provider submits a request to the insurer for verification of |
|
coverage. The copies must be accompanied by a letter of attestation |
|
from the provider that the copies are true and correct copies of the |
|
documents received by the provider. This section does not prohibit |
|
an insurer from exercising its right to contest the validity of a |
|
policy. |
|
(q) If the provider submits to the insurer a copy of |
|
independent evidence provided for Subsection (n)(2)(A) at the time |
|
the provider submits a request to the insurer to effect the transfer |
|
of the policy to the provider, the copy is deemed to establish that |
|
the settlement contract satisfies the requirements of this section. |
|
Sec. 1111A.015. AUTHORITY TO ADOPT RULES. (a) The |
|
commissioner may adopt rules implementing this chapter and |
|
regulating the activities and relationships of providers, brokers, |
|
insurers, and their authorized representatives. |
|
(b) The commissioner may not adopt a rule establishing a |
|
price or fee for the sale or purchase of a life settlement contract. |
|
This subsection does not prohibit the commissioner from adopting a |
|
rule relating to an unjust price or fee for the sale or purchase of a |
|
life settlement contract. |
|
(c) The commissioner may not adopt a rule that regulates the |
|
actions of an investor providing money to a life or viatical |
|
settlement company. |
|
Sec. 1111A.016. CONFLICT OF LAWS. (a) If there is more |
|
than one owner on a single policy, and the owners are residents of |
|
different states, the life settlement contract is governed by the |
|
law of the state in which the owner having the largest percentage |
|
ownership resides or, if the owners hold equal ownership, the state |
|
of residence of one owner agreed on in writing by all of the owners. |
|
The law of the state of the insured shall govern in the event that |
|
equal owners fail to agree in writing on a state of residence for |
|
jurisdictional purposes. |
|
(b) A provider licensed in this state who enters into a life |
|
settlement contract with an owner who is a resident of another state |
|
that has enacted statutes or adopted rules governing life |
|
settlement contracts is governed in the effectuation of that life |
|
settlement contract by the statutes and rules of the owner's state |
|
of residence. If the state in which the owner is a resident has not |
|
enacted statutes or adopted rules governing life settlement |
|
contracts, the provider shall give the owner notice that neither |
|
state regulates the transaction on which the owner is entering. For |
|
transactions in those states, however, the provider shall maintain |
|
all records required by this chapter if the transactions were |
|
executed in this state. The forms used in those states need not be |
|
approved by the department. |
|
(c) If there is a conflict in the laws that apply to an owner |
|
and a purchaser in any individual transaction, the laws of the state |
|
that apply to the owner shall take precedence and the provider shall |
|
comply with those laws. |
|
Sec. 1111A.017. PROHIBITED PRACTICES. (a) A person may |
|
not: |
|
(1) enter into a life settlement contract if the |
|
person knows or reasonably should have known that the life |
|
insurance policy was obtained by means of a false, deceptive, or |
|
misleading application for the policy; |
|
(2) engage in a transaction, practice, or course of |
|
business if the person knows or reasonably should have known that |
|
the intent of engaging in the transaction, practice, or course of |
|
business is to avoid the notice requirements of this chapter; |
|
(3) engage in a fraudulent act or practice in |
|
connection with a transaction relating to any settlement involving |
|
an owner who is a resident of this state; |
|
(4) issue, solicit, market, or otherwise promote the |
|
purchase of an insurance policy for the purpose of, or with an |
|
emphasis on, settling the policy; |
|
(5) if providing premium financing, receive any |
|
proceeds, fee, or other consideration from the policy or owner in |
|
addition to the amounts required to pay principal, interest, and |
|
any reasonable costs or expenses incurred by the lender or borrower |
|
in connection with the premium finance agreement, except in event |
|
of a default, unless either the default on the loan or transfer of |
|
the policy occurs pursuant to an agreement or understanding with |
|
any other person for the purpose of evading regulation under this |
|
chapter; |
|
(6) with respect to any settlement contract or |
|
insurance policy and to a broker, knowingly solicit an offer from, |
|
effectuate a life settlement contract with, or make a sale to any |
|
provider, financing entity, or related provider trust that is |
|
controlling, controlled by, or under common control with the broker |
|
unless the relationship is fully disclosed to the owner; |
|
(7) with respect to any life settlement contract or |
|
insurance policy and a provider, knowingly enter into a life |
|
settlement contract with an owner if, in connection with the life |
|
settlement contract, anything of value will be paid to a broker that |
|
is controlling, controlled by, or under common control with the |
|
provider or the financing entity or related provider trust that is |
|
involved in such settlement contract, unless the relationship is |
|
fully disclosed to the owner; |
|
(8) with respect to a provider, enter into a life |
|
settlement contract unless the life settlement promotional, |
|
advertising, and marketing materials, as may be prescribed by rule, |
|
have been filed with the commissioner, provided that in no event may |
|
any marketing materials expressly reference that the insurance is |
|
free for any period of time; or |
|
(9) with respect to any life insurance agent, |
|
insurance company, broker, or provider, make any statement or |
|
representation to the applicant or policyholder in connection with |
|
the sale or financing of a life insurance policy to the effect that |
|
the insurance is free or without cost to the policyholder for any |
|
period of time unless provided in the policy. |
|
(b) A violation of this section is a fraudulent life |
|
settlement act. |
|
Sec. 1111A.018. FRAUD PREVENTION AND CONTROL. (a) A |
|
person may not commit a fraudulent life settlement act. |
|
(b) A person may not interfere with the enforcement of this |
|
chapter or an investigation of a suspected or actual violation of |
|
this chapter. |
|
(c) A person in the business of life settlements may not |
|
knowingly or intentionally permit a person convicted of a felony |
|
involving dishonesty or breach of trust to participate in the |
|
business of life settlements. |
|
(d) A life settlement contract and an application for a life |
|
settlement contract, regardless of the form of transmission, must |
|
contain the following, or a substantially similar, statement: "Any |
|
person who knowingly presents false information in an application |
|
for insurance or a life settlement contract is guilty of a crime and |
|
may be subject to fines and confinement in prison." |
|
(e) The failure to include a statement as required in |
|
Subsection (d) is not a defense in any prosecution for a fraudulent |
|
life settlement act. |
|
Sec. 1111A.019. MANDATORY REPORTING OF FRAUDULENT LIFE |
|
SETTLEMENT ACTS. A person engaged in the business of life |
|
settlements has a duty under Section 701.051 to report a fraudulent |
|
life settlement act. |
|
Sec. 1111A.020. CONFIDENTIALITY. (a) The documents and |
|
evidence obtained by the commissioner in an investigation of a |
|
suspected or an actual fraudulent life settlement act are |
|
privileged and confidential, are not a public record, and are not |
|
subject to discovery or subpoena in a civil or criminal action. |
|
(b) Subsection (a) does not prohibit release by the |
|
commissioner of documents and evidence obtained in an investigation |
|
of a suspected or an actual fraudulent life settlement act: |
|
(1) in an administrative or judicial proceeding to |
|
enforce a provision of this code or another insurance law of this |
|
state; |
|
(2) to a federal, state, or local law enforcement or |
|
regulatory agency, to an organization established for the purpose |
|
of detecting and preventing a fraudulent life settlement act, or to |
|
the National Association of Insurance Commissioners; or |
|
(3) at the discretion of the commissioner, to a person |
|
in the business of life settlements that is aggrieved by a |
|
fraudulent life settlement act. |
|
(c) Release of documents and evidence under Subsection (b) |
|
does not abrogate or modify the privilege granted in Subsection |
|
(a). |
|
Sec. 1111A.021. OTHER LAW ENFORCEMENT OR REGULATORY |
|
AUTHORITY. This chapter does not: |
|
(1) preempt the authority or relieve the duty of |
|
another law enforcement or regulatory agency to investigate, |
|
examine, and prosecute a suspected violation of law; |
|
(2) preempt, supersede, or limit any provision of any |
|
state securities law or any rule, order, or notice issued under the |
|
law; |
|
(3) prevent or prohibit a person from disclosing |
|
voluntarily information concerning life settlement fraud to a law |
|
enforcement or regulatory agency other than the department; or |
|
(4) limit the powers granted by the laws of this state |
|
to the commissioner or an insurance fraud unit to investigate and |
|
examine a possible violation of law and to take appropriate action |
|
against wrongdoers. |
|
Sec. 1111A.022. LIFE SETTLEMENT ANTIFRAUD INITIATIVES. |
|
(a) A provider or broker shall implement antifraud initiatives |
|
reasonably calculated to detect, prosecute, and prevent fraudulent |
|
life settlement acts. At the discretion of the commissioner, the |
|
commissioner may order, or a license holder may request and the |
|
commissioner may grant, a modification of the following required |
|
initiatives as necessary to ensure an effective antifraud program. |
|
A modification granted under this section may be more or less |
|
restrictive than the required initiatives so long as the |
|
modification may reasonably be expected to accomplish the purpose |
|
of this section. Antifraud initiatives must include: |
|
(1) fraud investigators, who may be provider or broker |
|
employees or independent contractors; and |
|
(2) an antifraud plan, which must be submitted to the |
|
commissioner and must include: |
|
(A) a description of the procedures for detecting |
|
and investigating possible fraudulent life settlement acts and |
|
procedures for resolving material inconsistencies between medical |
|
records and insurance applications; |
|
(B) a description of the procedures for reporting |
|
possible fraudulent life settlement acts to the commissioner; |
|
(C) a description of the plan for antifraud |
|
education and training of underwriters and other personnel; and |
|
(D) a description or chart outlining the |
|
organizational arrangement of the antifraud personnel who are |
|
responsible for the investigation and reporting of possible |
|
fraudulent life settlement acts and investigating unresolved |
|
material inconsistencies between medical records and insurance |
|
applications. |
|
(b) An antifraud plan submitted to the commissioner is |
|
privileged and confidential, is not subject to disclosure under |
|
Chapter 552, Government Code, and is not subject to discovery or |
|
subpoena in a civil action. |
|
Sec. 1111A.023. INJUNCTION; CIVIL REMEDIES; CEASE AND |
|
DESIST ORDERS. (a) In addition to the penalties and other |
|
enforcement provisions of this chapter, if any person violates this |
|
chapter or any rule implementing this chapter, the commissioner may |
|
seek an injunction in a court in the county where the person resides |
|
or has a principal place of business and may apply for temporary and |
|
permanent orders that the commissioner determines necessary to |
|
restrain the person from further committing the violation. |
|
(b) The commissioner may issue a cease and desist order |
|
against a person who violates any provision of this chapter, any |
|
rule or order adopted by the commissioner, or any written agreement |
|
entered into with the commissioner, in accordance with Chapter 82. |
|
(c) If the commissioner finds that an action in violation of |
|
this chapter presents an immediate danger to the public and |
|
requires an immediate final order, the commissioner may issue an |
|
emergency cease and desist order under Chapter 83. |
|
(d) The provisions of this chapter may not be waived by |
|
agreement. No choice of law provision may prevent the application |
|
of this chapter to any settlement. |
|
Sec. 1111A.024. PENALTIES. (a) It is a violation of this |
|
chapter for any person, provider, broker, or any other party |
|
related to the business of life settlements to commit a fraudulent |
|
life settlement act. |
|
(b) A person who knowingly, recklessly, or intentionally |
|
commits a fraudulent life settlement act commits a criminal offense |
|
and is subject to penalties under Chapter 35, Penal Code. |
|
(c) Subtitle B, Title 2, applies to a violation of this |
|
chapter. |
|
Sec. 1111A.025. APPLICABILITY OF OTHER INSURANCE LAWS. The |
|
following laws apply to a person engaged in the business of life |
|
settlements: |
|
(1) Chapters 82, 83, 84, 101, 481, 541, and 701; |
|
(2) Sections 31.002, 32.021, 32.023, 32.041, 38.001, |
|
81.004, 86.001, 86.051, 86.052, 201.004, 401.051, 401.054, |
|
401.151(a), 521.003, 521.004, 543.001(c), 801.056, and 862.052; |
|
(3) Subchapter A, Chapter 32; |
|
(4) Subchapter C, Chapter 36; |
|
(5) Subchapter B, Chapter 404; and |
|
(6) Subchapter B, Chapter 491. |
|
SECTION 1.02. (a) A provider lawfully transacting |
|
business in this state before the effective date of this Act may |
|
continue to do so pending approval or disapproval of the person's |
|
application for a license as long as the application is filed with |
|
the commissioner of insurance not later than 30 days after the date |
|
of the publication by the commissioner of an application form and |
|
instructions for licensure of providers. If the publication of the |
|
application form and instructions is before the effective date of |
|
this Act, then the filing of the application may not be later than |
|
30 days after the effective date of this Act and the applicant may |
|
use any form of life settlement contract that has been filed with |
|
the commissioner pending approval, provided that the form is |
|
otherwise in compliance with the provisions of this Act. A person |
|
transacting business in this state under this provision shall |
|
comply with all other requirements of this Act. |
|
(b) A person who has lawfully negotiated a life settlement |
|
contract between an owner residing in this state and one or more |
|
providers for at least one year immediately before the effective |
|
date of this Act may continue to do so pending approval or |
|
disapproval of the person's application for a license provided that |
|
the application is filed with the commissioner of insurance not |
|
later than the 30th day after the date of publication by the |
|
commissioner of an application form and instructions for licensure |
|
of brokers. If the publication of the application form and |
|
instructions is before the effective date of this Act, then the |
|
filing of the application may not be later than the 30th day after |
|
the effective date of this Act. Any person transacting business in |
|
this state under this provision shall comply with all other |
|
requirements of this Act. |
|
ARTICLE 2. CONFORMING AMENDMENTS |
|
SECTION 2.01. The heading to Chapter 1111, Insurance Code, |
|
is amended to read as follows: |
|
CHAPTER 1111. [LIFE AND VIATICAL SETTLEMENTS AND] ACCELERATED |
|
TERM LIFE INSURANCE BENEFITS |
|
SECTION 2.02. Subsection (a), Section 1551.255, Insurance |
|
Code, is amended to read as follows: |
|
(a) In this section, "viatical settlement" has the meaning |
|
assigned to "life settlement contract" by Section 1111A.002 |
|
[1111.001]. |
|
SECTION 2.03. Subchapter A, Chapter 1111, Insurance Code, |
|
is repealed. |
|
ARTICLE 3. EFFECTIVE DATE |
|
SECTION 3.01. This Act takes effect September 1, 2011. |