304.15-700 Licensing requirements governing life settlement providers and brokers
-- Contracts -- Commissioner's approval required -- Forms.
(1)
(2)
No person may act as a life settlement provider without first having obtained a
license as a life settlement provider from the commissioner.
Except as provided in paragraph (b) or (c) of this subsection, no person may broker,
solicit, or negotiate life settlement contracts between an owner and one (1) or more
life settlement providers or otherwise act on behalf of an owner without first having
obtained a license as a life settlement broker from the commissioner as follows:
(a) All applicants for a life settlement broker license shall attend the required life
broker training and pass a life broker examination designated by the
commissioner through administrative regulation;
(b) A person licensed as a resident or nonresident insurance agent with a life line
of authority, as set forth in KRS 304.9-030(2)(a), shall be deemed to meet the
licensing requirements of a life settlement broker and shall be permitted to
operate as a life settlement broker without obtaining a license as a life
settlement broker as set forth in this subtitle if:
1.
That person has been licensed as a resident insurance agent with a life
line of authority in his home state for at least one (1) year;
2.
Not later than thirty (30) days from the first day of operating as a life
settlement broker, the agent notifies the commissioner, on a notification
form prescribed by the commissioner, that he is acting as a life
settlement broker and pays any applicable fees to be determined by the
commissioner. The notification shall include an acknowledgment by the
agent that he will operate as a life settlement broker in accordance with
this subtitle; and
3.
Irrespective of the manner in which a life settlement broker or life
insurance agent is compensated, the life settlement broker or life
insurance agent is deemed to represent only the owner and owes a
fiduciary duty to the owner to act according to the owner's instructions
and in the best interests of the owner;
(c) Notwithstanding this subsection, a person licensed as an attorney, certified
public accountant, or financial planner accredited by a nationally recognized
accreditation agency, who is retained to represent the owner, whose
compensation is not paid directly or indirectly by the life settlement provider,
may negotiate life settlement contracts without having to obtain a license as a
life settlement broker; and
(d) A life insurance agent operating as a life settlement broker in accordance with
paragraph (b) of this subsection, prior to the execution of the life settlement
contract by all the parties for which such agent is operating as a life settlement
broker, shall have in force and file with the commissioner evidence of
financial responsibility as follows:
1.
A policy of insurance covering the legal liability of the agent as the
result of erroneous acts or failure to act in his or her capacity as a life
(3)
(4)
(5)
(6)
settlement broker, and inuring to the benefit of any aggrieved party as
the result of any single occurrence in the sum of not less than twenty
thousand dollars (,000) and one hundred thousand dollars (0,000)
in the aggregate for all occurrences within one (1) year; or
2.
An agreement with a licensed life settlement provider whereby the agent
is an additional insured on the policy of insurance covering the legal
liability of both the life settlement provider and the agent as the result of
erroneous acts or failure to act in his or her capacity as a life settlement
broker on a life settlement contract to which the life settlement provider
is a party, in the sum of twenty thousand dollars (,000) for any single
occurrence; or
3.
A deposit with the commissioner of cash or a cash surety bond, executed
by an insurer authorized to write business in this Commonwealth, in the
sum of twenty thousand dollars (,000), which shall be subject to
lawful levy of execution by any party to whom the agent has been found
to be legally liable as the result of erroneous acts or failure to act in his
or her capacity as a life settlement broker.
Application for a life settlement provider license or a life settlement broker license
shall be made in accordance with KRS 304.9-150.
Licenses for life settlement providers and life settlement brokers shall be in
accordance with Subtitle 9 of KRS Chapter 304. A business entity licensed as a life
settlement broker or life settlement provider shall designate individuals to act under
its license in accordance with KRS 304.9-133.
Prior to issuance of a license as a life settlement broker or life settlement provider,
except as provided in subsection (2)(d) of this section, the applicant shall file with
the commissioner, and thereafter for as long as the license remains in effect shall
keep in force, evidence of financial responsibility in the sum of not less than twenty
thousand dollars (,000) per occurrence, and the sum of one hundred thousand
dollars (0,000) in the aggregate, for all occurrences within one (1) year. This
evidence shall be in the form of an errors and omissions insurance policy issued by
an authorized insurer, a bond issued by an authorized corporate surety, a deposit, or
any combination of these evidences of financial responsibility. The policy, bond,
deposit, or combination thereof shall not be terminated without thirty (30) days'
prior written notice to the licensee and the commissioner. This subsection shall not
apply to a life insurance agent operating as a life settlement broker in accordance
with subsection (2) of this section.
No person shall use a life settlement contract form or provide to an owner a
disclosure statement form in this Commonwealth unless it has been filed with and
approved by the commissioner in the following manner:
(a) At the expiration of sixty (60) days from the date the filing is complete, the
form filed shall be deemed approved unless the commissioner has by order
given prior approval or disapproval. Approval of a form by the commissioner
shall constitute a waiver of any unexpired portion of the waiting period. The
commissioner may extend by not more than thirty (30) days the time period in
which he or she may approve or disapprove the form. The commissioner shall
give notice to the licensee of the extension before expiration of the initial sixty
(60) day period. At the expiration of the extended period, and in the absence
of the prior approval or disapproval, the form shall be deemed approved. The
commissioner may at any time, after notice and for cause shown, withdraw
any approval. The commissioner shall disapprove a life settlement contract
form or disclosure statement form if, in the determination of the
commissioner, the contract or provisions contained therein are unreasonable,
contrary to the interests of the public, or otherwise are misleading or unfair to
the owner. Upon notice and hearing the commissioner shall withdraw
approval of any contract later determined to be unreasonable, misleading,
unfair, or contrary to the interest of the public; and
(b) Forms may be submitted simultaneously with an application or at any time
during the process of approving an application for a license pursuant to this
subtitle or at any other time.
(7) A licensed life settlement provider shall not use any person to perform the functions
of a life settlement broker as defined in KRS 304.15-020 unless the person holds a
current and valid license or is a licensed insurance agent authorized pursuant to this
subtitle to operate as a life settlement broker. A licensed life settlement broker shall
not use any person to perform the functions of a life settlement provider as defined
in KRS 304.15-020 unless the person holds a current and valid license as a life
settlement provider.
(8) If any employee of a licensee violates any provision of KRS 304.15-020, 304.15700 to 304.15-720, 304.42-190, and 304.99-126, the department may take
disciplinary action against the employer licensee.
(9) When a life settlement provider elects to use a related provider trust, the life
settlement provider shall file notice of its intention to use that trust with the
department with a copy of the trust agreement. Any change in the trust agreement
shall be filed with the commissioner prior to its effect.
(10) Any additional death benefit payment on a life insurance policy that is the subject of
a life settlement contract with a double or additional indemnity for accidental death
shall be payable to the following:
(a) The beneficiary last named by the policy owner prior to entering into the life
settlement contract; or
(b) To the estate of the owner in the absence of a beneficiary.
(11) An insurer that issued a policy that is the subject of a life settlement contract shall
not be responsible for any act or omission of a broker, provider, or purchaser arising
out of or in connection with the life settlement transaction, unless the insurer
receives compensation for the placement of the life settlement contract from the
provider, purchaser, or broker in connection with the life settlement contract.
(12) No insurer may, 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
in the Commonwealth.
Effective: July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1190, effective July 15, 2010. -Amended 2008 Ky. Acts ch. 32, sec. 2, effective July 15, 2008. -- Amended 2006
Ky. Acts ch. 54, sec. 1, effective July 12, 2006. -- Amended 2005 Ky. Acts ch. 58,
sec. 7, effective June 20, 2005. -- Amended 2000 Ky. Acts ch. 472, sec. 2, effective
July 14, 2000. -- Created 1998 Ky. Acts ch. 403, sec. 2, effective July 15, 1998.
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