304.15-710 Life settlement provider's duties of disclosure to owner.
(1)
With each application for a life settlement contract, a life settlement provider or life
settlement broker shall provide the owner a copy of the department's consumer
guide relating to life settlements. The provider shall provide in writing, in a separate
document that is signed by the owner and provider the information in this
subsection to the owner no later than the date the life settlement contract is signed
by all parties. The written disclosures shall be conspicuously displayed in any life
settlement contract or in a separate document furnished to the owner by a provider
including any affiliations or contractual arrangements between the provider and the
broker and shall provide the following information:
(a) That there are possible alternatives to life settlement contracts including but
not limited to accelerated benefits or policy loans offered under the owner's
policy;
(b) That some or all of the proceeds of the life settlement may be taxable under
federal income tax laws and state franchise and income tax laws, and that
assistance should be sought from a personal tax advisor;
(c) That proceeds of the life settlement contract could be subject to the claims of
creditors;
(d) That receipt of the proceeds of a life settlement contract may adversely affect
the owner's eligibility for Medicaid or other government benefits or
entitlements, and that advice should be obtained from the appropriate
government agencies;
(e) That the owner has a right to rescind a life settlement contract before the
earlier of thirty (30) calendar days of the date it is executed by all parties or
fifteen (15) calendar days after the receipt of the proceeds of the life
settlement contract by the owner. If exercised by the owner, rescission is
effective only if both notice of the rescission is given, and within the
rescission period all proceeds, and any premiums, loans, and loan interest are
repaid to the settlement provider. If the insured dies during the rescission
period, the settlement contract shall be deemed to have been rescinded,
subject to repayment of all life settlement proceeds and any premiums, loans,
and loan interest to the life settlement provider. The life settlement provider
shall effectuate the change of ownership of the policy or certificate to the
owner immediately upon effective rescission by the owner;
(f) That entering into a life settlement contract may cause other rights or benefits,
including conversion rights and waiver of premium benefits that may exist
under the policy, to be forfeited by the owner and that assistance should be
sought from a financial adviser;
(g) That funds will be sent to the owner within three (3) business days after the
life settlement provider has received the insurer's or group administrator's
acknowledgment that ownership of the policy has been transferred and the
beneficiary has been designated pursuant to the life settlement contract;
(h) That the disclosure document shall contain the following language:
(2)
"All medical, financial, or personal information solicited or obtained by a life
settlement provider or life settlement broker about an insured, including the
insured's identity or the identity of family members, a spouse, or a significant
other may be disclosed as necessary to effect the life settlement between the
owner and the life settlement 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 (2) years."; and
(i) That the insured may be contacted by the life settlement provider or its
authorized representative for the purpose of determining the insured's health
status or to verify the insured's address. This contact shall be limited to once
every three (3) months if the insured has a life expectancy of more than one
(1) year, and no more than once per month if the insured has a life expectancy
of one (1) year or less.
A life settlement provider shall provide the owner with at least the following
disclosures no later than the date the life settlement contract is signed by all parties.
The disclosures shall be conspicuously displayed in the life settlement contract or in
a separate document signed by the owner and the life settlement provider and
provide the following information:
(a) State the affiliation, if any, between the life settlement provider and the issuer
of the policy to be acquired pursuant to a settlement contract;
(b) State the name, address and telephone number of the life settlement provider;
(c) If a policy to be acquired pursuant to a life settlement contract has been issued
as a joint policy or involves family riders or any coverage of a life other than
the insured under the policy to be acquired pursuant to a settlement contract,
the owner shall be informed of the possible loss of coverage on the other lives
and shall be advised to consult with his insurance producer or the company
issuing the policy for advice on the proposed life settlement contract;
(d) State the dollar amount of the current death benefit payable to the life
settlement provider under the policy. The life settlement provider shall, if
known, also disclose the availability of any additional guaranteed insurance
benefits, the dollar amount of any accidental death and dismemberment
benefits under the policy, and the life settlement provider's interest in those
benefits;
(e) State 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;
(f) The date by which the funds will be available to the owner and the transmitter
of the funds;
(g) That a consumer guide shall be delivered to owners with each application as
required in this subsection;
(h)
(3)
(4)
That applications and life settlement contracts shall contain the statement as
required in KRS 304.15-717(2);
(i) 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
interests of the owner; and
(j) The fact that a change in 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 (1) life.
If the life settlement provider transfers ownership or changes the beneficiary of the
policy, the life settlement provider shall communicate the change in ownership or
beneficiary to the insured within twenty (20) days after the change.
A broker shall provide the owner and the provider with at least the following
disclosures no later than the date the life settlement contract is signed by all parties.
The disclosures shall be conspicuously displayed in the life settlement contract or in
a separate document signed by the owner and provide the following information:
(a) The name, business address, and telephone number of the broker;
(b) A full, complete, and accurate description of all the offers, counter-offers,
acceptances, and rejections relating to the proposed life settlement contract;
(c) The name of each broker who receives compensation and the amount of
compensation received by the broker, which compensation includes anything
of value paid or given to the broker in connection with the life settlement
contract;
(d) 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. For the purposes of
this paragraph, "gross offer or bid" means the total amount or value offered by
the provider for the purchase of one (1) or more life insurance policies,
inclusive of the commissions and fees; and
(e) The failure to provide the disclosures or rights described in this section shall
be deemed an unfair trade practice.
Effective: July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1194, effective July 15, 2010. -Amended 2008 Ky. Acts ch. 32, sec. 4, effective July 15, 2008. -- Amended 2005
Ky. Acts ch. 58, sec. 9, effective June 20, 2005. -- Amended 2000 Ky. Acts ch. 472,
sec. 9, effective July 14, 2000. -- Created 1998 Ky. Acts ch. 403, sec. 4, effective
July 15, 1998.
Legislative Research Commission Note (7/15/2008). 2008 Ky. Acts ch. 32 intended to
change all existing references in the KRS from "viator" to "owner." One reference to
"viator" in this section was overlooked during the bill drafting process. The Reviser
of Statutes has made this change upon the authority of KRS 7.136(1)(h).
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