2011 Kentucky Revised Statutes Subtitle 15. Life Insurance 304.15.717 Circumstances under which life settlement transactions are unlawful -- Required statement regarding false information -- Furnishing information regarding fraudulent life settlement acts.
KY Rev Stat § 304.15.717 (1996 through Reg Sess) What's This?
304.15-717 Circumstances under which life settlement transactions are unlawful -Required statement regarding false information -- Furnishing information
regarding fraudulent life settlement acts.
(1)
It is unlawful for any person:
(a) To knowingly or intentionally enter into a life settlement contract when the
subject life insurance policy was obtained by means of a false, deceptive, or
misleading application for the life insurance policy;
(b) To knowingly or intentionally interfere with the enforcement of the provisions
of this subtitle or investigations of suspected or actual violations of this
subtitle;
(c) To knowingly or intentionally permit a person convicted of a felony involving
dishonesty or breach of trust to participate in the business of life settlements
as defined in KRS 304.15-020(5);
(d) To commit a fraudulent life settlement act;
(e) To misrepresent that the life settlement provider, life settlement broker, other
licensee, or any other person has been guaranteed, sponsored, recommended,
or approved by the state, or by any local, state, or federal agency or officer
thereof;
(f) To act as a life settlement broker if the person is acting as a life settlement
provider in the same life settlement contract;
(g) For any person to pay any compensation or provide anything of value to an
insured's physician, attorney, accountant, or any other person who provides
medical, legal, or financial advice to the insured as a finder's or referral fee;
(h) To engage in any transaction, practice, or course of business if such person
knows or reasonably should have known that the intent was to avoid the
notice requirements of KRS 304.15-020 and 304.15-700 to 304.15-720;
(i) To engage in any fraudulent act or practice in connection with any transaction
relating to any settlement involving an owner who is a resident of this state;
(j) To issue, solicit, market, or otherwise promote the purchase of a life insurance
policy for the sole purpose of or with a primary emphasis on settling the
policy;
(k) To enter into a life settlement contact on a policy that was the subject of a
premium finance agreement as described in KRS 304.15-020(17)(b)2.;
(l) With respect to any life settlement contract or life insurance policy and a
broker, to knowingly solicit an offer from, effectuate a life settlement contract
with or make a sale to any provider, financing entity, or related provider trust,
or any insurer that is controlling, controlled by, or under common control with
such broker unless disclosed to the owner;
(m) With respect to any life settlement contract or life insurance policy and a
provider, to knowingly enter into a life settlement contract with an owner if, in
connection with such life settlement contract, anything of value will be paid to
a broker or provider that is controlling, controlled by, or under common
(2)
(3)
control with such provider, the financing entity, or related provider trust that is
involved in such life settlement, or any insurer unless disclosed to the owner;
(n) With respect to a provider, to enter into a life settlement contract unless the
life settlement promotional, advertising, and marketing materials, as may be
prescribed by administrative regulation, have been filed with the
commissioner. Marketing materials shall not expressly reference that the
insurance is "free" for any period of time. The inclusion of any reference in
the marketing materials that would cause an owner to reasonably believe that
the insurance is free for any period of time shall be considered a violation of
KRS 304.15-700 to 304.15-720;
(o) With respect to any insurance company, insurance producer, broker, or
provider, or any other person, to 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; or
(p) If an insurer, to:
1.
Engage in or permit any discrimination between individuals of the same
class, same policy amount, and equal expectation of life in the rates
charged for any life insurance policy or annuity contract based upon an
individual's having entered into a life settlement contract or being
insured under a settled policy;
2.
Make any false or misleading statement as to the business of life
settlements or financing premiums due for a policy or to any owner or
insured for the purpose of inducing or tending to induce the owner or
insured not to enter into a life settlement contract; or
3.
Engage in any transaction, act, practice, or course of business, or dealing
which restricts, limits, or impairs in any way the lawful transfer of
ownership, change of beneficiary, or assignment of a policy.
This subsection shall not prohibit a statement that the person is licensed, if that
statement is true and the effect of the statement is not misrepresented.
A life settlement contract and an application for a life settlement contract, regardless
of the form of transmission, shall contain the following statement or a substantially
similar statement:
"Any person who knowingly presents false information in an application for
insurance or life settlement contract is guilty of a crime and upon conviction
may be subject to fines or confinement in prison, or both."
The lack of a statement required by this section does not constitute a defense in any
prosecution for a fraudulent life settlement act.
(a) A person engaged in the business of life settlements who has knowledge or a
reasonable belief that a fraudulent life settlement act is being, will be, or has
been committed shall provide the information required to the commissioner,
in a manner prescribed by the commissioner.
(b)
(4)
(5)
Any person who has knowledge or a reasonable belief that a fraudulent life
settlement act is being, will be, or has been committed may provide the
information required to the commissioner, in a manner prescribed by the
commissioner in administrative regulations.
(a) Civil liability may not be imposed on and a cause of action may not arise from
a person's furnishing information concerning suspected, anticipated, or
completed fraudulent life settlement acts, or suspected or completed
fraudulent insurance acts, if the information is provided to or received from:
1.
The commissioner or the commissioner's employees, agents, or
representatives;
2.
Federal, state, or local law enforcement or regulatory officials, or their
employees, agents, or representatives;
3.
A person involved in the prevention and detection of fraudulent life
settlement acts or that person's agents, employees, or representatives;
4.
The National Association of Insurance Commissioners (NAIC), the
National Association of Securities Dealers (NASD), the North American
Securities Administrators Association (NASAA), or their employees,
agents, or representatives, or any other regulatory body overseeing life
insurance or life settlement contracts;
5.
The insurer that issued the policy covering the life of the insured; or
6.
The licensee and any agents, employees, or representatives.
(b) This subsection shall not apply to a statement made with actual malice. In an
action brought against a person for filing a report or furnishing other
information concerning a fraudulent life settlement act or a fraudulent
insurance act, the party bringing the action shall plead specifically any
allegation that this subsection shall not apply because the person filing the
report or furnishing the information did so with actual malice.
(c) A person who furnishes information concerning fraudulent life settlement acts
and who is a party in a civil cause of action for libel, slander, or another
relevant tort arising out of activities in carrying out the provisions of this
chapter shall be entitled to an award of attorney's fees and court costs if he is
the prevailing party in the suit and the party bringing the action was not
substantially justified in filing the cause of action. For purposes of this
paragraph, a proceeding is "substantially justified" if a person had a
reasonable basis in law or fact at the time the cause of action was initiated.
(d) This subsection shall not abrogate or modify common law or statutory
privileges or immunities enjoyed by a person.
(e) This subsection shall not apply to a person who furnishes information
concerning his own suspected, anticipated, or completed fraudulent life
settlement acts or suspected, anticipated, or completed fraudulent insurance
acts.
The documents and evidence provided pursuant to subsection (4) of this section or
obtained by the commissioner in an investigation of suspected or actual fraudulent
(6)
(7)
life settlement acts shall be privileged and confidential and shall not be a public
record and shall not be subject to discovery or subpoena in a civil or criminal
action, except that:
(a) This subsection shall not prohibit release by the commissioner of documents
and evidence obtained in an investigation of suspected or actual fraudulent life
settlement acts:
1.
In administrative or judicial proceedings to enforce laws administered by
the commissioner;
2.
To federal, state, or local law enforcement or regulatory agencies, to an
organization established for the purpose of detecting and preventing
fraudulent life settlement acts, or to the National Association of
Insurance Commissioners (NAIC); 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; and
(b) The release of documents and evidence provided by paragraph (a) of this
subsection shall not abrogate or modify the privilege granted by this
subsection.
This section shall not:
(a) Preempt the authority or relieve the duty of other law enforcement or
regulatory agencies to investigate, examine, and prosecute suspected
violations of law;
(b) Prevent or prohibit a person from voluntarily disclosing information
concerning fraudulent life settlement acts to a law enforcement or regulatory
agency other than the Department of Insurance;
(c) Limit the powers granted elsewhere by the laws of this state to the
commissioner or an insurance fraud unit to investigate and examine possible
violations of law and to take appropriate action against wrongdoers; or
(d) Preempt, supersede, or limit any provision of any state securities law or any
rule, order, administrative regulation, or notice issued thereunder.
A life settlement provider shall adopt antifraud initiatives reasonably calculated to
detect, prosecute, and prevent fraudulent life settlement acts. The commissioner
may order or, if a licensee requests, may grant modifications of the required
initiatives listed in this subsection as necessary to ensure an effective antifraud
program. The modifications may be more or less restrictive than the required
initiatives so long as the modifications reasonably may be expected to accomplish
the purpose of this section. Antifraud initiatives shall include the following:
(a) Fraud investigators, who may be life settlement providers or employees or
independent contractors of those life settlement providers; and
(b) An antifraud plan that shall be filed with the commissioner and that shall
include but is not limited to the following:
1.
The procedures for detecting and investigating possible fraudulent life
settlement acts and procedures for resolving material inconsistencies
between medical records and insurance applications;
2.
The procedures for reporting possible fraudulent life settlement acts to
the commissioner;
3.
The plan for antifraud education and training of underwriters and other
personnel; and
4.
A 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.
Antifraud plans filed with the commissioner shall be privileged and
confidential and shall not be a public record and shall not be subject to
discovery or subpoena in a civil or criminal action.
Effective: July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1197, effective July 15, 2010; and
ch. 166, sec. 8, effective July 15, 2010. -- Amended 2008 Ky. Acts ch. 32, sec. 8,
effective July 15, 2008. -- Amended 2005 Ky. Acts ch. 58, sec. 12, effective June 20,
2005. -- Created 2000 Ky. Acts ch. 472, sec. 6, effective July 14, 2000.
Legislative Research Commission Note (7/15/2010). During codification of 2008 Ky.
Acts ch. 32, the Reviser of Statutes renumbered the subdivisions of KRS 304.15020(17), which was Section 1 of that Act, but neglected to make a conforming
change to a citation to that statute in subsection (1)(k) of this section, which was
Section 8 of that Act. The conforming change to "KRS 304.15-020(17)(b)2." has
now been made under the authority of KRS 7.136(1)(e).
Legislative Research Commission Note (7/15/2008). 2008 Ky. Acts ch. 32 intended to
change all existing references in the KRS from "viatical settlements" to "life
settlements." One reference to "viatical settlement" 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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