CHAPTER 700b
LIFE INSURANCE, ANNUITIES, BURIAL CONTRACTS
AND LIFE SETTLEMENTS

Table of Contents

Sec. 38a-432b. Regulations concerning solicitation and sale of life insurance and annuities to senior citizens. Disciplinary action.
Sec. 38a-457. Accelerated benefits of life insurance policies.
Sec. 38a-465a. Licensing of life settlement providers and brokers.
Sec. 38a-465c. Contract form and disclosure statements. Filing and approval requirements. Disclosure of life settlement contract availability and lawful assignment not to be prohibited.
Sec. 38a-465e. Examination of licensees and applicants. Commissioner's access to records. Retention of records. Expenses of examination. Confidentiality of examination workpapers and reports.
Sec. 38a-465h. Premium finance loans. Disclosures and certifications.
Sec. 38a-465i. Violations.
Sec. 38a-465j. Fraudulent life settlement acts prohibited. Confidentiality of documents and evidence. Antifraud plans.
Sec. 38a-465p. Provider or broker lawfully transacting business in the state or person lawfully negotiating life settlement contracts prior to October 1, 2008.

PART I
LIFE INSURANCE AND ANNUITIES

      Sec. 38a-432b. Regulations concerning solicitation and sale of life insurance and annuities to senior citizens. Disciplinary action. (a) The Insurance Commissioner shall adopt regulations, in accordance with the provisions of chapter 54, to (1) prevent misleading and fraudulent marketing practices with respect to the solicitation and sale of life insurance or annuities sold to senior citizens, and (2) set standards for the use of senior-specific certification and professional designations used in the solicitation and sale of such life insurance and annuities.

       (b) Any person who violates the regulations adopted pursuant to subsection (a) of this section shall be subject to disciplinary action in accordance with the provisions of section 38a-774.

      (P.A. 09-174, S. 2.)

      History: P.A. 09-174 effective July 1, 2009.

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      Sec. 38a-457. Accelerated benefits of life insurance policies. (a) As used in this section:

       (1) "Accelerated benefits" means benefits payable under a life insurance policy sold in this state: (A) During the lifetime of the insured, in a lump sum or in periodic payments, as specified in the policy, (B) upon the occurrence of a qualifying event, as defined in the policy, and certified by a physician who is licensed under the laws of a state or territory of the United States, or such other foreign or domestic jurisdiction as the Insurance Commissioner may approve, and (C) which reduce the death benefits otherwise payable under the life insurance policy.

       (2) "Insurance policy" or "policy" means an insurance policy or certificate or rider or endorsement thereto.

       (3) "Qualifying event" means (A) a medically determinable condition suffered by the insured that can be expected to result in death in a relatively short period of time, such as twelve months and may include, but is not limited to, coronary artery disease, myocardial infarction, stroke, kidney failure or liver disease, (B) a medical condition that would, in the absence of extensive or extraordinary medical treatment, result in death in a relatively short period of time, such as twelve months, or (C) a medically determinable condition suffered by the insured, which has resulted in the insured being considered a chronically ill individual for the purposes of Section 101(g) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time, and which has caused the insured to be confined for at least six months in such insured's place of residence or in an institution that provides necessary care or treatment of an injury, illness or loss of functional capacity, and for which it has been medically determined that such insured is expected to remain confined in such place of residence or institution until death.

       (b) On and after October 1, 1990, any life insurance company or fraternal benefits society doing business in this state may issue accelerated benefits life insurance policies, as described in this section, and certificates, riders or endorsements to existing life insurance policies that provide accelerated benefits, as described in this section.

       (c) An accelerated benefits life insurance policy shall not include a policy providing for disability income protection coverage or long-term care coverage, as defined in sections 38a-501 and 38a-528.

       (d) (1) Death benefits may not be reduced more than the amount of the accelerated benefits paid plus any applicable actuarial discount appropriate to the policy design for policies without additional premium payments. When an accelerated benefit is paid, the amount paid may be considered as (A) a pro rata reduction in cash value or death benefits, or both, or (B) a lien against the death benefit of the contract and the access to the cash value shall be restricted to any excess of the cash value over the sum of other outstanding loans and the lien.

       (2) The accidental death benefit, if any, in the policy shall not be affected by the payment of the accelerated benefit.

       (e) All accelerated benefits policies shall comply with the following disclosure requirements:

       (1) The face of every accelerated benefits policy shall contain: (A) A description of coverage which uses the terminology "accelerated" and (B) the following statement: "Benefits as specified under this policy will be reduced upon receipt of an accelerated benefit."

       (2) Disclosure is required, at the time of application and at the time the accelerated benefits payment request is submitted, of the potential tax implications of receiving this payout. The disclosure statement shall indicate that the receipt of accelerated benefits may be taxable and that the insured should seek assistance from their personal tax advisor. Such disclosure shall be prominently displayed on the first page of the policy.

       (3) Prior to or concurrent with the application, the applicant shall be given a written disclosure including, but not limited to, a brief description of the accelerated benefit, the effect of the payment of an accelerated benefit on the policy's cash value, death benefit, premium, policy loans and policy liens, and definitions of the conditions or occurrences triggering payment of the accelerated benefits. In the event of direct mail solicitation, the disclosure shall be made upon acceptance of the application.

       (4) The insurer shall disclose in its solicitation any separate identifiable premium for the accelerated benefit. Those insurers indicating that this accelerated benefit is offered without additional premium shall furnish a written explanation to the Insurance Commissioner when filing the product.

       (5) Prior to or concurrent with the request for accelerated death benefits, the applicant shall be given an illustration demonstrating the effect of the payment of an accelerated benefit on the policy's cash value, death benefit, premium, policy loans and policy liens.

       (f) The insurer shall file with the Insurance Department the information concerning the manner by which the actuarial discount and mortality charge, if any, is calculated for the accelerated benefit. The commissioner, if he determines that such discount or mortality charge is excessive, shall hold a hearing to determine such reasonable charges.

       (g) Any life insurance policy or any certificate, rider or endorsement thereto, which provides accelerated benefits pursuant to the occurrence of a qualifying event, as defined in subparagraph (C) of subdivision (3) of subsection (a) of this section, shall contain the following statement printed in a conspicuous and readily discernible manner: "This policy is not a long-term care policy as defined in sections 38a-501 and 38a-528 of the Connecticut General Statutes."

       (h) The Insurance Commissioner may adopt, in accordance with chapter 54, such regulations as the commissioner deems necessary for the purpose of this section, including the medically determinable conditions that are considered to be qualifying events as set forth in subdivision (3) of subsection (a) of this section, and the authority to establish the minimum or maximum benefit, if any, payable under an accelerated benefit policy. Prior to the effective date of any such regulations, any such policy may be filed with the commissioner and, at the commissioner's discretion, may be approved.

      (P.A. 90-200, S. 1; P.A. 92-60, S. 18; P.A. 09-216, S. 1.)

      History: P.A. 92-60 made technical corrections for statutory consistency; P.A. 09-216 amended Susec. (a) by redefining "accelerated benefits" in Subdiv. (1) and "qualifying event" in Subdiv. (3), made a technical change in Subsec. (b), and amended Subsec. (h) by authorizing commissioner to adopt regulations re medically determinable conditions considered to be qualifying events and making technical changes, effective January 1, 2010.

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PART III
LIFE SETTLEMENTS

      Sec. 38a-465a. Licensing of life settlement providers and brokers. (a) Except as otherwise provided in this part, no person shall act as a provider or broker until the person is licensed by the commissioner pursuant to this section.

       (b) Any applicant for a license as a provider or broker shall submit written application to the commissioner. Such applicants shall provide such information as the commissioner requires. All initial applications shall be accompanied by a filing fee specified in section 38a-11.

       (c) A life insurance producer, who has been duly licensed as a resident insurance producer with a life line of authority in this state or in such producer's home state for not less than one year and is licensed as a nonresident producer pursuant to section 38a-702g, shall be deemed to meet the licensing requirements of this section and shall be permitted to operate as a broker.

       (d) Not later than thirty days after the first day of operating as a broker, a life insurance producer shall notify the commissioner that such producer is acting as a broker on a form prescribed by the commissioner, and shall pay a filing fee as specified in section 38a-11. Such notification shall include an acknowledgement by the life insurance producer that such producer shall operate as a broker in accordance with this part.

       (e) The insurer that issued the 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 a life settlement contract from the broker, provider or purchaser in connection with such life settlement contract.

       (f) 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 and whose compensation is not paid directly or indirectly by the provider or purchaser, may negotiate life settlement contracts on behalf of the owner without being required to obtain a license as a broker.

       (g) Any license issued for a provider or broker shall be in force only until the last day of March in each year, but may be renewed by the commissioner without formality other than proper application. The fees for such licenses shall be assessed annually, as provided in section 38a-11. If such provider or broker fails to timely pay the renewal fee, such license shall be automatically revoked if the license fee is not received by the commissioner not later than the fifth day after the commissioner sends, by first class mail, a written notice of nonrenewal to the principal office of the provider or broker, provided such notice shall only be mailed after said last day of March.

       (h) The term of a provider license shall be equal to that of a domestic stock life insurance company and the term of a broker license shall be equal to that of an insurance producer license. Licenses requiring periodic renewal shall be renewed on their anniversary date upon payment of the renewal fee, as specified in subsection (b) of this section. Failure to pay the fees on or before the renewal date shall result in expiration of the license.

       (i) Upon the filing of an application and full payment of the license fee, the commissioner shall investigate the applicant and shall issue a license if the commissioner determines that:

       (1) The applicant, if a provider, has provided a detailed plan of operation;

       (2) The applicant is competent and trustworthy, and intends to act in good faith pursuant to the license applied for;

       (3) The applicant has a good business reputation and adequate experience, training or education so as to be qualified in the business for which the license is applied;

       (4) If the applicant is a corporation, partnership, limited liability company or other legal entity, the applicant is formed or organized pursuant to the laws of this state or is a foreign legal entity authorized to do business in this state, or provides a certificate of good standing from its state of domicile; and

       (5) The applicant has provided to the commissioner an antifraud plan that meets the requirements of subsection (i) of section 38a-465j and includes:

       (A) A description of the procedures for detecting and investigating possible fraudulent acts and procedures for resolving material inconsistencies between medical records and insurance applications;

       (B) A description of the procedures for reporting fraudulent insurance acts to the commissioner;

       (C) A description of the plan for antifraud education and training of its underwriters and other personnel; and

       (D) A written description or chart outlining the arrangement of the antifraud personnel responsible for the investigation and reporting of possible fraudulent insurance acts and investigating unresolved material inconsistencies between medical records and insurance applications.

       (j) The applicant shall provide to the commissioner such information as the commissioner may require, on forms approved by the commissioner. The commissioner may, at any time, require the applicant to fully disclose the identity of its stockholders, except stockholders owning less than ten per cent of the shares of an applicant whose shares are publicly traded, partners, officers and employees, and the commissioner may deny any application for a license if the commissioner determines that any partner, officer, employee or stockholder thereof who may materially influence the applicant's conduct fails to meet any of the standards set forth in sections 38a-465 to 38a-465q, inclusive.

       (k) A license issued to a corporation, partnership, limited liability company or other legal entity authorizes all of such legal entity's members, officers and designated employees named in the application for such license, and any supplements to the application, to act as a licensee under such license.

       (l) The commissioner shall not issue any license to any nonresident applicant unless a written designation of an agent for service of process is filed and maintained with the commissioner or unless the applicant has filed with the commissioner the applicant's written irrevocable consent that any action against the applicant may be commenced against the applicant by service of process on the commissioner.

       (m) Each licensee shall file with the commissioner on or before the first day of March of each year an annual statement containing such information as the commissioner may prescribe by regulation.

       (n) A provider shall not use any person to perform the functions of a broker, as defined in this part, unless such person holds a current, valid license as a broker and as provided in this section.

       (o) A broker shall not use any person to perform the functions of a provider, as defined in this part, unless such person holds a current, valid license as a provider and as provided in this section.

       (p) A provider or broker shall provide to the commissioner new or revised information about officers, stockholders holding ten per cent or more of the company's stock, partners, directors, members or designated employees not later than thirty days after the change in information.

       (q) An individual licensed as a broker shall complete, on a biennial basis, fifteen hours of training related to life settlements and life settlement transactions, except that a life insurance producer operating as a broker pursuant to this section shall not be subject to the requirements of this subsection. Any person failing to meet the requirements of this subsection shall be subject to the penalties imposed by the commissioner.

      (P.A. 97-202, S. 2, 18; P.A. 99-104, S. 3; 99-145, S. 5, 23; P.A. 03-152, S. 2; P.A. 08-175, S. 2; P.A. 09-74, S. 17.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 99-104 amended Subsec. (d) to include "members" among those whose identity may be disclosed, and to substitute "stockholder or member thereof who may materially influence the applicant's conduct fails to meet any of the standards set forth in sections 38a-465 to 38a-465m, inclusive" for "majority stockholder fails to meet any of the criteria set forth in subsection (f) of this section" re grounds for denial of license; P.A. 99-145 amended Subsec. (a) to substitute "Except as otherwise provided in this part" for "Except as provided in subsection (a) of section 38a-11, sections 38a-465 to 38a-465m, inclusive, and subdivision (19) of section 38a-816", and substituted "subdivision (20) of section 38a-816" for "subdivision (19) of section 38a-816", effective June 8, 1999; P.A. 03-152 added references to "viatical settlement investment agents", made licensees subject to provisions of Secs. 38a-465n to 38a-465q, repositioned provisions of former Subsec. (f) to new Subsec. (c), revising therein Subdiv. (2) to substitute "license applied for" for "license" and Subdiv. (3) re qualification in the business for which the license is applied for, added new Subsec. (f) re new or revised information about officers, stockholders holding 10% or more of stock, partners, directors, members or designated employees, redesignated existing Subsecs. (c), (d), (e) and (g) as new Subsecs. (d), (e), (g) and (h), and made technical changes; P.A. 08-175 deleted provisions re viatical settlement throughout, made technical and conforming changes, deleted former Subsecs. (d), (f) and (h), redesignated existing Subsecs. (c), (e) and (g) as Subsecs. (i), (j) and (k), respectively, added new Subsecs. (c) and (d) re life insurance producer operating as a life settlement broker, added new Subsec. (e) re liability of an insurer for acts or omissions committed by a broker, provider or purchaser, added new Subsec. (f) re exemption of certain attorneys, certified public accountants or financial planners from licensing requirement, added new Subsecs. (g) and (h) re license renewals and payment of fees and added Subsecs. (l) to (q) re licensing, filing and training requirements; P.A. 09-74 made technical changes in Subsecs. (c) and (d), effective May 27, 2009.

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      Sec. 38a-465c. Contract form and disclosure statements. Filing and approval requirements. Disclosure of life settlement contract availability and lawful assignment not to be prohibited. (a) No person shall use any form of life settlement contract or disclosure statement in this state unless such form has been filed with and approved by the commissioner. The commissioner shall disapprove a life settlement contract form or disclosure statement form if the commissioner finds any provision in said form is unreasonable, contrary to the interests of the public, fails to comply with the provisions of sections 38a-465f, 38a-465g and 38a-465n and subsection (b) of section 38a-465k, or is otherwise misleading or unfair to the owner. The commissioner may require the submission of advertising materials.

       (b) No insurer shall, 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 the owner, insured, provider or broker to 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 this state.

       (c) No insurer shall (1) prohibit a life insurance producer or broker from disclosing to a client the availability of a life settlement contract, or (2) include any provision in a life insurance policy that prohibits the lawful assignment of such policy.

      (P.A. 97-202, S. 5, 18; P.A. 99-145, S. 7, 23; P.A. 03-152, S. 4; P.A. 08-175, S. 4; P.A. 09-74, S. 18.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 99-145 deleted reference to "subsection (a) of section 38a-11", and "subdivision (19) of section 38a-816", effective June 8, 1999; P.A. 03-152 substituted "person" for viatical settlement provider, broker or agent re prohibitions on use of unapproved forms, deleted provision re contract or disclosure statements deemed approved 60 days after filing, added "contrary to the interests of the public" and failure to comply with Secs. 38a-465n to 38a-465q re grounds for disapproval of contracts or statements and made a technical change; P.A. 08-175 replaced "viatical settlement" with "life settlement" and made technical and conforming changes, designated existing provisions as Subsec. (a) and added Subsec. (b) re additional form requirements and Subsec. (c) re prohibition on certain insurer provisions; P.A. 09-74 made a technical change in Subsec. (a), effective May 27, 2009.

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      Sec. 38a-465e. Examination of licensees and applicants. Commissioner's access to records. Retention of records. Expenses of examination. Confidentiality of examination workpapers and reports. (a) When the commissioner deems it reasonably necessary to protect the interests of the public, the commissioner may examine the business and affairs of any licensee or applicant for a license. The commissioner may order any licensee or applicant to produce any records, books, files or other information reasonably necessary to ascertain whether such licensee or applicant is acting or acted in violation of the law or is otherwise contrary to the interests of the public. The licensee or applicant shall pay all expenses incurred by the commissioner in conducting any examination.

       (b) Providers shall maintain records of each consummated transaction and life settlement contracts and, subject to the provisions of section 38a-465d, such records shall be available, during reasonable business hours, to the commissioner for inspection for the three-year period following the insured's death.

       (c) In lieu of an examination under this part of any foreign or alien licensee licensed in this state, the commissioner may accept an examination report on the licensee as prepared by the commissioner for the licensee's state of domicile or port-of-entry state.

       (d) Names and individual identification data of owners and insureds shall be considered private and confidential information and shall not be disclosed by the commissioner unless required by law.

       (e) (1) Upon determining that an examination should be conducted, the commissioner shall issue an examination warrant appointing one or more examiners to perform such examination and instructing them as to its scope. In conducting the examination, the examiner shall use methods common to the examination of any life settlement licensee and shall use guidelines and procedures set forth in an examiners' handbook adopted by a national organization.

       (2) Each licensee or person from whom information is sought, its officers, directors and agents shall provide to the examiners timely, convenient and free access at all reasonable hours at its offices to all books, records, accounts, papers, documents, assets and computer or other recordings relating to the property, assets, business and affairs of the licensee being examined. The officers, directors, employees and agents of the licensee or person shall facilitate the examination and aid in the examination so far as it is in their power to do so. The refusal by a licensee or its officers, directors, employees or agents to submit to an examination or to comply with any reasonable written request of the commissioner shall be grounds for suspension, refusal or nonrenewal of any license or authority held by the licensee to engage in the life settlement business or other business subject to the commissioner's jurisdiction. Any proceedings for suspension, revocation or refusal of any license or authority shall be conducted pursuant to sections 38a-17 to 38a-19, inclusive.

       (3) The commissioner shall have the power to issue subpoenas, administer oaths and examine under oath any person as to any matter pertinent to the examination. Upon the failure or refusal of a person to obey a subpoena, the commissioner may petition a court of competent jurisdiction, and upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence.

       (4) When making an examination under this part, the commissioner may retain attorneys, appraisers, independent actuaries, independent certified public accountants or other professionals and specialists as examiners, the reasonable cost of which shall be borne by the licensee that is the subject of the examination.

       (5) Nothing contained in this section shall be construed to limit the commissioner's authority to terminate or suspend an examination in order to pursue other legal or regulatory action pursuant to the insurance laws of this state. Findings of fact and conclusions made pursuant to any examination shall be prima facie evidence in any legal or regulatory action.

       (6) All final or preliminary examination reports, examiner or licensee work papers or other documents, or any other information discovered or developed during the course of an examination shall be kept confidential, pursuant to section 38a-69a.

       (f) (1) Examination reports shall be comprised of only facts appearing upon the books, from the testimony of the licensee, its officers or agents or other persons examined concerning its affairs, and such conclusions and recommendations as the examiners find reasonably warranted from the facts.

       (2) Not later than sixty days following completion of the examination, the examiner in charge shall file with the commissioner a verified written report of examination under oath. Upon receipt of the verified report, the commissioner shall transmit the report to the licensee examined, together with a notice that shall afford the licensee examined a reasonable opportunity of not more than thirty days to make a written submission or rebuttal with respect to any matters contained in the examination report and which shall become part of the report, or to request a hearing on any matter in dispute.

       (3) In the event the commissioner determines that regulatory action is appropriate as a result of an examination, the commissioner may initiate any proceedings or actions provided by law.

       (g) Except as otherwise provided in this section, all examination reports, working papers, recorded information, documents and copies thereof produced by, obtained by or disclosed to the commissioner or any other person in the course of an examination made under this section, or in the course of analysis or investigation by the commissioner of the financial condition or market conduct of a licensee, shall be confidential by law and privileged and shall not be subject to section 1-210, subject to subpoena, or subject to discovery or be admissible in evidence in any private civil action. The commissioner is authorized to use the documents, materials or other information in the furtherance of any regulatory or legal action brought as part of the commissioner's official duties. The licensee being examined shall have access to all documents used to make the report.

       (h) (1) An examiner shall not be appointed by the commissioner if the examiner, directly or indirectly, has a conflict of interest, is affiliated with the management of or owns a pecuniary interest in any person subject to examination under this section. This section shall not be construed to automatically preclude an examiner from being (A) an owner, (B) an insured in a life settlement contract or insurance policy, or (C) a beneficiary in an insurance policy that is proposed for a life settlement contract.

       (2) Notwithstanding the requirements of this subsection, the commissioner may retain from time to time, on an individual basis, qualified actuaries, certified public accountants or other similar individuals who are independently practicing their professions, even though these persons may from time to time be similarly employed or retained by persons subject to examination under this section.

       (i) (1) No cause of action shall arise or any liability be imposed against the commissioner, the commissioner's authorized representatives or any examiner appointed by the commissioner for any statements made or conduct performed in good faith while carrying out the provisions of this section.

       (2) No cause of action shall arise or any liability be imposed against any person for communicating or delivering information or data to the commissioner or the commissioner's authorized representative or examiner pursuant to an examination made under this section, if such communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive. This subdivision shall not abrogate or modify any common law or statutory privilege or immunity heretofore enjoyed by any person identified in subdivision (1) of this subsection.

       (3) A person identified in subdivision (1) or (2) of this subsection shall be entitled to an award of attorney's fees and costs if such person is the prevailing party in a civil cause of action for libel, slander or any other relevant tort arising out of activities in carrying out the provisions of this section and the party bringing the action was not substantially justified in doing so. For the purpose of this section, a proceeding is "substantially justified" if it had a reasonable basis in law or fact at the time that it was initiated.

       (j) The commissioner may investigate suspected fraudulent life settlement acts, as specified in section 38a-465j, and persons engaged in the business of life settlements.

      (P.A. 97-202, S. 7, 18; P.A. 99-104, S. 5; 99-145, S. 8, 23; P.A. 08-175, S. 6; P.A. 09-74, S. 19, 20.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 99-104 amended Subsec. (a) to substitute "When the commissioner deems it reasonably necessary to protect the interests of the public" for "In response to a complaint concerning a license or in connection with the review of an application for a license ..." re the commissioner's examination authority, amended Subsec. (b) to substitute "five-year period" for "three-year period" re inspection period following the insured's death, and deleted reference to "subsection (a) of section 38a-11" and "subdivision (19) of section 38a-816"; P.A. 99-145 deleted reference to "subsection (a) of section 38a-11" and "subdivision (19) of section 38a-816", effective June 8, 1999; P.A. 08-175 deleted provision re viatical settlement, amended Subsecs. (a) and (b) by making conforming and technical changes and reducing maintenance period for records from 5 years to 3 years, and added Subsecs. (c) to (j) re examinations and confidentiality requirements (Revisor's note: In 2009, a reference to "licensee of applicant" in Subsec. (a) was changed editorially by the Revisors to "licensee or applicant" for accuracy and consistency); P.A. 09-74 made technical changes in Subsecs. (a) and (e)(1), effective May 27, 2009.

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      Sec. 38a-465h. Premium finance loans. Disclosures and certifications. (a) Without limiting the ability of an insurer to assess the insurability of a policy applicant and in addition to other questions an insurance company may lawfully pose to a life insurance applicant, an insurance company may inquire in the application for life 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 subdivision (11) of section 38a-465, 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, the application shall be rejected as a violation of section 38a-465i.

       (c) If the financing does not violate section 38a-465i in this manner, the insurance company:

       (1) May make disclosures including, but not limited to, the following, to the applicant and the insured, in the application or an amendment to the application completed not later than the delivery of the policy: "If you have entered into a loan arrangement where 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 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."; and

       (2) May require the applicant or the insured to certify that:

       (A) Such applicant or insured has not entered into any agreement or arrangement providing for the future sale of such life insurance policy;

       (B) The loan arrangement for this policy provides funds sufficient to pay for partial or full payment of the premiums, costs and expenses associated with obtaining and maintaining such life insurance policy, and that such applicant or insured has not entered into any agreement by which such applicant or insured will receive consideration in exchange for procuring such policy; and

       (C) The borrower has an insurable interest in the insured.

      (P.A. 97-202, S. 10, 18; P.A. 08-175, S. 9; P.A. 09-74, S. 21.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 08-175 replaced former Subsecs. (a) to (e) with new Subsecs. (a) to (c) re disclosures and certifications concerning premium finance loans; P.A. 09-74 made a technical change in Subsec. (c)(2)(B), effective May 27, 2009.

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      Sec. 38a-465i. Violations. (a) It shall be a violation of this part for any person to:

       (1) Enter into a life settlement contract if such person knows or reasonably should have known that the life insurance policy was obtained by means of a false, deceptive or misleading application for such policy;

       (2) 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 this section;

       (3) 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;

       (4) Issue, solicit, market or otherwise promote the purchase of an insurance policy for the purpose of or with the emphasis on settling the policy;

       (5) Receive, if providing premium financing, any proceeds, fees or other consideration from the policy or policy owner that are in addition to the amounts required to pay principal, interest or any costs or expenses, which are reasonable in type and amount, incurred by the lender or borrower in connection with such premium finance agreement, except in the event of a default, provided neither default on such loan nor the transfer of the policy, in connection with such default, is pursuant to an agreement or understanding with any other person for the purpose of evading regulation under this part. Any payments, charges, fees or other amounts received by a person or entity providing premium financing in violation of this subdivision shall be remitted to the original owner of the policy or to such owner's estate if said original owner is not living at the time of the determination of the overpayment;

       (6) With respect to any settlement contract or 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 that is controlling, controlled by or under common control with such broker, unless such relationship is disclosed to the owner;

       (7) With respect to any life settlement contract or 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 that is controlling, controlled by or under common control with such provider, financing entity or related provider trust that is involved in such settlement contract, unless such relationship is disclosed to the owner;

       (8) 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 regulation, have been filed with the commissioner. In no event shall any marketing materials 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 the insurance is free for any period of time shall be considered a violation of this part; or

       (9) With respect to any life insurance producer, insurance company, broker or provider, 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 so provided in the policy.

       (b) A violation of this section shall be deemed a fraudulent life settlement act, as specified in section 38a-465j.

      (P.A. 97-202, S. 11, 18; P.A. 03-152, S. 8; P.A. 08-175, S. 10; P.A. 09-74, S. 22.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 03-152 deleted references to "viatical settlement agent" in Subsec. (a)(1) and (2), deleted "the provisions of" re chapter 54 in Subsec. (b), made technical changes in Subsecs. (b) and (d), added Subsec. (e) re contracts entered into within two-year period from date of issuance of policy, and added Subsec. (f) re satisfaction of requirements of section and the insurer's timely response to a request to transfer policy or certificate (Revisor's note: A semicolon at the end of Subsec. (e) was replaced editorially by the Revisors with a period for proper form); P.A. 08-175 replaced former Subsecs. (a) to (f) with new Subsecs. (a) and (b) re violations; P.A. 09-74 made a technical change in Subsec. (a)(5), effective May 27, 2009.

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      Sec. 38a-465j. Fraudulent life settlement acts prohibited. Confidentiality of documents and evidence. Antifraud plans. (a)(1) A person shall not commit a fraudulent life settlement act.

       (2) "Fraudulent life settlement act" includes, but is not limited to:

       (A) Acts or omissions committed by any person who, knowingly and with intent to defraud, for the purpose of depriving another of property or for pecuniary gain, commits or permits its employees or its agents to engage in acts including, but not limited to:

       (i) Presenting, causing to be presented or preparing with knowledge and belief that it will be presented to or by a provider, premium finance lender, broker, insurer, insurance producer or any other person, false material information, or concealing material information, as part of, in support of, or concerning a fact material to one or more of the following: (I) An application for the issuance of a life settlement contract or insurance policy; (II) the underwriting of a life settlement contract or insurance policy; (III) a claim for payment or benefit pursuant to a life settlement contract or insurance policy; (IV) premiums paid on an insurance policy; (V) payments and changes in ownership or beneficiary made in accordance with the terms of a life settlement contract or insurance policy; (VI) the reinstatement or conversion of an insurance policy; (VII) the solicitation, offer to enter into, or effectuation of a life settlement contract or insurance policy; (VIII) the issuance of written evidence of a life settlement contract or insurance policy; (IX) any application for or the existence of or any payments related to a loan secured directly or indirectly by any interest in a life insurance policy; or (X) the entry into any practice or plan that involves stranger-originated life insurance;

       (ii) Where the request for disclosure has been asked for by the insurer, failing to disclose to the insurer that the prospective insured has undergone a life expectancy evaluation by any person or entity other than the insurer or its authorized representative in connection with the issuance of the policy;

       (iii) Employing any device, scheme or artifice to defraud in the business of life settlements; or

       (iv) In the solicitation, application or issuance of a policy, employing any device, scheme or artifice in violation of state insurable interest laws;

       (B) In the furtherance of a fraud or to prevent the detection of a fraud any person commits or permits its employees or its agents to:

       (i) Remove, conceal, alter, destroy or sequester from the commissioner the assets or records of a licensee or other person engaged in the business of life settlements;

       (ii) Misrepresent or conceal the financial condition of a licensee, financing entity, insurer or other person;

       (iii) Transact the business of life settlements in violation of laws requiring a license, certificate of authority or other legal authority for the transaction of the business of life settlements;

       (iv) File with the commissioner a document containing false information or otherwise concealing information about a material fact from the commissioner;

       (v) Engage in embezzlement, theft, misappropriation or conversion of moneys, funds, premiums, credits or other property of a provider, insurer, insured, owner, insurance, policy owner or any other person engaged in the business of life settlements or insurance;

       (vi) Knowingly and with intent to defraud, enter into, broker or otherwise deal in a life settlement contract, the subject of which is a life insurance policy that was obtained by presenting false information concerning any fact material to the policy or by concealing, for the purpose of misleading another, information concerning any fact material to the policy, where the owner or the owner's agent intended to defraud the policy's issuer;

       (vii) Attempt to commit, assist, aid or abet in the commission of, or conspiracy to commit the acts or omissions specified in this subsection; or

       (viii) Misrepresent the state of residence of an owner to be a state or jurisdiction that does not have a law substantially similar to this part for the purpose of evading or avoiding the provisions of this part.

       (b) A person shall not knowingly or intentionally interfere with the enforcement of the provisions of this part or investigations or suspected or actual violations of this part.

       (c) A person in the business of life settlements shall not knowingly or intentionally permit any person convicted of a felony involving dishonesty or breach of trust to participate in the business of life settlements.

       (d) (1) Life settlement contracts and applications for life settlement contracts shall contain the following statement or a substantially similar statement, regardless of the form of transmission: "Any person who knowingly presents false information in an application for insurance or life settlement contract is guilty of a crime and may be subject to fines and confinement in prison."

       (2) The lack of a statement as required in subdivision (1) of this subsection shall not constitute a defense in any prosecution for a fraudulent life settlement act.

       (e) (1) Any person engaged in the business of life settlements having knowledge or a reasonable belief that a fraudulent life settlement act is being, will be or has been committed shall provide to the commissioner the information required by, and in a manner prescribed by, the commissioner.

       (2) Any other person having knowledge or a reasonable belief that a fraudulent life settlement act is being, will be or has been committed shall provide to the commissioner the information required by, and in a manner prescribed by, the commissioner.

       (f) (1) No civil liability shall be imposed on and no cause of action shall 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: (A) The commissioner or the commissioner's employees, agents or representatives; (B) federal, state or local law enforcement or regulatory officials or their employees, agents or representatives; (C) a person involved in the prevention and detection of fraudulent life settlement acts or that person's agents, employees or representatives; (D) any regulatory body or their employees, agents or representatives, overseeing life insurance, life settlements, securities or investment fraud; (E) the life insurer that issued the life insurance policy covering the life of the insured; or (F) the licensee or its agents, employees or representatives.

       (2) Subdivision (1) of this subsection shall not apply to statements 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 subdivision (1) of this subsection does not apply because the person filing the report or furnishing the information did so with actual malice.

       (3) A person identified in subdivision (1) of this subsection shall be entitled to an award of attorney's fees and costs if such person is the prevailing party in a civil cause of action for libel, slander or any other relevant tort arising out of activities in carrying out the provisions of this part and the party bringing the action was not substantially justified in doing so. For the purpose of this section, a proceeding is "substantially justified" if it had a reasonable basis in law or fact at the time that it was initiated.

       (4) This section does not abrogate or modify common law or statutory privileges or immunities enjoyed by a person described in subdivision (1) of this subsection.

       (g) (1) The documents and evidence provided pursuant to subsection (f) of this section or obtained by the commissioner in an investigation of suspected or actual fraudulent life settlement acts shall be privileged and confidential and shall not be a public record or subject to discovery or subpoena in a civil or criminal action.

       (2) Subdivision (1) of this subsection does not prohibit release by the commissioner of documents and evidence obtained in an investigation of suspected or actual fraudulent life settlement acts: (A) In administrative or judicial proceedings to enforce laws administered by the commissioner; (B) 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; or (C) at the discretion of the commissioner, to a person in the business of life settlements that is aggrieved by a fraudulent life settlement act.

       (3) Release of documents and evidence under subdivision (2) of this subsection does not abrogate or modify the privilege granted in subdivision (1) of this subsection.

       (h) Nothing in this part shall be construed to:

       (1) Preempt the authority or relieve the duty of other law enforcement or regulatory agencies to investigate, examine and prosecute suspected violations of law;

       (2) Preempt, supersede, or limit any provision of any state securities law or any rule, order or notice issued thereunder;

       (3) Prevent or prohibit a person from voluntarily disclosing information concerning life settlement fraud to a law enforcement or regulatory agency other than the Insurance Department; or

       (4) 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.

       (i) (1) Providers and brokers shall have in place antifraud initiatives reasonably calculated to detect, prosecute and prevent fraudulent life settlement acts. The commissioner may order, or a licensee may request and the commissioner may grant, such modifications of the following required initiatives as necessary to ensure an effective antifraud program. The modifications may be more or less restrictive than the required initiatives as long as the modifications may reasonably be expected to accomplish the purpose of this section. Antifraud initiatives shall include: (A) Fraud investigators, who may be provider or broker employees or independent contractors; and (B) an antifraud plan that shall be submitted to the commissioner.

       (2) The antifraud plan specified in subparagraph (B) of subdivision (1) of this subsection shall include, but not be limited to:

       (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 responsible for the investigation and reporting of possible fraudulent life settlement acts and investigating unresolved material inconsistencies between medical records and insurance applications.

       (3) Antifraud plans submitted to the commissioner shall be privileged and confidential and shall not be a public record or subject to discovery or subpoena in a civil or criminal action.

      (P.A. 97-202, S. 12, 18; P.A. 99-145, S. 11, 23; P.A. 08-175, S. 11; P.A. 09-74, S. 23.)

      History: P.A. 97-202 effective January 1, 1998; P.A. 99-145 deleted references to Secs. 38a-11(a) and 38a-816(19), effective June 8, 1999; P.A. 08-175 replaced former Subsecs. (a) to (c) with new Subsecs. (a) to (h) re fraudulent life settlement acts and new Subsec. (i) re antifraud initiatives and plans; P.A. 09-74 made technical changes in Subsec. (a)(2)(A)(i), effective May 27, 2009.

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      Sec. 38a-465p. Provider or broker lawfully transacting business in the state or person lawfully negotiating life settlement contracts prior to October 1, 2008. (a) Any provider or broker lawfully transacting business in this state prior to October 1, 2008, may continue to do so pending approval or disapproval of such provider's or broker's application for a license, provided such application is filed with the commissioner not later than thirty days after October 1, 2008. During the time that such application is pending with the commissioner, the applicant may use any form of life settlement contract that has been filed with the commissioner pending approval thereof, provided that such form is otherwise in compliance with the provisions of this part. Any person transacting business in this state under this provision shall be obligated to comply with all other requirements of this part.

       (b) Any person who has lawfully negotiated life settlement contracts between any owner residing in this state and one or more providers for not less than one year immediately prior to October 1, 2008, may continue to do so pending approval or disapproval of that person's application for a license, provided such application is filed with the commissioner not later than thirty days after October 1, 2008. Any person transacting business in this state under this provision shall be obligated to comply with all other requirements of this part.

      (P.A. 03-152, S. 14; P.A. 08-175, S. 17; P.A. 09-74, S. 24.)

      History: P.A. 08-175 replaced former Subsecs. (a) and (b) re viatical settlement investment agents with new Subsecs. (a) and (b) re 30-day licensing grace period for providers and brokers lawfully transacting business and persons lawfully negotiating life settlement contracts in the state prior to October 1, 2008; P.A. 09-74 made a technical change in Subsec. (a), effective May 27, 2009.

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