[§431E-33]  General rules.  (a)  Aprovider entering into a life settlement contract with any owner of a policy,wherein the insured is terminally or chronically ill, shall first obtain:

(1)  If the owner is the insured, a written statementfrom a licensed attending physician that the owner is of sound mind and underno constraint or undue influence to enter into a life settlement contract; and

(2)  A document in which the insured consents to therelease of the insured's medical records to a provider, broker, or insuranceproducer and, if the policy was issued less than two years from the date ofapplication for a life settlement contract, to the insurance company thatissued the policy.

The provider, broker, or its authorizedrepresentative shall be limited to contact for the purpose of determining theowner's health status or to verify the owner's address, once every three monthsif the insured has a life expectancy of more than one year, and no more thanonce per month if the insured has a life expectancy of one year or less.

(b)  The insurer shall respond to a request forverification of coverage submitted by a provider, broker, or life insuranceproducer, not later than thirty calendar days of the date the request isreceived.  The request for verification of coverage shall be made on a formapproved by the commissioner.  The insurer shall complete and issue theverification of coverage or indicate in which respects it is unable torespond.  In its response, the insurer shall indicate whether, based on themedical evidence and documents provided, the insurer intends to pursue aninvestigation at this time regarding the validity of the insurance contract.

(c)  Before or at the time of execution of thelife settlement contract, the provider shall obtain a witnessed document inwhich the owner:

(1)  Consents to the life settlement contract;

(2)  Represents that the owner has a full and completeunderstanding of the life settlement contract;

(3)  Represents that the owner has a full and completeunderstanding of the benefits of the policy;

(4)  Acknowledges that the owner is entering into thelife settlement contract freely and voluntarily; and

(5)  For persons with a chronic or terminal illness orcondition, acknowledges that the insured has a chronic or terminal illness andthat the chronic or terminal illness or condition was diagnosed after thepolicy was issued.

(d)  An insurer shall not unreasonably delayeffecting change of ownership or beneficiary in connection with any lifesettlement contract lawfully entered into in this State or with a resident ofthis State.

(e)  If a broker or life insurance producerperforms any of the activities required of the provider under this section, theprovider shall be deemed to have fulfilled the requirements of this section.

(f)  If a broker performs those verification ofcoverage activities required of the provider, the provider is deemed to haveperformed those activities.

(g)  Within twenty days after an owner executesthe life settlement contract, the provider shall give written notice to theinsurer that issued that policy that the policy has become subject to a lifesettlement contract. The notice shall be accompanied by the documents requiredby section 431E-32(c).

(h)  All life settlement contracts entered intoin this State shall provide that the owner may rescind the contract on orbefore fifteen days after the date it is executed by all parties thereto. Rescission, if exercised by the owner, is effective only if both notice of therescission is given, and the owner repays all proceeds and any premiums, loans,and loan interest paid on account of the provider within the rescissionperiod.  If the insured dies during the rescission period, the contract shallbe deemed to have been rescinded subject to repayment by the owner or the owner'sestate of all proceeds and any premiums, loans, and loan interest to theprovider.

(i)  Within three business days after receiptfrom the owner of documents to effect the transfer of the policy, the providershall pay the proceeds of the settlement to an escrow or trust account managedby a trustee or escrow agent in a state or federally chartered financialinstitution pending acknowledgment of the transfer by the issuer of thepolicy.  The trustee or escrow agent shall be required to transfer the proceedsdue to the owner within three business days of acknowledgment of the transferfrom the insurer.

(j)  Failure to tender the life settlementcontract proceeds to the owner by the date disclosed to the owner shall renderthe contract voidable by the owner for lack of consideration until the time theproceeds are tendered to and accepted by the owner.  A failure to give writtennotice of the right of rescission hereunder shall toll the right of rescissionuntil thirty days after the written notice of the right of rescission has beengiven.

(k)  Any fee paid by a provider, party,individual, or an owner to a broker in exchange for services provided to theowner pertaining to a life settlement contract shall be computed as a percentageof the offer obtained, not the face value of the policy.  Nothing in thissection shall be construed as prohibiting a broker from reducing such broker'sfee below this percentage if the broker so chooses.

(l)  The broker shall disclose to the owneranything of value paid or given to a broker and that relates to a lifesettlement contract.

(m)  No person at any time prior to or at thetime of the application for, or issuance of, a policy, or during a two-yearperiod commencing with the date of issuance of the policy, shall enter into alife settlement regardless of the date the compensation is to be provided andregardless of the date the assignment, transfer, sale, devise, bequest, orsurrender of the policy is to occur.  This prohibition shall not apply if theowner certifies to the provider that:

(1)  The policy was issued upon the owner's exerciseof conversion rights arising out of a group or individual policy; provided thatthe total of the time covered under the conversion policy plus the time coveredunder the prior policy is at least twenty-four months. The time covered under agroup policy shall be calculated without regard to a change in insurancecarriers; provided further that the coverage has been continuous and under thesame group sponsorship; or

(2)  The owner submits independent evidence to theprovider that one or more of the following conditions have been met within thetwo-year period:

(A)  The owner or insured is chronically orterminally ill;

(B)  The owner or insured disposes of ownershipinterests in a closely-held corporation, pursuant to the terms of a buyout orother similar agreement in effect at the time the policy was initially issued;

(C)  The owner's spouse dies;

(D)  The owner divorces the owner's spouse;

(E)  The owner retires from full-timeemployment;

(F)  The owner becomes physically or mentallydisabled and a physician determines that the disability prevents the owner frommaintaining full-time employment; or

(G)  A final order, judgment, or decree isentered by a court of competent jurisdiction, on the application of a creditorof the owner, adjudicating the owner bankrupt or insolvent, or approving apetition seeking reorganization of the owner or appointing a receiver, trustee,or liquidator to all or a substantial part of the owner's assets;

(3)  Copies of the independent evidence required bysubsection (m)(2) shall be submitted to the insurer when the provider submits arequest to the insurer for verification of coverage.  The copies shall beaccompanied by a letter of attestation from the provider that the copies aretrue and correct copies of the documents received by the provider.  Nothing inthis section shall prohibit an insurer from exercising its right to contest thevalidity of any policy;

(4)  If the provider submits to the insurer a copy ofindependent evidence required by subsection (m)(2) when the provider submits arequest to the insurer to effect the transfer of the policy to the provider,the copy shall be deemed to establish that the life settlement contractsatisfies the requirements of this section. [L 2008, c 177, pt of §1]