GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2001
H	2
HOUSE BILL 359*
 Committee Substitute Favorable 6/19/01 

Short Title:	Viatical Settlements Rewrite-AB.	()	
Sponsors:	     	
Referred to:	     	
March 1, 2001

A BILL TO BE ENTITLED
AN ACT TO REVISE NORTH CAROLINA'S LAW REGULATING VIATICAL SETTLEMENTS IN ACCORDANCE WITH A MODEL ACT OF THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS. 

The General Assembly of North Carolina enacts:
SECTION 1. The title of Article 58 of Chapter 58 of the General Statutes reads as rewritten:
"Article 58.
Life Insurance and Viatical Settlements."
SECTION 2. Article 58 of Chapter 58 of the General Statutes is amended as follows:
(1)	By designating G.S. 58-58-1 through G.S. 58-58-40 as Part 1 with the heading "General Provisions".
(2)	By designating G.S. 58-58-45 through G.S. 58-58-65 as Part 2 with the heading "Financial Provisions".
(3)	By designating G.S. 58-58-70 through G.S. 58-58-120 as Part 3 with the heading "Insurable Interests and Other Rights".
(4)	By designating G.S. 58-58-125 through G.S. 58-58-170 as Part 4 with the heading "Miscellaneous Provisions".
(5)	By reserving G.S. 58-58-175 through G.S. 58-58-195 for future codification purposes.
SECTION 3. Article 58 of Chapter 58 of the General Statutes is amended by adding a new Part to read:
"Part 5. Viatical Settlements.
"§ 58-58-200.  Short title.
This Part may be cited as the Viatical Settlements Act.
"§ 58‑58‑205. Definitions.
(1)	'Advertising' means any written, electronic, or printed communication or any communication by means of recorded telephone messages or transmitted on radio, television, the Internet, or similar communications media, including filmstrips, motion pictures, and videos, published, disseminated, circulated, or placed before the public, directly or indirectly, for the purpose of creating an interest in or inducing a person to purchase or sell a life insurance policy or an interest in a life insurance policy under a viatical settlement contract or a purchase agreement.
(2)	'Business of viatical settlements' means an activity involved in, but not limited to, the offering, solicitation, negotiation, procurement, effectuation, purchasing, investing, financing, monitoring, tracking, underwriting, selling, transferring, assigning, pledging, hypothecating, or in any other manner, of viatical settlement contracts or purchase agreements.
(3)	'Chronically ill' means:
a.	Being unable to perform at least two activities of daily living (i.e., eating, toileting, transferring, bathing, dressing, or continence);
b.	Requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment; or
c.	Having a level of disability similar to that described in sub‑subdivision a. of this subdivision as determined by the Secretary of Health and Human Services.
(4)	'Financing entity' means an underwriter, placement agent, lender, purchaser of securities, purchaser of a policy from a viatical settlement provider, credit enhancer, or any entity that has a direct ownership in a policy that is the subject of a viatical settlement contract, but: 
a.	Whose principal activity related to the transaction is providing funds to effect the viatical settlement or purchase of one or more viaticated policies; and 
b.	Who has an agreement in writing with one or more licensed viatical settlement providers to finance the acquisition of viatical settlement contracts. 
'Financing entity' does not include a nonaccredited investor or viatical settlement purchaser.
(5)	'Fraudulent viatical settlement act' includes: 
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:
1.	Presenting, causing to be presented, or preparing with knowledge or belief that it will be presented to or by a viatical settlement provider, viatical settlement broker, viatical settlement purchaser, viatical settlement investment agent, financing entity, insurer, insurance producer, viator, insured 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 viatical settlement contract or insurance policy. 
II.	The underwriting of a viatical settlement contract or insurance policy.
III.	A claim for payment or benefit under a viatical settlement contract or insurance policy.
IV.	Premiums paid on an insurance policy or as a result of a viatical settlement purchase agreement.
V.	 Payments and changes in ownership or beneficiary made in accordance with the terms of a viatical settlement contract, viatical settlement purchase agreement, or insurance policy.
VI.	The reinstatement or conversion of an insurance policy.
VII.	In the solicitation, offer, effectuation, or sale of a viatical settlement contract, insurance policy, or viatical settlement purchase agreement.
VIII.	The issuance of written evidence of viatical settlement contract, viatical settlement purchase agreement, or insurance.
IX.	 A financing transaction. 
2.	Employing any device, scheme, or artifice to defraud related to viaticated policies.
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:
1.	Remove, conceal, alter, destroy, or sequester from the Commissioner the assets or records of a licensee or other person engaged in the business of viatical settlements; 
2.	Misrepresent or conceal the financial condition of a licensee, financing entity, insurer, or other person;
3.	Transact the business of viatical settlements in violation of laws requiring a license, certificate of authority, or other legal authority for the transaction of the business of viatical settlements; or
4.	File with the Commissioner or the insurance regulator of another jurisdiction a document containing false information or otherwise conceal information about a material fact from the Commissioner.
c.	Embezzlement, theft, misappropriation, or conversion of monies, funds, premiums, credits, or other property of a viatical settlement provider, insurer, insured, viator, insurance policy owner or any other person engaged in the business of viatical settlements or insurance; or
d.	Attempting to commit, assisting, aiding, or abetting in the commission of, or conspiracy to commit the acts or omissions specified in this subdivision.
(6)	'Policy' means an individual or group life insurance policy, group life insurance certificate, group life insurance contract, or any other arrangement of life insurance affecting the rights of a resident of this State or bearing a reasonable relation to this State, regardless of whether delivered or issued for delivery in this State.
(7)	'Related provider trust' means a titling trust or other trust established by a licensed viatical settlement provider or a financing entity for the sole purpose of holding the ownership or beneficial interest in purchased policies in connection with a financing transaction. The trust shall have a written agreement with the licensed viatical settlement provider under which the licensed viatical settlement provider is responsible for ensuring compliance with all statutory and regulatory requirements and under which the trust agrees to make all records and files related to viatical settlement transactions available to the Commissioner as if those records and files were maintained directly by the licensed viatical settlement provider.
(8)	'Special purpose entity' means a corporation, partnership, trust, limited liability company, or other similar entity formed solely to provide either directly or indirectly access to institutional capital markets for a financing entity or licensed viatical settlement provider.
(9)	'Terminally ill' means having an illness or sickness that can reasonably be expected to result in death in 24 months or fewer.
(10)	'Viatical settlement investment agent' or 'investment agent' means a person who is an appointed or contracted agent of a licensed viatical settlement provider who solicits or arranges the funding for the purchase of a viatical settlement by a viatical settlement purchaser and who is acting on behalf of a viatical settlement provider.
(11)	'Viatical settlement broker' or 'broker' means a person that on behalf of a viator and for a fee, commission, or other valuable consideration offers or attempts to negotiate viatical settlement contracts between a viator and one or more viatical settlement providers. Notwithstanding the manner in which the viatical settlement broker is compensated, a viatical settlement broker is deemed to represent only the viator and owes a fiduciary duty to the viator to act according to the viator's instructions and in the best interest of the viator. The term does not include an attorney, certified public accountant, or a financial planner accredited by a nationally recognized accreditation agency, who is retained to represent the viator and whose compensation is not paid directly or indirectly by the viatical settlement provider or purchaser.
(12)	'Viatical settlement contract' means a written agreement establishing the terms under which compensation or anything of value will be paid, which compensation or value is less than the expected death benefit of the policy, in return for the viator's assignment, transfer, sale, devise, or bequest of the death benefit or ownership of any portion of the policy. A viatical settlement contract also includes a contract for a loan or other financing transaction with a viator secured primarily by a policy, other than a loan by a life insurance company under the terms of the life insurance contract, or a loan secured by the cash value of a policy. A viatical settlement contract includes an agreement with a viator to transfer ownership or change the beneficiary designation at a later date regardless of the date that compensation is paid to the viator.
(13)	'Viatical settlement provider' or 'provider' means a person, other than a viator, that enters into or effectuates a viatical settlement contract. Viatical settlement provider does not include:
a.	A bank, savings bank, savings and loan association, credit union, or other licensed lending institution that takes an assignment of a life insurance policy as collateral for a loan;
b.	The issuer of a life insurance policy providing accelerated benefits under rules adopted by the Commissioner and under the contract;
c.	An authorized or eligible insurer that provides stop-loss coverage to a viatical settlement provider, purchaser, financing entity, special purpose entity, or related provider trust; 
d.	A natural person who enters into or effectuates no more than one agreement in a calendar year for the transfer of life insurance policies for any value less than the expected death benefit; 
e.	A financing entity; 
f.	A special purpose entity;
g.	A related provider trust;
h.	A viatical settlement purchaser; or
i.	An accredited investor or qualified institutional buyer as defined respectively in Regulation D, Rule 501 or Rule 144A of the Federal Securities Act of 1933, as amended, and who purchases a viaticated policy from a viatical settlement provider.
(14)	'Viatical settlement purchase agreement' or 'purchase agreement' means an agreement, entered into by a viatical settlement purchaser, to which the viator is not a party, to purchase a life insurance policy or an interest in a life insurance policy, that is entered into for the purpose of deriving an economic benefit.
(15)	'Viatical settlement purchaser' or 'purchaser' means a person who gives a sum of money as consideration for a life insurance policy or an interest in the death benefits of a life insurance policy or a person who owns or acquires or is entitled to a beneficial interest in a trust that owns a viatical settlement contract or is the beneficiary of a life insurance policy that has been or will be the subject of a viatical settlement contract for the purpose of deriving an economic benefit. 'Viatical settlement purchaser' does not include:
a.	A licensee under this Part;
b.	An accredited investor or qualified institutional buyer as defined respectively in Regulation D, Rule 501 or Rule 144A of the Federal Securities Act of 1933, as amended; 
c.	A financing entity;
d.	A special purpose entity; or
e.	A related provider trust.
(16)	'Viaticated policy' means a policy that has been acquired by a viatical settlement provider under a viatical settlement contract. 
(17)	'Viator' means the owner of a policy or a certificate holder under a group policy who enters or seeks to enter into a viatical settlement contract. For the purposes of this Part, a viator shall not be limited to an owner of a life insurance policy or a certificate holder under a group policy insuring the life of an individual with a terminal or chronic illness or condition except where specifically addressed. 'Viator' does not include:
a.	A licensee under this Part;
b.	An accredited investor or qualified institutional buyer as defined respectively in Regulation D, Rule 501 or Rule 144A of the Federal Securities Act of 1933, as amended; 
c.	A financing entity;
d.	A special purpose entity; or
e.	A related provider trust.
"§ 58‑58‑210. License requirements.
(a)	No person shall operate as a provider or broker without first obtaining a license from the insurance regulator of the state of residence of the viator. If there is more than one viator on a single policy and the viators are residents of different states, the viatical settlement shall be governed by the law of the state in which the viator having the largest percentage ownership resides or, if the viators hold equal ownership, the state of residence of one viator agreed upon in writing by all viators.
(b)	A person shall not operate as an investment agent in this State without first obtaining a license from the Commissioner. If there is more than one purchaser of a single policy and the purchasers are residents of different states, the purchase agreement shall be governed by the law of the state in which the purchaser having the largest percentage ownership resides or, if the purchasers hold equal ownership, the state of residence of one purchaser agreed upon in writing by all purchasers.
(c)	Application for a provider, broker, or investment agent license shall be made to the Commissioner by the applicant on a form prescribed by the Commissioner, and these applications shall be accompanied by a fee of one hundred dollars ($100.00).
(d)	Licenses may be renewed from year to year on the anniversary date upon payment of the annual renewal fee of one hundred dollars ($100.00). Failure to pay the fees by the renewal date results in expiration of the license.
(e)	The applicant shall provide information on forms required by the Commissioner. The Commissioner may require the applicant to fully disclose the identity of all stockholders, partners, officers, members, and employees; and may refuse to issue a license in the name of a legal entity if not satisfied that any officer, employee, stockholder, partner, or member of the legal entity who may materially influence the applicant's conduct meets the standards of this Part.
(f)	A license issued to a legal entity authorizes all partners, officers, members, and designated employees to act as providers, brokers, or investment agents, as applicable, under the license; and all those persons shall be named in the application and any supplements to the application.
(g)	Upon the filing of an application and the payment of the license fee, the Commissioner shall investigate each applicant and issue a license if the Commissioner finds that the applicant:
(1)	If a provider, has provided a detailed plan of operation.
(2)	Is competent and trustworthy and intends to act in good faith in the capacity involved by the license applied for.
(3)	Has a good business reputation and has had experience, training, or education so as to be qualified in the business for which the license is applied. 
(4)	If a legal entity, provides a certificate of good standing from the state of its domicile.
(h)	The Commissioner shall not issue a license to a nonresident applicant unless a written designation of an agent for service of process is filed and maintained with the Commissioner or 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.
(i)	A provider, broker, or investment agent shall provide to the Commissioner new or revised information about officers, ten percent (10%) or more stockholders, partners, directors, members, or designated employees within 20 days after the change. 
"§ 58‑58‑215. License revocation and denial.
(a)	The Commissioner may refuse to issue, suspend, revoke, or refuse to renew the license of a provider, broker, or investment agent if the Commissioner finds that:
(1)	There was any material misrepresentation in the application for the license;
(2)	The licensee or any officer, partner, member, or key management personnel has been convicted of fraudulent or dishonest practices, is subject to a final administrative action, or is otherwise shown to be untrustworthy or incompetent;
(3)	The provider demonstrates a pattern of unreasonable payments to viators; 
(4)	The licensee or any officer, partner, member, or key management personnel has been found guilty of, or has pleaded guilty or nolo contendere to, any felony, or to a misdemeanor involving fraud or moral turpitude, regardless of whether a judgment of conviction has been entered by the court; 
(5)	The provider has entered into any viatical settlement contract that has not been approved pursuant to this Part;
(6)	The provider has failed to honor contractual obligations set out in a viatical settlement contract or a purchase agreement;
(7)	The licensee no longer meets the requirements for initial licensure; 
(8)	The provider has assigned, transferred, or pledged a viaticated policy to a person other than a provider licensed in this State, viatical settlement purchaser, an accredited investor, or qualified institutional buyer as defined respectively in Regulation D, Rule 501 or Rule 144A of the Federal Securities Act of 1933, as amended, financing entity, special purpose entity, or related provider trust; or
(9)	The licensee or any officer, partner, member, or key management personnel has violated any provision of this Part.
(b)	If the Commissioner denies a license application or suspends, revokes, or refuses to renew the license of a provider, broker or investment agent, the Commissioner shall conduct a hearing in accordance with Chapter 150B of the General Statutes.
"§ 58‑58‑220. Approval of viatical settlement contracts and disclosure statements.
A person shall not use a contract or provide to a viator a disclosure statement form in this State unless filed with and approved by the Commissioner. The Commissioner shall disapprove a contract form or disclosure statement form if, in the Commissioner's opinion, the contract or provisions contained therein are unreasonable, contrary to the interests of the public, or otherwise misleading or unfair to the viator. At the Commissioner's discretion, the Commissioner may require the submission of advertising material.
"§ 58‑58‑225. Reporting requirements and privacy.
(a)	Each licensee shall file with the Commissioner on or before June 1 of each year an annual statement containing such information as the Commissioner prescribes by administrative rule.
(b)	Except as otherwise allowed or required by law, a provider, broker, investment agent, insurance company, insurance producer, information bureau, rating agency or company, or any other person with actual knowledge of an insured's identity, shall not disclose that identity as an insured, or the insured's financial or medical information to any other person unless the disclosure:
(1)	Is necessary to effect a viatical settlement between the viator and a provider and the viator and insured have provided prior written consent to the disclosure;
(2)	Is necessary to effect a purchase agreement between the viatical settlement purchaser and a provider and the viator and insured have provided prior written consent to the disclosure;
(3)	Is provided in response to an investigation or examination by the Commissioner or any other governmental officer or agency or pursuant to the requirements of G.S. 58‑58‑270;
(4)	Is a term of or condition to the transfer of a policy by one provider to another provider;
(5)	Is necessary to permit a financing entity, related provider trust, or special purpose entity to finance the purchase of policies by a provider and the viator and insured have provided prior written consent to the disclosure;
(6)	Is necessary to allow the provider or broker or their authorized representatives to make contacts for the purpose of determining health status; or
(7)	Is required to purchase stop-loss coverage.
"§ 58‑58‑230. Examinations.
(a)	The Commissioner may conduct an examination of a licensee as often as the Commissioner considers appropriate.
(b)	An examination under this Part shall be conducted in accordance with the Examination Law.
(c)	In lieu of an examination of any foreign or alien person licensed under this Part, the Commissioner may accept an examination report on the licensee prepared by the appropriate viatical settlement regulator for the licensee's state of domicile or port-of-entry state. 
(d)	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.
"§ 58‑58‑235. Record retention requirements.
(a)	A person licensed under this Part shall retain copies for five years of all:
(1)	Proposed, offered, or executed contracts, purchase agreements, underwriting documents, policy forms, and applications from the date of the proposal, offer, or execution of the contract or purchase agreement, whichever is later.
(2)	Checks, drafts, or other evidence and documentation related to the payment, transfer, deposit, or release of funds from the date of the transaction. 
(3)	Other records and documents related to the requirements of this Part.
(b)	This section does not relieve a person of the obligation to produce these documents to the Commissioner after the retention period has expired if the person has retained the documents.
(c)	Records required to be retained by this section must be legible and complete and may be retained in paper, photograph, microprocess, magnetic, mechanical, or electronic media, or by any process that accurately reproduces or forms a durable medium for the reproduction of a record. 
"§ 58‑58‑240. Investigative authority of the Commissioner.
The Commissioner may investigate suspected fraudulent viatical settlement acts and persons engaged in the business of viatical settlements.
"§ 58‑58‑245. Disclosure.
(a)	With each application for a viatical settlement, the provider or broker shall provide the viator with at least the following disclosures no later than the time the application for the contract is signed by all parties. The disclosures shall be provided in a separate document that is signed by the viator and the provider or broker and shall provide the following information:
(1)	There are possible alternatives to contracts including any accelerated death benefits or policy loans offered under the viator's policy.
(2)	Some or all of the proceeds of the viatical settlement may be taxable under federal income tax and state franchise and income taxes, and assistance should be sought from a professional tax advisor.
(3)	Proceeds of the viatical settlement could be subject to the claims of creditors. 
(4)	Receipt of the proceeds of a viatical settlement may adversely affect the viator's eligibility for Medicaid or other government benefits or entitlements, and advice should be obtained from the appropriate government agencies.
(5)	The viator has the right to rescind a contract for 15 days after the receipt of the viatical settlement proceeds by the viator, as provided in G.S. 58‑58‑250(h). If the insured dies during the rescission period, the settlement contract shall be deemed to have been rescinded, subject to repayment of all viatical settlement proceeds and any premiums, loans, and loan interest to the provider or purchaser. 
(6)	Funds will be sent to the viator within three business days after the provider has received the insurer or group administrator's acknowledgment that ownership of the policy or interest in the certificate has been transferred and the beneficiary has been designated.
(7)	Entering into a 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 viator. Assistance should be sought from a financial adviser.
(8)	Disclosure to a viator shall include distribution of a brochure describing the process of viatical settlements. The NAIC's form for the brochure shall be used unless the Commissioner develops one.
(9)	The disclosure document shall contain the following language: 'All medical, financial, or personal information solicited or obtained by a provider or 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 viatical settlement between the viator and the 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 years.'
(10)	The insured may be contacted by either the provider or broker or its authorized representative for the purpose of determining the insured's health status. This contact is limited to once every three months if the insured has a life expectancy of more than one year, and no more than once per month if the insured has a life expectancy of one year or less.
(b)	A provider shall provide the viator with at least the following disclosures no later than the date the contract is signed by all parties. The disclosures shall be conspicuously displayed in the contract or in a separate document signed by the viator and the provider or broker, and provide the following information:
(1)	State the affiliation, if any, between the provider and the issuer of the insurance policy to be viaticated.
(2)	The document shall include the name, address, and telephone number of the provider.
(3)	A broker shall disclose to a prospective viator the amount and method of calculating the broker's compensation. The term 'compensation' includes anything of value paid or given to a broker for the placement of a policy.
(4)	If an insurance policy to be viaticated 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 viaticated, the viator shall be informed of the possible loss of coverage on the other lives under the policy and shall be advised to consult with his or her insurance producer or the insurer issuing the policy for advice on the proposed viatical settlement.
(5)	State the dollar amount of the current death benefit payable to the provider under the policy. If known, the provider shall 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 provider's interest in those benefits.
(6)	State the name, business address, and telephone number of the independent third-party escrow agent and the fact that the viator or owner may inspect or receive copies of the relevant escrow or trust agreements or documents.
(c)	If the provider transfers ownership or changes the beneficiary of the insurance policy, the provider shall communicate the change in ownership or beneficiary to the insured within 20 days after the change.
(d)	A provider or its investment agent shall provide the viatical settlement purchaser with at least the following disclosures before the date the purchase agreement is signed by all parties. The disclosures shall be conspicuously displayed in any purchase agreement or in a separate document signed by the viatical settlement purchaser and provider or investment agent, and shall make the following disclosure to the viatical settlement purchaser:
(1)	The purchaser will receive no returns (i.e., dividends and interest) until the insured dies. 
(2)	The actual annual rate of return on a contract is dependent upon an accurate projection of the insured's life expectancy, and the actual date of the insured's death. An annual 'guaranteed' rate of return is not determinable.
(3)	The viaticated life insurance contract should not be considered a liquid purchase since it is impossible to predict the exact timing of its maturity and the funds probably are not available until the death of the insured. There is no established secondary market for resale of these products by the purchaser. 
(4)	The purchaser may lose all benefits or may receive substantially reduced benefits if the insurer goes out of business during the term of the viatical investment. 
(5)	The purchaser is responsible for payment of the insurance premium or other costs related to the policy, if required by the terms of the viatical purchase agreement. These payments may reduce the purchaser's return. If a party other than the purchaser is responsible for the payment, the name and address of that party also shall be disclosed.
(6)	If the purchaser is responsible for payment of the insurance premiums or other costs related to the policy if the insured returns to health, disclose the amount of such premiums, if applicable.
(7)	State the name and address of any person providing escrow services and the relationship to the broker.
(8)	The amount of any trust fees or other expenses to be charged to the viatical settlement purchaser shall be disclosed.
(9)	State whether the purchaser is entitled to a refund of all or part of his or her investment under the contract if the policy is later determined to be null and void.
(10)	Disclose that group policies may contain limitations or caps in the conversion rights, additional premiums may have to be paid if the policy is converted, name the party responsible for the payment of the additional premiums and, if a group policy is terminated and replaced by another group policy, state that there may be no right to convert the original coverage.
(11)	Disclose the risks associated with policy contestability including, but not limited to, the risk that the purchaser will have no claim or only a partial claim to death benefits should the insurer rescind the policy within the contestability period.
(12)	Disclose whether the purchaser will be the owner of the policy in addition to being the beneficiary, and if the purchaser is the beneficiary only and not also the owner, the special risks associated with that status, including, but not limited to, the risk that the beneficiary may be changed or the premium may not be paid.
(13)	Describe the experience and qualifications of the person who determines the life expectancy of the insured, i.e., in-house staff, independent physicians, and specialty firms that weigh medical and actuarial data; the information this projection is based on; and the relationship of the projection maker to the provider, if any.
(14)	Disclosure to an investor shall include distribution of a brochure describing the process of investment in viatical settlements. The NAIC's form for the brochure shall be used unless the Commissioner develops one.
(e)	A provider or its investment agent shall provide the viatical settlement purchaser with at least the following disclosures no later than at the time of the assignment, transfer, or sale of all or a portion of an insurance policy. The disclosures shall be contained in a document signed by the viatical settlement purchaser and provider or investment agent and shall make the following disclosures to the viatical settlement purchaser: 
(1)	Disclose all the life expectancy certifications obtained by the provider in the process of determining the price paid to the viator.
(2)	State whether premium payments or other costs related to the policy have been escrowed. If escrowed, state the date upon which the escrowed funds will be depleted and whether the purchaser will be responsible for payment of premiums thereafter and, if so, the amount of the premiums.
(3)	State whether premium payments or other costs related to the policy have been waived. If waived, disclose whether the investor will be responsible for payment of the premiums if the insurer that wrote the policy terminates the waiver after purchase and the amount of those premiums.
(4)	Disclose the type of policy offered or sold, i.e., whole life, term life, universal life, or a group policy certificate, any additional benefits contained in the policy, and the current status of the policy.
(5)	If the policy is term insurance, disclose the special risks associated with term insurance including, but not limited to, the purchaser's responsibility for additional premiums if the viator continues the term policy at the end of the current term.
(6)	State whether the policy is contestable. 
(7)	State whether the insurer that wrote the policy has any additional rights that could negatively affect or extinguish the purchaser's rights under the contract, what these rights are, and under what conditions these rights are activated. 
(8)	State the name and address of the person responsible for monitoring the insured's condition. Describe how often the monitoring of the insured's condition is done, how the date of death is determined, and how and when this information will be transmitted to the purchaser.
(f)	The purchase agreement is voidable by the purchaser at any time within three days after the disclosures mandated by subsections (d) and (e) of this section are received by the purchaser.
"§ 58‑58‑250. General rules.
(a)	A provider entering into a contract shall first obtain:
(1)	If the viator is the insured, a written statement from a licensed attending physician that the viator is of sound mind and under no constraint or undue influence to enter into a contract.
(2)	A document in which the insured consents to the release of his or her medical records to a provider or broker and, if the policy being viaticated has been in effect for less than five years, to the insurance company that issued the policy covering the life of the insured.
(b)	Within 20 days after a viator executes documents necessary to transfer any rights under a policy or within 20 days after entering any agreement, option, promise, or any other form of understanding, expressed or implied, to viaticate the policy, the provider shall give written notice to the insurer that issued that policy that the policy has or will become a viaticated policy. The notice shall be accompanied by the documents required by subsection (c) of this section.
(c)	If the policy being viaticated has been in effect for less than five years, the viatical provider shall deliver a copy of the medical release required under subdivision (a)(2) of this section, a copy of the viator's application for the contract, the notice required under subsection (b) of this section and a request for verification of coverage to the insurer that issued the policy that is the subject of the viatical settlement. The NAIC's form for verification shall be used unless the Commissioner develops standards for verification.
(d)	The insurer shall respond to a request for verification of coverage submitted on an approved form by a provider within 30 days after the date the request is received and shall indicate whether, based on the medical evidence and documents provided, the insurer intends to pursue an investigation at this time regarding the validity of the policy.
(e)	Before or at the time of execution of the contract, the provider shall obtain a witnessed document in which the viator consents to the contract, represents that the viator has a full and complete understanding of the contract, that he or she has a full and complete understanding of the benefits of the policy, acknowledges that he or she is entering into the contract freely and voluntarily and, for persons with a terminal or chronic illness or condition, acknowledges that the insured has a terminal or chronic illness.
(f)	If a broker performs any of these activities required of the provider, the provider is deemed to have fulfilled the requirements of this section.
(g)	All medical information solicited or obtained by any licensee is subject to the applicable provisions of federal and North Carolina law relating to confidentiality of medical information.
(h)	All contracts entered into in this State shall provide the viator with an unconditional right to rescind the contract for at least 15 days after the receipt of the viatical settlement proceeds. If the insured dies during the rescission period, the contract shall be deemed to have been rescinded, subject to repayment to the provider or purchaser of all viatical settlement proceeds, and any premiums, loans, and loan interest that have been paid by the provider or purchaser.
(i)	The purchaser may rescind a contract within three days after the purchaser receives the disclosures required by G.S. 58‑58‑245(d) and G.S. 58‑58‑245(e).
(j)	The provider shall instruct the viator to send the executed documents required to effect the change in ownership, assignment, or change in beneficiary directly to the independent escrow agent. Within three business days after the date the escrow agent receives the documents, or from the date the provider receives the documents, if the viator erroneously provides the documents directly to the provider, the provider shall pay or transfer the proceeds of the viatical settlement into an escrow or trust account maintained in a state or federally chartered financial institution, the deposits of which are insured by the Federal Deposit Insurance Corporation (FDIC) or any successor entity. Upon payment of the settlement proceeds into the escrow account, the escrow agent shall deliver the original change in ownership, assignment, or change in beneficiary forms to the provider or related provider trust. Upon the escrow agent's receipt of the acknowledgment of the properly completed transfer of ownership, assignment, or designation of beneficiary from the insurance company, the escrow agent shall pay the settlement proceeds to the viator.
(k)	Failure to tender consideration to the viator for the contract within the time required under G.S. 58‑58‑245(a)(6) renders the contract voidable by the viator for lack of consideration until the time consideration is tendered to and accepted by the viator.
(l)	Contacts with the insured for the purpose of determining the health status of the insured by the provider or broker after the viatical settlement has occurred shall only be made by the provider or broker licensed in this State or its authorized representatives and shall be limited to once every three months for insureds with a life expectancy of more than one year, and to no more than once per month for insureds with a life expectancy of one year or less. The provider or broker shall explain the procedure for these contacts at the time the contract is entered into. The limitations set forth in this subsection shall not apply to any contacts with an insured for reasons other than determining the insured's health status. Providers and brokers shall be responsible for the actions of their authorized representatives.
(m)	An investment agent shall not have any direct or indirect contact with the viator or have knowledge of the identity of the viator. An investment agent is deemed to represent the viatical settlement provider of whom the investment agent is an appointed or contracted agent.
"§ 58‑58‑255. Prohibited practices.
(a)	It is a violation of this Part for any person to enter into a contract within a two-year period commencing with the date of issuance of the policy unless the viator certifies to the provider that one or more of the following conditions have been met within the two-year period:
(1)	The policy was issued upon the viator's exercise of conversion rights arising out of a policy, provided the total time covered under the conversion policy plus the time covered under the prior policy is at least 24 months, or the contestability and suicide time periods have been waived by the insurer. The time covered under a group policy shall be calculated without regard to any change in insurance carriers, provided the coverage has been continuous and under the same group sponsorship.
(2)	The viator is a charitable organization exempt from taxation under 26 U.S.C. § 501 (c)(3).
(3)	The viator is not a natural person (e.g., the owner is a corporation, limited liability company, partnership, etc.).
(4)	The viator submits independent evidence to the provider that one or more of the following conditions have been met within the two-year period:
a.	The viator or insured is terminally or chronically ill.
b.	The viator's spouse dies.
c.	The viator divorces his or her spouse.
d.	The viator retires from full-time employment.
e.	The viator becomes physically or mentally disabled and a physician determines that the disability prevents the viator from maintaining full-time employment.
f.	The viator was the insured's employer at the time the policy was issued and the employment relationship terminated.
g.	A final order, judgment, or decree is entered by a court of competent jurisdiction, on the application of a creditor of the viator, adjudicating the viator bankrupt or insolvent, or approving a petition seeking reorganization of the viator or appointing a receiver, trustee, or liquidator to all or a substantial part of the viator's assets.
h.	The viator experiences a significant decrease in income that is unexpected and that impairs the viator's reasonable ability to pay the policy premium. 
i.	The viator or insured disposes of his or her ownership interests in a closely held corporation.
(b)	Copies of the independent evidence described in subdivision (a)(4) of this subsection and documents required by G.S. 58‑58‑250(a) shall be submitted to the insurer when the provider submits a request to the insurer for verification of coverage. The copies shall be accompanied by a letter of attestation from the provider that the copies are true and correct copies of the documents received by the provider. 
(c)	If the provider submits to the insurer a copy of the owner or insured's certification described in subdivision (a)(4) and subsection (b) of this section when the provider submits a request to the insurer to effect the transfer of the policy to the provider, the copy shall be deemed to conclusively establish that the contract satisfies the requirements of this section and the insurer shall timely respond to the request.
"§ 58‑58‑260. Advertising for viatical settlements and viatical settlements purchase agreements.
(a)	The purpose of this section is to provide prospective viators and viatical settlement purchasers with clear and unambiguous statements in the advertisement of viatical settlements and to assure the clear, truthful, and adequate disclosure of the benefits, risks, limitations, and exclusions of any contract or purchase agreement bought or sold. This purpose is intended to be accomplished by the establishment of guidelines and standards of permissible and impermissible conduct in the advertising of viatical settlements to assure that product descriptions are presented in a manner that prevents unfair, deceptive, or misleading advertising and is conducive to accurate presentation and description of viatical settlements through the advertising media and material used by viatical settlement licensees.
(b)	This section shall apply to any advertising of contracts, viatical purchase agreements or related products or services intended for dissemination in this State, including Internet advertising viewed by persons located in this State. Where disclosure requirements are established pursuant to federal regulation, this section shall be interpreted so as to minimize or eliminate conflict with federal regulation wherever possible.
(c)	Every viatical settlement licensee shall establish and at all times maintain a system of control over the content, form, and method of dissemination of all advertisements of its contracts, products, and services. All advertisements, regardless of by whom written, created, designed, or presented, shall be the responsibility of the viatical settlement licensee, as well as the individual who created or presented the advertisement. A system of control shall include regular routine notification, at least once a year, to agents and others authorized by the viatical settlement licensee who disseminate advertisements of the requirements and procedures for approval before the use of any advertisements not furnished by the viatical settlement licensee.
(d)	Advertisements shall be truthful and not misleading in fact or by implication. The form and content of an advertisement of a contract or purchase agreement, product, or service shall be sufficiently complete and clear so as to avoid deception. It shall not have the capacity or tendency to mislead or deceive. Whether an advertisement has the capacity or tendency to mislead or deceive shall be determined by the Commissioner from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence within the segment of the public to which it is directed.
(e)	Certain viatical settlement advertisements are deemed false and misleading on their face and are prohibited. False and misleading viatical settlement advertisements include, but are not limited to, the following representations:
(1)	'Guaranteed', 'fully secured', '100 percent secured', 'fully insured', 'secure', 'safe', 'backed by rated insurance companies', 'backed by federal law', 'backed by state law', or 'state guaranty funds', or similar representations;
(2)	'No risk', 'minimal risk', 'low risk', 'no speculation', 'no fluctuation', or similar representations;
(3)	'Qualified or approved for individual retirement accounts (IRAs), Roth IRAs, 401(k) plans, simplified employee pensions (SEP), 403(b), Keogh plans, TSA, other retirement account rollovers', 'tax deferred', or similar representations;
(4)	Utilization of the word 'guaranteed' to describe the fixed return, annual return, principal, earnings, profits, investment, or similar representations;
(5)	'No sales charges or fees' or similar representations;
(6)	'High yield', 'superior return', 'excellent return', 'high return', 'quick profit', or similar representations;
(7)	Purported favorable representations or testimonials about the benefits of contracts or purchase agreements as an investment, taken out of context from newspapers, trade papers, journals, radio and television programs, and all other forms of print and electronic media.
(f)	The information required to be disclosed under this section shall not be minimized, rendered obscure, or presented in an ambiguous fashion or intermingled with the text of the advertisement so as to be confusing or misleading.
(g)	An advertisement shall not:
(1)	Omit material information or use words, phrases, statements, references, or illustrations if the omission or use has the capacity, tendency, or effect of misleading or deceiving viators, purchasers, or prospective purchasers as to the nature or extent of any benefit, loss covered, premium payable, or state or federal tax consequence. The fact that the contract or purchase agreement offered is made available for inspection before consummation of the sale, or an offer is made to refund the payment if the viator is not satisfied or that the contract or purchase agreement includes a 'free look' period that satisfies or exceeds legal requirements, does not remedy misleading statements.
(2)	Use the name or title of a life insurance company or a policy unless the insurer has approved the advertisement.
(3)	Represent that premium payments will not be required to be paid on the policy that is the subject of a contract or purchase agreement in order to maintain that policy, unless that is the fact.
(4)	State or imply that interest charged on an accelerated death benefit or a policy loan is unfair, inequitable, or in any manner an incorrect or improper practice.
(5)	State or imply that a contract or purchase agreement, benefit, or service has been approved or endorsed by a group of individuals, society, association, or other organization unless that is the fact and unless any relationship between an organization and the viatical settlement licensee is disclosed. If the entity making the endorsement or testimonial is owned, controlled, or managed by the viatical settlement licensee, or receives any payment or other consideration from the viatical settlement licensee for making an endorsement or testimonial, that fact shall be disclosed in the advertisement.
(6)	Contain statistical information unless it accurately reflects recent and relevant facts. The source of all statistics used in an advertisement shall be identified.
(7)	Disparage insurers, providers, brokers, investment agents, insurance producers, policies, services, or methods of marketing.
(8)	Use a trade name, group designation, name of the parent company of a viatical settlement licensee, name of a particular division of the viatical settlement licensee, service mark, slogan, symbol, or other device or reference without disclosing the name of the viatical settlement licensee, if the advertisement would have the capacity or tendency to mislead or deceive as to the true identity of the viatical settlement licensee, or to create the impression that a company other than the viatical settlement licensee would have any responsibility for the financial obligation under a contractor purchase agreement.
(9)	Use any combination of words, symbols, or physical materials that by their content, phraseology, shape, color, or other characteristics are so similar to a combination of words, symbols, or physical materials used by a government program or agency or otherwise appear to be of such a nature that they tend to mislead prospective viators or purchasers into believing that the solicitation is in some manner connected with a government program or agency.
(10)	Create the impression that the provider, its financial condition or status, the payment of its claims, or the merits, desirability, or advisability of its contracts or purchase agreement forms are recommended or endorsed by any government entity. 
(h)	The words 'free', 'no cost', 'without cost', 'no additional cost', at no extra cost', or words of similar import shall not be used with respect to any benefit or service unless true. An advertisement may specify the charge for a benefit or a service, may state that a charge is included in the payment, or use other appropriate language.
(i)	Testimonials, appraisals, or analysis used in advertisements must be genuine; represent the current opinion of the author; be applicable to the contract or purchase agreement, product, or service advertised, if any; and be accurately reproduced with sufficient completeness to avoid misleading or deceiving prospective viators or purchasers as to the nature or scope of the testimonials, appraisals, analysis, or endorsement. In using testimonials, appraisals, or analysis, the viatical settlement licensee makes as its own all the statements contained therein, and the statements are subject to all the provisions of this section.
(j)	If the individual making a testimonial, appraisal, analysis, or an endorsement has a financial interest in the provider or related entity as a stockholder, director, officer, employee, or otherwise, or receives any benefit directly or indirectly other than required union scale wages, that fact shall be prominently disclosed in the advertisement.
(k)	When an endorsement refers to benefits received under a contract or purchase agreement, all pertinent information shall be retained for a period of five years after its use.
(l)	The name of the viatical settlement licensee shall be clearly identified in all advertisements about the licensee or its contract or purchase agreements, products, or services, and if any specific contract or purchase agreement is advertised, the contract or purchase agreement shall be identified either by form number or some other appropriate description. If an application is part of the advertisement, the name of the provider or broker shall be shown on the application.
(m)	An advertisement may state that a viatical settlement licensee is licensed in the state where the advertisement appears, provided it does not exaggerate that fact or suggest or imply that a competing viatical settlement licensee may not be so licensed. The advertisement may ask the audience to consult the licensee's web site or contact the department of insurance to find out if the state requires licensing and, if so, whether the provider, broker, or investment agent is licensed.
(n)	The name of the actual licensee shall be stated in all of its advertisements. An advertisement shall not use a trade name, any group designation, name of any affiliate or controlling entity of the licensee, service mark, slogan, symbol, or other device in a manner that would have the capacity or tendency to mislead or deceive as to the true identity of the actual licensee or create the false impression that an affiliate or controlling entity would have any responsibility for the financial obligation of the licensee.
(o)	An advertisement shall not directly or indirectly create the impression that any state or federal governmental agency endorses, approves, or favors:
(1)	Any viatical settlement licensee or its business practices or methods of operation;
(2)	The merits, desirability, or advisability of any contract or purchase agreement; 
(3)	Any contract or purchase agreement; or
(4)	Any policy or life insurance company.
(p)	If the advertiser emphasizes the speed with which the viatication will occur, the advertising must disclose the average time frame from completed application to the date of offer and from acceptance of the offer to receipt of the funds by the viator.
(q)	If the advertising emphasizes the dollar amounts available to viators, the advertising shall disclose the average purchase price as a percent of face value obtained by viators contracting with the licensee during the past six months.
"§ 58‑58‑265.  Fraudulent viatical settlement acts, interference, and participation of convicted felons prohibited.
(a)	A person who commits a fraudulent viatical settlement act is guilty of a Class H felony.
(b)	A person shall not knowingly or intentionally interfere with the enforcement of the provisions of this Part or investigations of suspected or actual violations of this Part.
(c)	A person in the business of viatical 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 viatical settlements.
"§ 58‑58‑270.  Report to Commissioner.
Whenever any person licensed under this Part knows or has reasonable cause to believe that any other person has violated any provision of this Part, it is the duty of that person, upon acquiring the knowledge, to notify the Commissioner and provide the Commissioner with a complete statement of all of the relevant facts and circumstances. The report is a privileged communication, and when made without actual malice does not subject the person making the report to any liability whatsoever. The Commissioner may suspend, revoke, or refuse to renew the license of any person who willfully fails to comply with this section.
"§ 58‑58‑275.  Reporting and investigation of suspected viatical settlement fraudulent acts; immunity from liability.
(a)	As used in this section, 'Commissioner' includes an employee, agent, or designee of the Commissioner. A person, or an employee or agent of that person, acting without actual malice, is not subject to civil liability for libel, slander, or any other cause of action by virtue of furnishing to the Commissioner under the requirements of law or at the direction of the Commissioner reports or other information relating to any known or suspected viatical settlement fraudulent act.
(b)	The Commissioner, acting without actual malice, is not subject to civil liability for libel or slander by virtue of an investigation of any known or suspected viatical settlement fraudulent act; or by virtue of the publication or dissemination of any official report related to any such investigation, which report is published or disseminated in the absence of fraud, bad faith, or actual malice on the part of the Commissioner. 
(c)	During the course of an investigation of a known or suspected viatical settlement fraudulent act, the Commissioner may request any person to furnish copies of any information relative to the known or suspected viatical settlement fraudulent act. The person shall release the information requested and cooperate with the Commissioner under this section.
"§ 58‑58‑280.  Confidentiality.
(a)	Information and evidence provided under G.S. 58‑58‑270 or G.S. 58‑58‑275 or obtained by the Commissioner in an investigation of suspected or actual fraudulent viatical settlement acts shall be privileged and confidential, is not a public record, and is not subject to discovery or subpoena in a civil or criminal action.
(b)	Subsection (a) of this section does not prohibit release by the Commissioner of documents and evidence obtained in an investigation of suspected or actual fraudulent viatical 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 viatical settlement acts, or to the NAIC; or
(3)	At the discretion of the Commissioner, to a person in the business of viatical settlements that is aggrieved by a fraudulent viatical settlement act.
(c)	Release of documents and evidence under subsection (b) of this section does not abrogate or modify the privilege granted in subsection (a) of this section. 
"§ 58‑58‑285.  Other law enforcement or regulatory authority.
This Part does not:
(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)	Prevent or prohibit a person from disclosing voluntarily information concerning viatical settlement fraud to a law enforcement or regulatory agency other than the Commissioner.
(3)	Limit the powers granted elsewhere by the laws of this State to the Commissioner to investigate and examine possible violations of law and to take appropriate action against wrongdoers.
"§ 58‑58‑290.  Injunctions; civil remedies; cease and desist orders.
(a)	In addition to the penalties and other enforcement provisions of this Part, if any person violates this Part or any rule implementing this Part, the Commissioner may seek an injunction in a court of competent jurisdiction and may apply for temporary and permanent orders that the Commissioner determines are necessary to restrain the person from committing the violation.
(b)	Any person damaged by the acts of a person in violation of this Part may bring a civil action against the person committing the violation in a court of competent jurisdiction.
(c)	A violation of this Part attendant to the execution of a purchase agreement renders the purchase agreement voidable and subject to rescission by the viatical settlement purchaser, upon return of the policy received to the provider. Suit for rescission may be brought in a court of competent jurisdiction or where the alleged violator resides or has a principal place of business or where the alleged violation occurred.
(d)	The Commissioner may issue, in accordance with G.S. 58‑63‑32, a cease and desist order upon a person that violates any provision of this Part, any rule or order adopted by the Commissioner, or any written agreement entered into with the Commissioner. The cease and desist order may be subject to judicial review under G.S. 58‑63‑35.
(e)	When the Commissioner finds that an activity in violation of this Part presents an immediate danger to the public that requires an immediate final order, the Commissioner may issue an emergency cease and desist order reciting with particularity the facts underlying the findings. The emergency cease and desist order is effective immediately upon service of a copy of the order on the respondent and remains effective for 90 days. If the Commissioner begins nonemergency cease and desist proceedings, the emergency cease and desist order remains effective, absent an order by a court of competent jurisdiction in accordance with G.S. 58‑63‑35.
(f)	In addition to the penalties and other enforcement provisions of this Part, any person who violates this Part is subject to G.S. 58‑2‑70.
"§ 58‑58‑295.  Unfair trade practices.
A violation of this Part is an unfair trade practice under Article 63 of this Chapter.
"§ 58‑58‑300.  Authority to adopt rules.
The Commissioner may:
(1)	Adopt rules implementing this Part. 
(2)	Establish standards for evaluating reasonableness of payments under contracts for persons who are terminally or chronically ill, including standards for the amount paid in exchange for assignment, transfer, sale, devise, or bequest of a benefit under a policy. 
(3)	Establish appropriate licensing requirements, fees, and standards for continued licensure for providers and investment agents.
(4)	Require a bond or other mechanism for financial accountability for providers and brokers. 
(5)	Adopt rules governing the relationship and responsibilities of insurers and providers, brokers, and investment agents during the viatication of a policy.
"§ 58‑58‑305.  Disclaimer.
Nothing in this Part affects the North Carolina Securities Act or the jurisdiction of the North Carolina Secretary of State.
"§ 58‑58‑310.  Effective date.
A provider, broker, or investment agent transacting business in this State on the effective date of this Part may continue to do so pending approval of the provider, broker, or investment agent's application for a license as long as the application is filed with the Commissioner no later than three months from the effective date of this Part. If the application is disapproved, then the provider, broker, or investment agent shall cease transacting viatical business in this State."
SECTION 4.  G.S. 58‑33‑32(e) reads as rewritten:
"(e)	Notwithstanding any other provision of this section, a person licensed or registered as a viatical settlement broker, viatical settlement provider, or viatical settlement representative, as defined in G.S. 58‑58‑42 (a), G.S. 58‑58‑205, in that person's home state shall receive a nonresident viatical settlement broker, viatical settlement provider, or viatical settlement representative license pursuant to this section. Except for the licensure provisions of this section, nothing in this section otherwise amends or supersedes any provision of G.S. 58‑58‑42. Part 5 of Article 58 of this Chapter."
SECTION 5.  G.S. 58‑58‑42 is repealed.
SECTION 6.  This act becomes effective October 1, 2001.