§ 27-72-11 - General rules. [Effective July 1, 2010.]. - Rhode Island Statutes

SECTION 27-72-11

   § 27-72-11  General rules. [EffectiveJuly 1, 2010.]. – (a) A provider entering into a life settlement contract with any owner of apolicy, wherein the insured is terminally or chronically ill, shall firstobtain:

   (1) If the owner is the insured, a written statement from alicensed attending physician that the owner is of sound mind and under noconstraint or undue influence to enter into a settlement contract; and

   (2) A document in which the insured consents to the releaseof his/her medical records to a provider, settlement broker, or insuranceproducer and, if the policy was issued less than two (2) years from the date ofapplication for a settlement contract, to the insurance company that issued thepolicy.

   (b) The insurer shall respond to a request for verificationof coverage submitted by a provider, settlement broker, or life insuranceproducer not later than thirty (30) calendar days from the date the request isreceived. The request for verification of coverage must 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 to respond.In its response, the insurer shall indicate whether, based on the medicalevidence and documents provided, the insurer intends to pursue an investigationat this time regarding the validity of the insurance contract.

   (c) Before or at the time of execution of the settlementcontract, the provider shall obtain a witnessed document in which the ownerconsents to the settlement contract, represents that the owner has a full andcomplete understanding of the settlement contract, that the owner has a fulland complete understanding of the benefits of the policy, acknowledges that theowner is entering into the settlement contract freely and voluntarily, and, forpersons with a terminal or chronic illness or condition, acknowledges that theinsured has a terminal or chronic illness and that the terminal or chronicillness or condition was diagnosed after the policy was issued.

   (d) The insurer shall not unreasonably delay effecting changeof ownership or beneficiary with any life settlement contract lawfully enteredinto in this state or with a resident of this state.

   (e) If a settlement broker or life insurance producerperforms any of these activities required of the provider, the provider isdeemed to have fulfilled the requirements of this chapter.

   (f) If a broker performs those verification of coverageactivities required of the provider, the provider is deemed to have fulfilledthe requirements of § 27-72-9.

   (g) Within twenty (20) days after an owner executes the lifesettlement contract, the provider shall give written notice to the insurer thatissued that insurance policy that the policy has become subject to a lifesettlement contract. The notice shall be accompanied by the documents requiredby subdivision 27-72-10(a)(2).

   (h) All medical information solicited or obtained by anylicensee shall be subject to the applicable provision of state law relating toconfidentiality of medical information, if not otherwise provided in thischapter.

   (i) All life settlement contracts entered into in this stateshall provide that the owner may rescind the contract on or before fifteen (15)days after the date it is executed by all parties thereto. Rescission, ifexercised by the owner, is effective only if both notice of the rescission isgiven, and the owner repays all proceeds and any premiums, loans, and loaninterest paid on account of the provider within the rescission period. If theinsured dies during the rescission period, the contract shall be deemed to havebeen rescinded subject to repayment by the owner or the owner's estate of allproceeds and any premiums, loans, and loan interest to the provider.

   (j) Within three (3) business days after receipt from theowner of documents to effect the transfer of the insurance 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 acknowledgement 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 (3) business days of acknowledgement of thetransfer from the insurer.

   (k) Failure to tender the life settlement contract proceedsto the owner by the date disclosed to the owner renders the contract voidableby the owner for lack of consideration until the time the proceeds are tenderedto and accepted by the owner. A failure to give written notice of the right ofrescission hereunder shall toll the right of rescission until thirty (30) daysafter the written notice of the right of rescission has been given.

   (l) Any fee paid by a provider, party, individual, or anowner to a broker in exchange for services provided to the owner pertaining toa life settlement contract shall be computed as a percentage of the offerobtained, not the face value of the policy. Nothing in this section shall beconstrued as prohibiting a broker from reducing such broker's fee below thispercentage if the broker so chooses.

   (m) The broker shall disclose to the owner anything of valuepaid or given to a broker, which relates to a life settlement contract.

   (n) No person at any time prior to, or at the time of, theapplication for, or issuance of, a policy, or during a two (2) year periodcommencing with the date of issuance of the policy, shall enter into a lifesettlement 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 exercise ofconversion rights arising out of a group or individual policy, provided thetotal of the time covered under the conversion policy plus the time coveredunder the prior policy is at least twenty-four (24) months. The time coveredunder a group policy must be calculated without regard to a change in insurancecarriers, provided the coverage has been continuous and under the same groupsponsorship; or

   (2) The owner submits independent evidence to the providerthat one or more of the following conditions have been met within the two (2)year period:

   (i) The owner or insured is terminally or chronically ill;

   (ii) The owner or insured disposes of his/her ownershipinterests in a closely held corporation, pursuant to the terms of a buyout orother similar agreement in effect at the time the insurance policy wasinitially issued;

   (iii) The owner's spouse dies;

   (iv) The owner divorces his or her spouse;

   (v) The owner retires from full-time employment;

   (vi) The owner becomes physically or mentally disabled and aphysician determines that the disability prevents the owner from maintainingfull-time employment; or

   (vii) A final order, judgment or decree is entered by a courtof competent jurisdiction, on the application of a creditor of the owner,adjudicating the owner bankrupt or insolvent, or approving a petition seekingreorganization of the owner or appointing a receiver, trustee or liquidator toall or a substantial part of the owner's assets;

   (3) Copies of the independent evidence required bysubdivision 27-72-11(n)(2) shall be submitted to the insurer when the providersubmits a request to the insurer for verification of coverage. The copies shallbe accompanied 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 provided for in subdivision 27-72-11(n)(2) when theprovider submits a request to the insurer to effect the transfer of the policyto the provider, the copy is deemed to establish that the settlement contractsatisfies the requirements of this section.