56-50-114 - Fraud prevention and control. - Tennessee Statutes

56-50-114 Fraud prevention and control.

(a)  Fraudulent Viatical Settlement Acts, Interference and Participation of Convicted Felons Prohibited. 

     (1)  A person shall not commit a fraudulent viatical settlement act.

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

     (3)  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.

(b)  Fraud Warning Required. 

     (1)  Viatical settlement contracts and purchase agreement forms and applications for viatical settlements, regardless of the form of transmission, shall contain the following statement or a substantially similar statement:  

Any person who knowingly presents false information in an application for insurance, viatical settlement contract or a viatical settlement purchase agreement 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 (b)(1) does not constitute a defense in any prosecution for a fraudulent viatical settlement act.

(c)  Mandatory Reporting of Fraudulent Viatical Settlement Acts. 

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

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

(d)  Immunity from Liability. 

     (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 viatical 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 viatical settlement acts or that person's agents, employees or representatives;

          (D)  The National Association of Insurance Commissioners (NAIC), the Financial Industry Regulatory Authority (FINRA), the North American Securities Administrators Association (NASAA), or their employees, agents or representatives, or other regulatory body overseeing life insurance, viatical settlements, securities or investment fraud; or

          (E)  The life insurer that issued the life insurance policy covering the life of the insured.

     (2)  Subdivision (d)(1) 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 viatical settlement act, the party bringing the action shall plead specifically any allegation that subdivision (d)(1) does not apply because the person filing the report or furnishing the information did so with actual malice.

     (3)  A person furnishing information as identified in subdivision (d)(1) shall be entitled to an award of attorney's fees and costs if the 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 this chapter and the party bringing the action was not substantially justified in doing so. For purposes of this subdivision (d)(3), a proceeding is “substantially justified” if it had a reasonable basis in law or fact at the time that it was initiated. However, such an award does not apply to any person furnishing information concerning the person’s own fraudulent viatical settlement acts.

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

(e)  Confidentiality. 

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

     (2)  Subdivision (e)(1) does not prohibit release by the commissioner of documents and evidence obtained in an investigation of suspected or actual fraudulent viatical 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 viatical settlement acts or to the NAIC; or

          (C)  At the discretion of the commissioner, to a person in the business of viatical settlements that is aggrieved by a fraudulent viatical settlement act.

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

(f)  Other Law Enforcement or Regulatory Authority.  This chapter shall 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 voluntarily disclosing information concerning viatical settlement fraud to a law enforcement or regulatory agency other than the department of commerce and insurance; or

     (3)  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.

(g)  Viatical Settlement Antifraud Initiatives. 

     (1)  Viatical settlement providers and viatical settlement brokers shall have in place antifraud initiatives reasonably calculated to detect, prosecute and prevent fraudulent viatical settlement acts. At the discretion of the commissioner, the commissioner may order, or a licensee may request and the commissioner may grant, such modifications of the required initiatives in subdivision (g)(2) as necessary to ensure an effective antifraud program. The modifications may be more or less restrictive than the required initiatives so long as the modifications may reasonably be expected to accomplish the purpose of this chapter.

     (2)  Antifraud initiatives shall include:

          (A)  Fraud investigators, who may be viatical settlement provider or viatical settlement broker employees or independent contractors; and

          (B)  An antifraud plan, which shall be submitted to the commissioner. The antifraud plan shall include, but not be limited to:

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

                (ii)  A description of the procedures for reporting possible fraudulent viatical settlement acts to the commissioner;

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

                (iv)  A description or chart outlining the organizational arrangement of the antifraud personnel who are responsible for the investigation and reporting of possible fraudulent viatical 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 and shall not be subject to discovery or subpoena in a civil or criminal action.

[Acts 2009, ch. 604, § 15.]