1.1.................... moves to amend S.F. No. 166, the third engrossment, as follows:
1.2Delete everything after the enacting clause and insert:

1.3    "Section 1. [60A.957] SHORT TITLE.
1.4Sections 60A.957 to 60A.9585 may be cited as the "Life Settlements Act."

1.5    Sec. 2. [60A.9572] DEFINITIONS.
1.6    Subdivision 1. Terms. For the purpose of sections 60A.957 to 60A.9585, the terms
1.7in subdivision 2 to 27 have the meanings given them.
1.8    Subd. 2. Advertisement. "Advertisement" means any written, electronic, or printed
1.9communication or any communication by means of recorded telephone messages or
1.10transmitted on radio, television, the Internet, or similar communications media, including
1.11film strips, motion pictures, and videos published, disseminated, circulated, or placed
1.12directly before the public in this state for the purpose of creating an interest in or inducing
1.13a person to purchase or sell, assign, devise, bequest, or transfer the death benefit or
1.14ownership of a life insurance policy or an interest in a life insurance policy pursuant to a
1.15life settlement contract.
1.16    Subd. 3. Broker. "Broker" means a person who, on behalf of an owner and for a fee,
1.17commission, or other valuable consideration, offers or attempts to negotiate life settlement
1.18contracts between an owner and providers. A broker represents only the owner and owes a
1.19fiduciary duty to the owner to act according to the owner's instructions, and in the best
1.20interest of the owner, notwithstanding the manner in which the broker is compensated.
1.21A broker does not include an attorney, certified public accountant, or financial planner
1.22retained in the type of practice customarily performed in that person's professional
1.23capacity to represent the owner whose compensation is not paid directly or indirectly by
1.24the provider or any other person except the owner.
2.1    Subd. 4. Business of life settlements. "Business of life settlements" means an
2.2activity involved in, but not limited to, offering to enter into, soliciting, negotiating,
2.3procuring, effectuating, monitoring, or tracking of life settlement contracts.
2.4    Subd. 5. Chronically ill. "Chronically ill" means:
2.5(1) being unable to perform at least two activities of daily living including, but not
2.6limited to, eating, toileting, transferring, bathing, dressing or continence;
2.7(2) requiring substantial supervision to protect the individual from threats to health
2.8and safety due to severe cognitive impairment; or
2.9(3) having a level of disability similar to that described in clause (1) as determined
2.10by the United States secretary of health and human services.
2.11    Subd. 6. Commissioner. "Commissioner" means the commissioner of commerce.
2.12    Subd. 7. Financing entity. "Financing entity" means an underwriter, placement
2.13agent, lender, purchaser of securities, purchaser of a policy or certificate from a provider,
2.14credit enhancer, or any entity that has a direct ownership in a policy or certificate that is
2.15the subject of a life settlement contract, but:
2.16(1) whose principal activity related to the transaction is providing funds to effect the
2.17life settlement contract or purchase of one or more policies; and
2.18(2) who has an agreement in writing with one or more providers to finance the
2.19acquisition of life settlement contracts.
2.20Financing entity does not include a nonaccredited investor or purchaser.
2.21    Subd. 8. Financing transaction. "Financing transaction" means a transaction in
2.22which a licensed provider obtains financing from a financing entity including, without
2.23limitation, any secured or unsecured financing, any securitization transaction, or any
2.24securities offering which either is registered or exempt from registration under federal
2.25and state securities law.
2.26    Subd. 9. Fraudulent life settlement act. "Fraudulent life settlement act" includes:
2.27(a) acts or omissions committed by any person who, knowingly and with intent to
2.28defraud, for the purpose of depriving another of property or for pecuniary gain, commits
2.29or permits the person's employees or the person's agents to engage in acts including,
2.30but not limited to:
2.31(1) presenting, causing to be presented, or preparing with knowledge and belief
2.32that it will be presented to or by a provider, premium finance lender, broker, insurer,
2.33insurance producer, or any other person, false material information or concealing material
2.34information, as part of, in support of, or concerning a fact material to one or more of
2.35the following:
3.1(i) an application for the issuance of a life settlement contract or insurance policy;
3.2(ii) the underwriting of a life settlement contract or insurance policy;
3.3(iii) a claim for payment or benefit pursuant to a life settlement contract or insurance
3.4policy;
3.5(iv) premiums paid on an insurance policy;
3.6(v) payments and changes in ownership or beneficiary made in accordance with the
3.7terms of a life settlement contract or insurance policy;
3.8(vi) the reinstatement or conversion of an insurance policy;
3.9(vii) in the solicitation, offer to enter into, or effectuation of a life settlement contract
3.10or insurance policy;
3.11(viii) the issuance of written evidence of life settlement contracts or insurance;
3.12(ix) any application for or the existence of or any payments related to a loan secured
3.13directly or indirectly by any interest in a life insurance policy; or
3.14(x) entering into stranger-originated life insurance;
3.15(2) employing any device, scheme, or artifice to defraud in the business of life
3.16settlements; or
3.17(3) in the solicitation, application, or issuance of a life insurance policy, employing
3.18any device, scheme, or artifice in violation of state insurable interest laws; and
3.19(b) in the furtherance of a fraud or to prevent the detection of a fraud, acts by any
3.20person which commit or permit the person's employees or the person's agents to:
3.21(1) remove, conceal, alter, destroy, or sequester from the commissioner the assets or
3.22records of a licensee or other person engaged in the business of life settlements;
3.23(2) misrepresent or conceal the financial condition of a licensee, financing entity,
3.24insurer, or other person;
3.25(3) transact the business of life settlements in violation of laws requiring a license,
3.26certificate of authority, or other legal authority for the transaction of the business of life
3.27settlements;
3.28(4) file with the commissioner or the chief insurance regulatory official of another
3.29jurisdiction a document containing false information or otherwise concealing information
3.30about a material fact from the commissioner;
3.31(5) engage in embezzlement, theft, misappropriation, or conversion of money, funds,
3.32premiums, credits, or other property of a provider, insurer, insured, owner, insurance
3.33policy owner, or any other person engaged in the business of life settlements or insurance;
3.34(6) knowingly and with intent to defraud, enter into, broker, or otherwise deal in a
3.35life settlement contract, the subject of which is a life insurance policy that was obtained by
3.36presenting false information concerning any fact material to the policy or by concealing,
4.1for the purpose of misleading another, information concerning any fact material to the
4.2policy where the owner or the owner's agent intended to defraud the policy's issuer;
4.3(7) attempt to commit, assist, aid or abet in the commission of, or conspiracy to
4.4commit, the acts or omissions specified in this subdivision; or
4.5(8) misrepresent the state of residence of an owner to be a state or jurisdiction that
4.6does not have a law substantially similar to sections 60A.957 to 60A.9587 for the purpose
4.7of evading or avoiding the provisions of sections 60A.957 to 60A.9587.
4.8    Subd. 10. Insured. "Insured" means the person covered under the policy being
4.9considered for sale in a life settlement contract.
4.10    Subd. 11. Life expectancy. "Life expectancy" means the arithmetic mean of the
4.11number of months the insured under the life insurance policy to be settled can be expected
4.12to live considering medical records and appropriate experiential data.
4.13    Subd. 12. Life insurance producer. "Life insurance producer" means any person
4.14licensed in this state as a resident or nonresident insurance producer who has received
4.15qualification or authority for life insurance coverage or a life line of coverage pursuant to
4.16chapter 60K.
4.17    Subd. 13. Life settlement contract. (a) "Life settlement contract" means a written
4.18agreement entered into between a provider and an owner, establishing the terms under
4.19which compensation or anything of value will be paid, which compensation or thing of
4.20value is less than the expected death benefit of the insurance policy or certificate, in return
4.21for the owner's assignment, transfer, sale, devise, or bequest of the death benefit or any
4.22portion of an insurance policy or certificate of insurance for compensation, provided,
4.23however, that the minimum value for a life settlement contract shall be greater than a cash
4.24surrender value or accelerated death benefit available at the time of an application for a life
4.25settlement contract. Life settlement contract also includes the transfer for compensation or
4.26value of ownership or beneficial interest in a trust or other entity that owns such policy if
4.27the trust or other entity was formed or availed of for the principal purpose of acquiring
4.28one or more life insurance contracts, which life insurance contract insures the life of a
4.29person residing in this state.
4.30(b) Life settlement contract also includes a premium finance loan made for a policy
4.31on or before the date of issuance of the policy where:
4.32(i) the loan proceeds are not used solely to pay premiums for the policy and any
4.33costs or expenses incurred by the lender or the borrower in connection with the financing;
4.34(ii) the owner receives on the date of the premium finance loan a guarantee of the
4.35future life settlement value of the policy; or
5.1(iii) the owner agrees on the date of the premium finance loan to sell the policy or
5.2any portion of its death benefit on any date following the issuance of the policy.
5.3(c) Life settlement contract does not include:
5.4(1) a policy loan by a life insurance company pursuant to the terms of the life
5.5insurance policy or accelerated death provisions contained in the life insurance policy,
5.6whether issued with the original policy or as a rider;
5.7(2) a premium finance loan, as defined herein, or any loan made by a bank or other
5.8licensed financial institution, provided that neither default on such loan nor the transfer of
5.9the policy in connection with such default is pursuant to an agreement or understanding
5.10with any other person for the purpose of evading regulation under sections 60A.957
5.11to 60A.9587;
5.12(3) a collateral assignment of a life insurance policy by an owner;
5.13(4) a loan made by a lender that does not violate chapter 59A, provided the loan is
5.14not described in clause (1), and is not otherwise within the definition of life settlement
5.15contract;
5.16(5) an agreement where all the parties (i) are closely related to the insured by blood
5.17or law or (ii) have a lawful substantial economic interest in the continued life, health, and
5.18bodily safety of the person insured, or are trusts established primarily for the benefit
5.19of the parties;
5.20(6) any designation, consent, or agreement by an insured who is an employee of an
5.21employer in connection with the purchase by the employer, or trust established by the
5.22employer, of life insurance on the life of the employee;
5.23(7) a bona fide business succession planning arrangement:
5.24(i) between one or more shareholders in a corporation or between a corporation and
5.25one or more of its shareholders or one or more trusts, established by its shareholders;
5.26(ii) between one or more partners in a partnership or between a partnership and one
5.27or more of its partners or one or more trusts, established by its partners; or
5.28(iii) between one or more members in a limited liability company or between a
5.29limited liability company and one or more of its members or one or more trusts established
5.30by its members;
5.31(8) an agreement entered into by a service recipient, or a trust established by the
5.32service recipient, and a service provider, or a trust established by the service provider, who
5.33performs significant services for the service recipient's trade or business; or
5.34(9) any other contract, transaction, or arrangement from the definition of life
5.35settlement contract that the commissioner determines is not of the type intended to be
5.36regulated by sections 60A.957 to 60A.9587.
6.1    Subd. 14. Owner. "Owner" means the owner of a life insurance policy or a
6.2certificate holder under a group policy, with or without a terminal illness, who enters or
6.3seeks to enter into a life settlement contract. An owner shall not be limited to an owner
6.4of a life insurance policy or a certificate holder under a group policy that insures the life
6.5of an individual with a terminal or chronic illness or condition except where specifically
6.6addressed. Owner does not include:
6.7(1) any provider or other licensee under sections 60A.957 to 60A.9587;
6.8(2) a qualified institutional buyer as defined in Rule 144A of the federal Securities
6.9Act of 1933, as amended;
6.10(3) a financing entity;
6.11(4) a special purpose entity; or
6.12(5) a related provider trust.
6.13    Subd. 15. Policy. "Policy" means an individual or group policy, group certificate,
6.14contract, or arrangement of life insurance owned by a resident of this state, regardless of
6.15whether delivered or issued for delivery in this state.
6.16    Subd. 16. Premium finance loan. "Premium finance loan" is a loan made primarily
6.17for the purposes of making premium payments on a life insurance policy, which loan is
6.18secured by an interest in such life insurance policy.
6.19    Subd. 17. Person. "Person" means any natural person or legal entity including, but
6.20not limited to, a partnership, limited liability company, association, trust, or corporation.
6.21    Subd. 18. Provider. "Provider" means a person, other than an owner, who enters
6.22into or effectuates a life settlement contract with an owner. A provider does not include:
6.23(1) any bank, savings bank, savings and loan association, or credit union;
6.24(2) a licensed lending institution or creditor or secured party pursuant to a premium
6.25finance loan agreement which takes an assignment of a life insurance policy or certificate
6.26issued pursuant to a group life insurance policy as collateral for a loan;
6.27(3) the insurer of a life insurance policy or rider to the extent of providing accelerated
6.28death benefits or riders under section 61A.072 or cash surrender value;
6.29(4) any natural person who enters into or effectuates no more than one agreement in
6.30a calendar year for the transfer of a life insurance policy or certificate issued pursuant to a
6.31group life insurance policy for compensation or anything of value less than the expected
6.32death benefit payable under the policy;
6.33(5) a purchaser;
6.34(6) any authorized or eligible insurer that provides stop-loss coverage to a provider,
6.35purchaser, financing entity, special purpose entity, or related provider trust;
6.36(7) a financing entity;
7.1(8) a special purpose entity;
7.2(9) a related provider trust;
7.3(10) a broker; or
7.4(11) an accredited investor or qualified institutional buyer as defined respectively in
7.5Regulation D, Rule 501 or Rule 144A of the federal Securities Act of 1933, as amended,
7.6who purchases a life settlement policy from a provider.
7.7    Subd. 19. Purchaser. "Purchaser" means a person who pays compensation or
7.8anything of value as consideration for a beneficial interest in a trust which is vested with,
7.9or for the assignment, transfer or sale of, an ownership or other interest in a life insurance
7.10policy or a certificate issued pursuant to a group life insurance policy which has been
7.11the subject of a life settlement contract.
7.12    Subd. 20. Related provider trust. "Related provider trust" means a titling trust or
7.13other trust established by a licensed provider or a financing entity for the sole purpose
7.14of holding the ownership or beneficial interest in purchased policies in connection with
7.15a financing transaction. In order to qualify as a related provider trust, the trust must
7.16have a written agreement with the licensed provider under which the licensed provider
7.17is responsible for ensuring compliance with all statutory and regulatory requirements
7.18and under which the trust agrees to make all records and files relating to life settlement
7.19transactions available to the Department of Commerce as if those records and files were
7.20maintained directly by the licensed provider.
7.21    Subd. 21. Special purpose entity. "Special purpose entity" means a corporation,
7.22partnership, trust, limited liability company, or other legal entity formed solely to provide
7.23either directly or indirectly access to institutional capital markets for a financing entity or
7.24provider in connection with a transaction in which the securities in the special purpose
7.25entity are acquired by the owner or by a qualified institutional buyer as defined in Rule 144
7.26promulgated under the Securities Act of 1933, as amended; or the securities pay a fixed
7.27rate of return commensurate with established asset-backed institutional capital markets.
7.28    Subd. 22. Stranger-originated life insurance; STOLI. "Stranger-originated life
7.29insurance" or "STOLI" is an act, practice, or arrangement to initiate the issuance of a life
7.30insurance policy in this state for the benefit of a third-party investor who, at the time of
7.31policy origination, has no insurable interest, under the laws of this state, in the life of the
7.32insured. STOLI practices include but are not limited to cases in which life insurance is
7.33purchased with resources or guarantees from or through a person or entity who, at the
7.34time of policy inception, could not lawfully initiate the policy himself, herself, or itself,
7.35and where, at the time of inception, there is an arrangement or agreement to directly or
7.36indirectly transfer the ownership of the policy or the policy benefits to a third party. Trusts
8.1that are created to give the appearance of insurable interest and are used to initiate policies
8.2for investors violate insurable interest laws and the prohibition against wagering on life.
8.3STOLI arrangements do not include otherwise lawful life settlement contracts permitted
8.4by this act or those practices in section 60A.9572, subdivision 13, paragraph (c).
8.5    Subd. 23. Terminally ill. "Terminally ill" means having an illness or sickness that
8.6can reasonably be expected to result in death in 24 months or less.

8.7    Sec. 3. [60A.9573] ADVERTISING.
8.8(a) A broker or provider licensed pursuant to sections 60A.957 to 60A.9585 may
8.9conduct or participate in advertisements within this state. Such advertisements shall
8.10comply with all advertising and marketing laws that are applicable to life insurers or to
8.11brokers and providers licensed pursuant to sections 60A.957 to 60A.9585.
8.12(b) Advertisements shall be accurate, truthful, and not misleading in fact or by
8.13implication.

8.14    Sec. 4. [60A.9574] DISCLOSURE TO OWNERS.
8.15    Subdivision 1. Provider or broker disclosures. The provider or broker shall
8.16provide in writing, in a separate document that is signed by the owner, the following
8.17information to the owner no later than the date of application for a life settlement contract:
8.18(1) the fact that possible alternatives to life settlement contracts exist, including, but
8.19not limited to, accelerated benefits offered by the issuer of the life insurance policy;
8.20(2) the fact that some or all of the proceeds of a life settlement contract may be
8.21taxable and that assistance should be sought from a professional tax advisor;
8.22(3) the fact that the proceeds from a life settlement contract could be subject to
8.23the claims of creditors;
8.24(4) the fact that receipt of proceeds from a life settlement contract may adversely
8.25affect the recipients' eligibility for public assistance or other government benefits or
8.26entitlements and that advice should be obtained from the appropriate agencies;
8.27(5) the fact that the owner has a right to rescind a life settlement contract within 30
8.28days of the date it is executed by all parties and the owner has received the disclosures
8.29contained herein or 15 days from receipt by the owner of the proceeds of the settlement,
8.30whichever is sooner. Rescission, if exercised by the owner, is effective only if both notice
8.31of the rescission is given, and the owner repays all proceeds and any premiums, loans, and
8.32loan interest paid on account of the provider within the rescission period. If the insured
8.33dies during the rescission period, the contract shall be deemed to have been rescinded
8.34subject to repayment by the owner or the owner's estate of all proceeds and any premiums,
8.35loans, and loan interest to the provider;
9.1(6) the fact that proceeds will be sent to the owner within three business days after the
9.2provider has received the insurer or group administrator's acknowledgment that ownership
9.3of the policy or interest in the certificate has been transferred and the beneficiary has been
9.4designated in accordance with the terms of the life settlement contract;
9.5(7) the fact that entering into a life settlement contract may cause other rights or
9.6benefits, including conversion rights and waiver of premium benefits that may exist under
9.7the policy or certificate of a group policy to be forfeited by the owner and that assistance
9.8should be sought from a professional financial advisor;
9.9(8) the date by which the funds will be available to the owner and the transmitter of
9.10the funds;
9.11(9) the fact that the commissioner shall require delivery of a buyer's guide or a
9.12similar consumer advisory package in the form prescribed by the commissioner to owners
9.13during the solicitation process;
9.14(10) the disclosure document shall contain the following language: "all medical,
9.15financial, or personal information solicited or obtained by a provider or broker about an
9.16insured, including the insured's identity or the identity of family members, a spouse or
9.17a significant other may be disclosed as necessary to effect the life settlement contract
9.18between the owner and provider. If you are asked to provide this information, you will be
9.19asked to consent to the disclosure. The information may be provided to someone who
9.20buys the policy or provides funds for the purchase. You may be asked to renew your
9.21permission to share information every two years";
9.22(11) the fact that the commissioner shall require providers and brokers to print
9.23separate signed fraud warnings on their applications and on their life settlement contracts
9.24is as follows:
9.25"Any person who knowingly presents false information in an application for
9.26insurance or life settlement contract is guilty of a crime and may be subject to fines
9.27and confinement in prison.";
9.28(12) the fact that the insured may be contacted by either the provider or broker or
9.29the provider's or broker's authorized representative for the purpose of determining the
9.30insured's health status or to verify the insured's address. This contact is limited to once
9.31every three months if the insured has a life expectancy of more than one year, and no more
9.32than once per month if the insured has a life expectancy of one year or less;
9.33(13) the affiliation, if any, between the provider and the issuer of the insurance
9.34policy to be settled;
10.1(14) that a broker represents exclusively the owner, and not the insurer or the
10.2provider or any other person, and owes a fiduciary duty to the owner, including a duty to
10.3act according to the owner's instructions and in the best interest of the owner;
10.4(15) the document shall include the name, address, and telephone number of the
10.5broker;
10.6(16) the name, business address, and telephone number of the independent
10.7third-party escrow agent, and the fact that the owner may inspect or receive copies of the
10.8relevant escrow or trust agreements or documents; and
10.9(17) the fact that a change of ownership could in the future limit the insured's ability
10.10to purchase future insurance on the insured's life because there is a limit to how much
10.11coverage insurers will issue on one life.
10.12    Subd. 2. Display. The written disclosures shall be conspicuously displayed in any
10.13life settlement contract furnished to the owner by a provider including any affiliations or
10.14contractual arrangements between the provider and the broker.
10.15    Subd. 3. Broker disclosures. A broker shall provide the owner and the provider
10.16with at least the following disclosures no later than the date the life settlement contract
10.17is signed by all parties. The disclosures shall be conspicuously displayed in the life
10.18settlement contract or in a separate document signed by the owner and provide the
10.19following information:
10.20(1) the name, business address, and telephone number of the broker;
10.21(2) a full, complete, and accurate description of all the offers, counteroffers,
10.22acceptances, and rejections relating to the proposed life settlement contract;
10.23(3) a written disclosure of any affiliations or contractual arrangements between the
10.24broker and any person making an offer in connection with the proposed life settlement
10.25contracts;
10.26(4) a complete reconciliation of the gross offer or bid by the provider to the net
10.27amount of proceeds or value to be received by the owner. For the purpose of this section,
10.28gross offer or bid shall mean the total amount or value offered by the provider for the
10.29purchase of one or more life insurance policies, inclusive of commissions and fees; and
10.30(5) the failure to provide the disclosures or rights described in this section shall be
10.31deemed an unfair trade practice pursuant to section 60A.9585.

10.32    Sec. 5. [60A.958] DISCLOSURE BY INSURER.
10.33    Subdivision 1. Premium payment financing. In addition to other questions an
10.34insurance carrier may lawfully pose to a life insurance applicant, insurance carriers
10.35may inquire in the application for insurance whether the proposed owner intends to
11.1pay premiums with the assistance of financing from a lender that will use the policy as
11.2collateral to support the financing.
11.3If the premium finance loan provides funds that can be used for a purpose other than
11.4paying for the premiums, costs, and expenses associated with obtaining and maintaining
11.5the life insurance policy and loan, the application may be rejected as a violation of the
11.6prohibited practices in section 60A.9582.
11.7If the financing does not violate section 60A.9582 the insurer may not reject the life
11.8insurance application solely because the premiums will be financed. The insurance carrier:
11.9(1) may make disclosures, including but not limited to such as the following, to the
11.10applicant and the insured, either on the application or an amendment to the application
11.11to be completed no later than the delivery of the policy:
11.12"If you have entered into a loan arrangement where the policy is used as collateral,
11.13and the policy does change ownership at some point in the future in satisfaction
11.14of the loan, the following may be true:
11.15(i) a change of ownership could lead to a stranger owning an interest in the insured's
11.16life;
11.17(ii) a change of ownership could in the future limit your ability to purchase future
11.18insurance on the insured's life because there is a limit to how much coverage insurers
11.19will issue on one life;
11.20(iii) should there be a change of ownership and you wish to obtain more insurance
11.21coverage on the insured's life in the future, the insured's higher issue age, a change
11.22in health status, and/or other factors may reduce the ability to obtain coverage and/or
11.23may result in significantly higher premiums;
11.24(iv) you should consult a professional advisor, since a change in ownership in
11.25satisfaction of the loan may result in tax consequences to the owner, depending on
11.26the structure of the loan"; and
11.27(2) may require certifications, such as the following, from the applicant and the
11.28insured:
11.29(i) "I have not entered into any agreement or arrangement providing for the future
11.30sale of this life insurance policy";
11.31(ii) "My loan arrangement for this policy provides funds sufficient to pay for some or
11.32all of the premiums, costs, and expenses associated with obtaining and maintaining
11.33my life insurance policy, but I have not entered into any agreement by which I am to
11.34receive consideration in exchange for procuring this policy"; and
11.35(iii) "The borrower has an insurable interest in the insured."
12.1    Subd. 2. Notice of alternative transaction. With respect to each policy issued by
12.2an insurance company, the insurance company shall send written notice to the owner of an
12.3individual life insurance policy, or a certificate holder under a group life insurance policy,
12.4where the insured person under such policy is age 60 or older or is known to be terminally
12.5ill or chronically ill, that a life settlement is an available alternative transaction to such
12.6owner at the time of each of the following:
12.7(1) when a life insurance company receives from such owner a request to surrender,
12.8in whole or in part, an individual life insurance policy, or a certificate under a group
12.9life insurance policy;
12.10(2) when a life insurance company receives from such owner a request to receive
12.11an accelerated death benefit under an individual life insurance policy, or a certificate
12.12under a group life insurance policy;
12.13(3) when a life insurance company receives from such owner a request to collaterally
12.14assign an individual life insurance policy, or a certificate under a group life insurance
12.15policy as security for a loan;
12.16(4) when a life insurance company sends to such owner a notice of lapse of an
12.17individual life insurance policy, or a certificate under a group life insurance policy; or
12.18(5) or at any other time that the commissioner may require by rule.

12.19    Sec. 6. [60A.9581] LIFE SETTLEMENT CONTRACTS; GENERAL RULES.
12.20    Subdivision 1. Life settlement contracts. A provider entering into a life settlement
12.21contract with any owner of a policy, wherein the insured is terminally or chronically
12.22ill, shall first obtain:
12.23(1) if the owner is the insured, a written statement from a licensed attending
12.24physician that the owner is of sound mind and under no constraint or undue influence to
12.25enter into a settlement contract; and
12.26(2) a document in which the insured consents to the release of the insured's medical
12.27records to a provider, settlement broker, or insurance producer and, if the policy was
12.28issued less than two years from the date of application for a settlement contract, to the
12.29insurance company that issued the policy.
12.30    Subd. 2. Request for verification of coverage. The insurer shall respond to a
12.31request for verification of coverage submitted by a provider, settlement broker, or life
12.32insurance producer not later than 30 calendar days of the date the request is received.
12.33The request for verification of coverage must be made on a form approved by the
12.34commissioner. The insurer shall complete and issue the verification of coverage or
12.35indicate in which respects it is unable to respond. In its response, the insurer shall indicate
13.1whether, based on the medical evidence and documents provided, the insurer intends to
13.2pursue an investigation at this time regarding the validity of the insurance contract.
13.3    Subd. 3. Owner's consent. Before or at the time of execution of the settlement
13.4contract, the provider shall obtain a witnessed document in which the owner consents to
13.5the settlement contract, represents that the owner has a full and complete understanding
13.6of the settlement contract, that the owner has a full and complete understanding of the
13.7benefits of the policy, acknowledges that the owner is entering into the settlement contract
13.8freely and voluntarily, and, for persons with a terminal or chronic illness or condition,
13.9acknowledges that the insured has a terminal or chronic illness and that the terminal or
13.10chronic illness or condition was diagnosed after the policy was issued.
13.11    Subd. 4. Unreasonable delay in change of ownership or beneficiary. The insurer
13.12shall not unreasonably delay effecting change of ownership or beneficiary with any life
13.13settlement contract lawfully entered into in this state or with a resident of this state.
13.14    Subd. 5. Alternative compliance. (a) If a settlement broker or life insurance
13.15producer performs any of these activities required of the provider, the provider is deemed
13.16to have fulfilled the requirements of this section.
13.17(b) If a broker performs those verification of coverage activities required of the
13.18provider, the provider is deemed to have fulfilled the requirements of section 60A.9579,
13.19subdivision 1.
13.20    Subd. 6. Notice that policy subject to life settlement contracts. Within 20 days
13.21after an owner executes the life settlement contract, the provider shall give written notice
13.22to the insurer that issued the insurance policy that the policy has become subject to a
13.23life settlement contract. The notice shall be accompanied by the documents required by
13.24section 60A.958, subdivision 1, clause (1).
13.25    Subd. 7. Confidentiality of medical information. All medical information
13.26solicited or obtained by any licensee shall be subject to the applicable provision of state
13.27law relating to confidentiality of medical information if not otherwise provided in sections
13.2860A.957 to 60A.9585.
13.29    Subd. 8. Rescission. All life settlement contracts entered into in this state shall
13.30provide that the owner may rescind the contract on or before 30 days after the date it is
13.31executed by all parties thereto, and the owner has received all required disclosures, or 15
13.32days from receipt by the owner of full payment of the proceeds as specified in subdivision
13.339, whichever is sooner. Rescission, if exercised by the owner, is effective only if both
13.34notice of the rescission is given, and the owner repays all proceeds and any premiums,
13.35loans, and loan interest paid on account of the provider within the rescission period. If
14.1the insured dies during the rescission period, the contract shall be deemed to have been
14.2rescinded subject to repayment by the owner or the owner's estate of all proceeds and any
14.3premiums, loans, and loan interest to the provider.
14.4    Subd. 9. Settlement proceeds. Within three business days after receipt from the
14.5owner of documents to effect the transfer of the insurance policy, the provider shall pay the
14.6proceeds of the settlement to an escrow or trust account managed by a trustee or escrow
14.7agent in a state or federally chartered financial institution pending acknowledgment of
14.8the transfer by the issuer of the policy. The trustee or escrow agent shall be required to
14.9transfer the proceeds due to the owner within three business days of acknowledgment
14.10of the transfer from the insurer.
14.11    Subd. 10. Failure to tender proceeds. Failure to tender the life settlement contract
14.12proceeds to the owner by the date disclosed to the owner renders the contract voidable
14.13by the owner for lack of consideration until the time the proceeds are tendered to and
14.14accepted by the owner. A failure to give written notice of the right of rescission hereunder
14.15shall toll the right of rescission until 30 days after the written notice of the right of
14.16rescission has been given.
14.17    Subd. 11. Fee computation. Any fee paid by a provider, party, individual, or an
14.18owner to a broker in exchange for services provided to the owner pertaining to a life
14.19settlement contract shall be computed as a percentage of the offer obtained, not the face
14.20value of the policy. Nothing in this section shall be construed as prohibiting a broker from
14.21reducing such broker's fee below this percentage if the broker so chooses.
14.22    Subd. 12. Broker's disclosure. The broker shall disclose to the owner anything of
14.23value paid or given to a broker which relates to a life settlement contract.
14.24    Subd. 13. Prohibition; entry into life settlement contract. No person at any time
14.25prior to, or at the time of, the application for, or issuance of, a policy, or during a two-year
14.26period commencing with the date of issuance of the policy, shall enter into a life settlement
14.27contract regardless of the date the compensation is to be provided and regardless of the
14.28date the assignment, transfer, sale, devise, bequest, or surrender of the policy is to occur.
14.29This prohibition shall not apply if the owner certifies to the provider that:
14.30(1) the policy was issued upon the owner's exercise of conversion rights arising out
14.31of a group or individual policy, provided the total of the time covered under the conversion
14.32policy plus the time covered under the prior policy is at least 24 months. The time covered
14.33under a group policy must be calculated without regard to a change in insurance carriers,
14.34provided the coverage has been continuous and under the same group sponsorship;
15.1(2) the owner submits independent evidence to the provider that one or more of the
15.2following conditions have been met within the two-year period:
15.3(i) the owner or insured is terminally or chronically ill;
15.4(ii) the owner or insured disposes of his ownership interests in a closely held
15.5corporation, pursuant to the terms of a buyout or other similar agreement in effect at the
15.6time the insurance policy was initially issued;
15.7(iii) the owner's spouse dies;
15.8(iv) the owner divorces the owner's spouse;
15.9(v) the owner retires from full-time employment;
15.10(vi) the owner becomes physically or mentally disabled and a physician determines
15.11that the disability prevents the owner from maintaining full-time employment;
15.12(vii) a final order, judgment, or decree is entered by a court of competent jurisdiction,
15.13on the application of a creditor of the owner, adjudicating the owner bankrupt or insolvent,
15.14or approving a petition seeking reorganization of the owner or appointing a receiver,
15.15trustee, or liquidator to all or a substantial part of the owner's assets; or
15.16(viii) the owner experienced a significant change in financial condition which was
15.17unexpected and which imperiled the owner's ability to pay premiums;
15.18(3) copies of the independent evidence required by clause (2) shall be submitted to
15.19the insurer when the provider submits a request to the insurer for verification of coverage.
15.20The copies shall be accompanied by a letter of attestation from the provider that the
15.21copies are true and correct copies of the documents received by the provider. Nothing
15.22in this section shall prohibit an insurer from exercising its right to contest the validity
15.23of any policy; and
15.24(4) if the provider submits to the insurer a copy of independent evidence provided
15.25for in clause (2), item (i), when the provider submits a request to the insurer to effect the
15.26transfer of the policy to the provider, the copy is deemed to establish that the settlement
15.27contract satisfies the requirements of this section.

15.28    Sec. 7. [60A.9582] PROHIBITED PRACTICES.
15.29It is unlawful for any person to:
15.30(1) enter into a life settlement contract if the person knows or reasonably should
15.31have known that the life insurance policy was obtained by means of a false, deceptive, or
15.32misleading application for a policy;
15.33(2) engage in any transaction, practice, or course of business if the person knows
15.34or reasonably should have known that the intent was to avoid the notice requirements
15.35of this section;
16.1(3) engage in any fraudulent act or practice in connection with any transaction
16.2relating to any settlement involving an owner who is a resident of this state;
16.3(4) if the person is a provider or broker, directly or indirectly, advertise, solicit,
16.4or otherwise promote the purchase of a new policy for the sole purpose of or with the
16.5primary emphasis on settling the policy;
16.6(5) if the person is providing premium financing to receive any proceeds, fees, or
16.7other consideration from the policy or owner of the policy that are in addition to the
16.8amounts required to pay principal, interest, and any costs or expenses incurred by the
16.9lender or borrower in connection with the premium finance agreement, except for the
16.10event of a default, unless either the default on the loan or transfer of the policy occurs
16.11pursuant to an agreement or understanding with any other person for the purpose of
16.12evading regulation under sections 60A.957 to 60A.9585;
16.13(6) with respect to any settlement contract or insurance policy and a broker,
16.14knowingly solicit an offer from, effectuate a life settlement contract with, or make a sale to
16.15any provider, financing entity, or related provider trust that is controlling, controlled by, or
16.16under common control with such broker unless the relationship is disclosed to the owner;
16.17(7) with respect to any life settlement contract or insurance policy and a provider,
16.18knowingly enter into a life settlement contract with a owner, if, in connection with such
16.19life settlement contract, anything of value will be paid to a broker that is controlling,
16.20controlled by, or under common control with such provider or the financing entity or
16.21related provider trust that is involved in such settlement contract unless the relationship is
16.22disclosed to the owner;
16.23(8) with respect to a provider, enter into a life settlement contract unless the life
16.24settlement promotional, advertising, and marketing materials, as may be prescribed by
16.25regulation, have been filed with the commissioner. In no event shall any marketing
16.26materials expressly reference that the insurance is "free" for any period of time. The
16.27inclusion of any reference in the marketing materials that would cause an owner to
16.28reasonably believe that the insurance is free for any period of time shall be considered a
16.29violation of this act;
16.30(9) with respect to any life insurance producer, insurance company, broker, or
16.31provider, make any statement or representation to the applicant or policyholder in
16.32connection with the sale or financing of a life insurance policy to the effect that the
16.33insurance is free or without cost to the policyholder for any period of time unless provided
16.34in the policy; or
16.35(10) if an insurer, to:
17.1(i) make any false or misleading statement for the purpose of dissuading an owner or
17.2insured from a life settlement contract; or
17.3(ii) engage in any transaction, act, or practice that restricts, limits, or impairs the
17.4lawful transfer of ownership, change of beneficiary, or assignment of a policy.

17.5    Sec. 8. [60A.9583] FRAUD PREVENTION AND CONTROL.
17.6    Subdivision 1. Fraudulent life settlement acts, interference and participation of
17.7convicted felons prohibited. (a) A person shall not commit a fraudulent life settlement
17.8act.
17.9(b) A person shall not knowingly and intentionally interfere with the enforcement of
17.10the provisions of sections 60A.957 to 60A.9585 or investigations of suspected or actual
17.11violations of sections 60A.957 to 60A.9585.
17.12(c) A person in the business of life settlements shall not knowingly or intentionally
17.13permit any person convicted of a felony involving dishonesty or breach of trust to
17.14participate in the business of life settlements.
17.15    Subd. 2. Fraud warning required. (a) Life settlement contracts and applications
17.16for life settlement contracts, regardless of the form of transmission, shall contain the
17.17following statement or a substantially similar statement:
17.18"Any person who knowingly presents false information in an application for
17.19insurance or life settlement contract is guilty of a crime and may be subject to fines
17.20and confinement in prison."
17.21(b) The lack of a statement as required in paragraph (a) does not constitute a defense
17.22in any prosecution for a fraudulent life settlement act.
17.23    Subd. 3. Mandatory reporting of fraudulent life settlement acts. (a) Any person
17.24engaged in the business of life settlements having knowledge or a reasonable belief that
17.25a fraudulent life settlement act is being, will be, or has been committed shall provide
17.26to the commissioner the information required by, and in a manner prescribed by, the
17.27commissioner.
17.28(b) Any other person having knowledge or a reasonable belief that a fraudulent life
17.29settlement act is being, will be, or has been committed may provide to the commissioner
17.30the information required by, and in a manner prescribed by, the commissioner.
17.31    Subd. 4. Immunity from liability. (a) No civil liability shall be imposed on and no
17.32cause of action shall arise from a person's furnishing information concerning suspected,
17.33anticipated, or completed fraudulent life settlement acts or suspected or completed
17.34fraudulent insurance acts, if the information is provided to or received from:
17.35(1) the commissioner or the commissioner's employees, agents, or representatives;
18.1(2) federal, state, or local law enforcement or regulatory officials or their employees,
18.2agents, or representatives;
18.3(3) a person involved in the prevention and detection of fraudulent life settlement
18.4acts or that person's agents, employees, or representatives;
18.5(4) any regulatory body or their employees, agents, or representatives, overseeing
18.6life insurance, life settlements, securities, or investment fraud;
18.7(5) the life insurer that issued the life insurance policy covering the life of the
18.8insured; or
18.9(6) the licensee and any agents, employees, or representatives.
18.10(b) Paragraph (a) shall not apply to statements made with actual malice. In an action
18.11brought against a person for filing a report or furnishing other information concerning a
18.12fraudulent life settlement act or a fraudulent insurance act, the party bringing the action
18.13shall plead specifically any allegation that paragraph (a) does not apply because the person
18.14filing the report or furnishing the information did so with actual malice.
18.15(c) A person identified in paragraph (a) shall be entitled to an award of attorney's
18.16fees and costs if the person is the prevailing party in a civil cause of action for libel,
18.17slander, or any other relevant tort arising out of activities in carrying out the provisions
18.18of sections 60A.957 to 60A.9585 and the party bringing the action was not substantially
18.19justified in doing so. For purposes of this section, a proceeding is "substantially justified"
18.20if it had a reasonable basis in law or fact at the time that it was initiated.
18.21(d) This section does not abrogate or modify common law or statutory privileges or
18.22immunities enjoyed by a person described in paragraph (a).
18.23    Subd. 5. Confidentiality. (a) The documents and evidence provided pursuant to
18.24subdivision 4 or obtained by the commissioner in an investigation of suspected or actual
18.25fraudulent life settlement acts shall be privileged and confidential and shall not be a public
18.26record and shall not be subject to discovery or subpoena in a civil or criminal action.
18.27(b) Paragraph (a) does not prohibit release by the commissioner of documents and
18.28evidence obtained in an investigation of suspected or actual fraudulent life settlement acts:
18.29(1) in administrative or judicial proceedings to enforce laws administered by the
18.30commissioner;
18.31(2) to federal, state, or local law enforcement or regulatory agencies, to an
18.32organization established for the purpose of detecting and preventing fraudulent life
18.33settlement acts or to the National Association of Insurance Commissioners; or
18.34(3) at the discretion of the commissioner, to a person in the business of life
18.35settlements that is aggrieved by a fraudulent life settlement act.
19.1(c) Release of documents and evidence under paragraph (b) does not abrogate or
19.2modify the privilege granted in paragraph (a).
19.3    Subd. 6. Other law enforcement or regulatory authority. Sections 60A.957 to
19.460A.9585 shall not:
19.5(1) preempt the authority or relieve the duty of other law enforcement or regulatory
19.6agencies to investigate, examine, and prosecute suspected violations of law;
19.7(2) preempt, supersede, or limit any provision of any state securities law or any rule,
19.8order, or notice issued thereunder;
19.9(3) prevent or prohibit a person from disclosing voluntarily information concerning
19.10life settlement fraud to a law enforcement or regulatory agency other than the insurance
19.11department; or
19.12(4) limit the powers granted elsewhere by the laws of this state to the commissioner
19.13or an insurance fraud unit to investigate and examine possible violations of law and to
19.14take appropriate action against wrongdoers.
19.15    Subd. 7. Life settlement antifraud initiatives. (a) Providers and brokers shall
19.16have in place antifraud initiatives reasonably calculated to detect, prosecute, and prevent
19.17fraudulent life settlement acts. At the discretion of the commissioner, the commissioner
19.18may order, or a licensee may request and the commissioner may grant, such modifications
19.19of the following required initiatives as necessary to ensure an effective antifraud program.
19.20The modifications may be more or less restrictive than the required initiatives so long as
19.21the modifications may reasonably be expected to accomplish the purpose of this section.
19.22Antifraud initiatives shall include:
19.23(1) fraud investigators, who may be provider or broker employees or independent
19.24contractors; and
19.25(2) an antifraud plan, which shall be submitted to the commissioner.
19.26(b) The antifraud plan shall include, but not be limited to:
19.27(1) a description of the procedures for detecting and investigating possible fraudulent
19.28life settlement acts and procedures for resolving material inconsistencies between medical
19.29records and insurance applications;
19.30(2) a description of the procedures for reporting possible fraudulent life settlement
19.31acts to the commissioner;
19.32(3) a description of the plan for antifraud education and training of underwriters
19.33and other personnel; and
19.34(4) a description or chart outlining the organizational arrangement of the antifraud
19.35personnel who are responsible for the investigation and reporting of possible fraudulent
20.1life settlement acts and investigating unresolved material inconsistencies between medical
20.2records and insurance applications.
20.3(c) Antifraud plans submitted to the commissioner are privileged and confidential,
20.4are not a public record, and are not subject to discovery or subpoena in a civil or criminal
20.5action.

20.6    Sec. 9. [60A.9584] PENALTIES.
20.7(a) It is a violation of sections 60A.957 to 60A.9585 for any person, provider,
20.8broker, or any other party related to the business of life settlements to commit a fraudulent
20.9life settlement act.
20.10(b) For criminal liability purposes, a person that commits a fraudulent life settlement
20.11act is guilty of committing insurance fraud and shall be subject to additional penalties
20.12under sections 60A.951 to 60A.956.
20.13(c) The commissioner shall be empowered to levy a civil penalty not exceeding
20.14$1,000 and the amount of the claim for each violation upon any person, including those
20.15persons and their employees licensed pursuant to sections 60A.957 to 60A.9587, who is
20.16found to have committed a fraudulent life settlement act or violated any other provision of
20.17sections 60A.957 to 60A.9585.
20.18(d) The license of a person licensed under sections 60A.957 to 60A.9585 that
20.19commits a fraudulent life settlement act shall be revoked for a period of at least one year.

20.20    Sec. 10. [60A.9585] UNFAIR TRADE PRACTICES.
20.21A violation of sections 60A.957 to 60A.9584 shall be considered an unfair trade
20.22practice pursuant to state law and subject to the penalties provided by state law.

20.23    Sec. 11. EFFECTIVE DATE.
20.24This act is effective August 1, 2009, and applies to policies issued on or after that
20.25date."