1-1 By: Maxey (Senate Sponsor - Carona) H.B. No. 792
1-2 (In the Senate - Received from the House May 10, 1999;
1-3 May 10, 1999, read first time and referred to Committee on Economic
1-4 Development; May 14, 1999, reported favorably by the following
1-5 vote: Yeas 7, Nays 0; May 14, 1999, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to the regulation of viatical settlement agreements and
1-9 life settlement agreements.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. The heading of Article 3.50-6A, Insurance Code,
1-12 is amended to read as follows:
1-13 Art. 3.50-6A. VIATICAL SETTLEMENTS AND LIFE SETTLEMENTS
1-14 SECTION 2. Section 1, Article 3.50-6A, Insurance Code, is
1-15 amended by adding Subdivision (3) to read as follows:
1-16 (3) "Life settlement" means an agreement that is
1-17 solicited, negotiated, offered, entered into, delivered, or issued
1-18 for delivery in this state under which a person pays compensation
1-19 or anything of value that is less than the expected death benefit
1-20 of a policy insuring the life of an individual who does not have a
1-21 catastrophic or life-threatening illness or condition in return for
1-22 the policy owner's or certificate holder's assignment, transfer,
1-23 sale, devise, or bequest of the death benefit under or ownership of
1-24 the policy.
1-25 SECTION 3. Section 2, Article 3.50-6A, Insurance Code, is
1-26 amended by amending Subsections (a), (b), and (c) and adding
1-27 Subsections (e) and (f) to read as follows:
1-28 (a) The purpose of this article is to register persons
1-29 engaged in the business of viatical settlements or the business of
1-30 life settlements and to provide consumer protection for a person
1-31 [with a catastrophic or life-threatening illness or condition] who
1-32 may sell or otherwise transfer the person's life insurance policy.
1-33 (b) The commissioner shall adopt reasonable rules to
1-34 implement this article as it relates to viatical settlements and as
1-35 it relates to life settlements.
1-36 (c) The rules adopted by the commissioner under this article
1-37 must include rules governing:
1-38 (1) registration of a person engaged in the business
1-39 of viatical settlements;
1-40 (2) registration of a person engaged in the business
1-41 of life settlements;
1-42 (3) approval of contract forms;
1-43 (4) [(3)] disclosure requirements;
1-44 (5) [(4)] prohibited practices relating to:
1-45 (A) unfair discrimination in the provision of
1-46 viatical settlements or life settlements; and
1-47 (B) referral fees paid by persons engaged in the
1-48 business of viatical settlements or life settlements;
1-49 (6) [(5)] the assignment or resale of life insurance
1-50 policies; [and]
1-51 (7) [(6)] the maintenance of appropriate
1-52 confidentiality of personal and medical information; and
1-53 (8) the responsibility of a registrant to ensure
1-54 compliance with this article and rules relating to viatical
1-55 settlements or life settlements after the registration is revoked,
1-56 is suspended, or otherwise lapses.
1-57 (e) The commissioner may not adopt rules establishing prices
1-58 or fees for the sale or purchase of life settlements. This
1-59 subsection does not prohibit the commissioner from adopting rules
1-60 addressing unjust prices or fees for the sale or purchase of life
1-61 settlements.
1-62 (f) The commissioner may not adopt rules that require
1-63 regulation of the passive financial actions of an institutional
1-64 investor or accredited investor, as those terms are defined under
2-1 regulations adopted under the Securities Act of 1933 (15 U.S.C.
2-2 Section 77a et seq.).
2-3 SECTION 4. Sections 3 and 4, Article 3.50-6A, Insurance
2-4 Code, are amended to read as follows:
2-5 Sec. 3. APPLICATION OF OTHER INSURANCE LAWS. Articles 1.10,
2-6 1.10A, 1.10C, 1.10D, 1.10E, 1.19, 1.19-1, 1.24, and 21.21 of this
2-7 code apply to a person engaged in the business of viatical
2-8 settlements or life settlements. [ENFORCEMENT. For a violation of
2-9 a rule adopted under this article, the commissioner may take any
2-10 action against a person engaged in the business of viatical
2-11 settlements that may be taken under:]
2-12 [(1) Articles 1.10 and 1.10E of this code; or]
2-13 [(2) Article 1.10D of this code against a person
2-14 engaged in a fraudulent insurance act.]
2-15 Sec. 4. DENIAL, SUSPENSION, OR REVOCATION OF REGISTRATION;
2-16 ENFORCEMENT. (a) The commissioner may suspend or revoke the
2-17 registration of a registrant or deny an application for
2-18 registration under this article if the commissioner finds that the
2-19 registrant or applicant, individually or through any officer,
2-20 director, or shareholder of the registrant or applicant:
2-21 (1) wilfully violates this article, an applicable
2-22 provision of this code or another insurance law of this state, or a
2-23 rule adopted under this article or under such a provision;
2-24 (2) intentionally makes a material misstatement in the
2-25 application for registration under this article;
2-26 (3) obtains, or attempts to obtain, registration under
2-27 this article by fraud or misrepresentation;
2-28 (4) misappropriates, converts to the registrant's or
2-29 applicant's own use, or illegally withholds money belonging to a
2-30 party to a viatical settlement or life settlement;
2-31 (5) is guilty of fraudulent or dishonest practices;
2-32 (6) materially misrepresents the terms and conditions
2-33 of business conducted under this article or any other provision of
2-34 this code or other insurance laws of this state;
2-35 (7) makes or issues, or causes to be made or issued, a
2-36 statement misrepresenting or making incomplete comparisons
2-37 regarding the terms or conditions of any business conducted under
2-38 this article; or
2-39 (8) is convicted of a misdemeanor involving moral
2-40 turpitude or criminal fraud or a felony.
2-41 (b) An applicant or registrant whose registration has been
2-42 denied, suspended, or revoked under this section may not file
2-43 another application for registration before the first anniversary
2-44 of the effective date of the denial, suspension, or revocation or,
2-45 if judicial review of the denial, suspension, or revocation is
2-46 sought, the first anniversary of the date of the final court order
2-47 or decree affirming the action. An application filed after that
2-48 period may be denied by the commissioner unless the applicant shows
2-49 good cause why the denial, suspension, or revocation of the
2-50 previous license should not bar the issuance of a new license.
2-51 (c) In addition to an action taken under Subsections (a)
2-52 and (b) of this section, the commissioner may take against a person
2-53 engaged in the business of viatical settlements or life settlements
2-54 who violates this article, an applicable provision of this code or
2-55 another insurance law of this state, or a rule adopted under this
2-56 article or under such a provision any action that the commissioner
2-57 may take against a person engaged in the business of insurance who
2-58 violates a statute or rule. [RELATION TO OTHER INSURANCE LAWS.
2-59 Except as otherwise provided by this article or by rules adopted
2-60 under this article, this code and any other insurance law of this
2-61 state do not apply to the business of viatical settlements.]
2-62 SECTION 5. The change in law made by this Act applies only
2-63 to conduct that occurs on or after the effective date of this Act.
2-64 Conduct that occurs before the effective date of this Act is
2-65 governed by the law in effect when the conduct occurred, and that
2-66 law is continued in effect for that purpose.
2-67 SECTION 6. This Act takes effect September 1, 1999.
2-68 SECTION 7. The importance of this legislation and the
2-69 crowded condition of the calendars in both houses create an
3-1 emergency and an imperative public necessity that the
3-2 constitutional rule requiring bills to be read on three several
3-3 days in each house be suspended, and this rule is hereby suspended.
3-4 * * * * *