Topic: State Legislative Developments

New Insurance Platforms Arguably Require Producer Licenses

New York Associate Zachary Lerner authored a Law360 article on commission sharing, referral fee and producer licensing issues.  Within the article, Mr. Lerner identifies important issues for insurers and producers to consider, both in the admitted and surplus lines insurance markets, with respect to the sharing of commissions and whether proper licenses should be obtained in light of the NAIC’s recent comments regarding Lemonade Insurance Company’s application-based platform. The complete Law360 article is available here (subscription may be...

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The Pruco Florida Supreme Court decision has been legislatively reversed by a recent amendment to the Florida Viatical Settlement Act

The Florida Supreme Court Pruco advisory opinion, Wells Fargo Bank, N.A. v. Pruco Life Ins. Co., 200 So. 3d at 1203 & 1206-07, to the United States Eleventh Circuit Court of Appeals held that an insurer may not challenge the validity of a Florida life insurance policy, even on lack of insurable interest under Section 627.404 or STOLI grounds, after the expiration of Florida’s two-year contestability period provided in Section 627.455 – Florida Statutes. In Pruco the Florida Supreme Court determined that the policies at issue were stranger initiated life insurance policies (STOLI) policies that nevertheless satisfied the Florida insurable interest statute.  “Accordingly, under the plain language of [the two-year contestability period statute] a policy that has the required insurable interest at its inception, even where the interest is created as a result of a STOLI scheme, is incontestable after two years.”  The Supreme Court continued to say that even though it “might be wise public policy [to remove the two-year bar], that decision is for the Florida Legislature, not this Court”. At the time of the Pruco decision, Florida statutory law did not define a STOLI scheme or practice.  However, in the recent amendment to the Florida Viatical Settlement Act, STOLI practices are now defined. See Section 626.99289. In the legislative final bill analysis, the writer for the Florida House of Representatives wrote, “In response to the Pruco...

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New Notice Requirement for Insurers under Florida’s Viatical Settlement Act

Florida has recently adopted amendments to its Viatical Settlement Act. One of the new provisions, Section 626.99292 Notice to life insurance policyholders, provides: “(1) A life insurer shall provide an individual life insurance policyholder with a statement informing him or her that if he or she is considering making changes in the status of his or her policy, he or she should consult with a licensed insurance or financial advisor.  The statement may accompany or be included in notices or mailings otherwise provided to the policyholder. “(2) The statement must also advise the policyholder that he or she may contact the department for more information and include a website address or other location or manner by which the policyholder may contact the department.” The following may represent unresolved issues with respect to this required notice provision: Individuals – Not life insurance trust, family limited partnerships, family limited liability companies, business  entities, etc.? Policyholder – Who is the policyholder of a group life insurance policy for purposes of this notice requirement?  Typically the group policyholder is not an individual, although there are individual life insurance certificate holders. ‘a statement’; ‘The statement’  – One statement required and only one?  Although the language seems clear on its face that only one notice should be required, some analysts of the provision have suggested that there is some ambiguity with the number of times...

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Florida may have outlawed the secondary sale of policies if at any time during the five year period post issuance there was a loan secured by the policy

Florida has recently adopted amendments to its Viatical Settlement Act. One of the new provisions, Section 626.99287 Contestability of viaticated policies, provides as follows: (2) Except as hereinafter provided [certain life changing events, such as death of a spouse, divorce, retirement from full time employment, terminal or chronic illness, mental disability, bankruptcy, unexpected adverse change in financial situation, etc.], if a viatical settlement policy is subject to a loan secured directly or indirectly by an interest in the policy within a 5-year period commencing on the date of issuance of the policy or certificate, the viatical settlement contract is void and unenforceable by either party. At first blush this provision would seem to be patterned after the NAIC Viatical Settlements Model Act which provides: Section 11. Prohibited Practices A. It is a violation of this Act for any person to enter into a viatical settlement contract at any time prior to the application or issuance of a policy which is the subject of viatical settlement contract or within a five-year period commencing with the date of issuance of the insurance policy or certificate unless the viator certifies to the viatical settlement provider that one or more of the following conditions [certain life changing events] have been met within the five-year period: Thus, under the NAIC Model Act, once five years passes from the issuance of the life insurance policy,...

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Florida may have outlawed legitimate premium finance lending

Florida has recently adopted amendments to its Viatical Settlement Act. One of the new provisions, Section 626.9911 (9), defines a prohibited stranger-originated life insurance practice as: (9) “Stranger-originated life insurance practice” means an act, practice, arrangement, or agreement to initiate a life insurance policy for the benefit of a third-party investor who, at the time of policy origination, has no insurable interest in the insured.  Stranger-originated life insurance practices include, but are not limited to: (a) The purchase of a life insurance policy with resources or guarantees from or through a person who, at the time of such policy’s inception, could not lawfully initiate the policy and the execution of a verbal or written arrangement or agreement to directly or indirectly transfer the ownership of such policy or policy benefits to a third party. (b) The creation of a trust or other entity that has the appearance of an insurable interest in order to initiate policies for investors, in violation of insurable interest laws and the prohibition against wagering on life. The NCOIL Model Act, Section 2(Y), defines STOLI as follows: ‘Stranger-Originated Life Insurance’ or ‘STOLI’ is a practice or plan to initiate a life insurance policy for the benefit of a third party investor who, at the time of policy origination, has no insurable interest in the insured.  STOLI practices include but are not limited to cases in...

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