(a) A provider entering into a life settlement contract with any owner of a policy, wherein the insured is terminally or chronically ill, shall first obtain:

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Terms Used In Hawaii Revised Statutes 431C-33

  • Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
  • Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
  • Bequest: Property gifted by will.
  • Broker: means a person who, on behalf of an owner and for a fee, commission, or other valuable consideration, offers or attempts to negotiate life settlement contracts between an owner and providers, represents only the owner, and owes a fiduciary duty to the owner to act according to the owner's instructions, and in the best interest of the owner, notwithstanding the manner in which the broker is compensated. See Hawaii Revised Statutes 431C-2
  • Chronically ill: means :

    (1) Being unable to perform at least two activities of daily living, such as eating, toileting, transferring, bathing, dressing, or continence;

    (2) Requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment; or

    (3) Having a level of disability similar to that described in paragraph (1) as determined by the United States Secretary of Health and Human Services. See Hawaii Revised Statutes 431C-2

  • Commissioner: means the insurance commissioner. See Hawaii Revised Statutes 431C-2
  • Contract: A legal written agreement that becomes binding when signed.
  • Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
  • Devise: To gift property by will.
  • Escrow: Money given to a third party to be held for payment until certain conditions are met.
  • Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
  • Insured: means the person covered under the policy being considered for sale in a life settlement contract. See Hawaii Revised Statutes 431C-2
  • Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
  • Life expectancy: means the arithmetic mean of the number of months the insured under the policy to be settled can be expected to live as determined by a life expectancy company considering medical records and appropriate experiential data. See Hawaii Revised Statutes 431C-2
  • Life insurance producer: means any person licensed in this State as a resident or nonresident insurance producer who has received qualification for life insurance pursuant to article 9A of chapter 431. See Hawaii Revised Statutes 431C-2
  • Life settlement contract: means :

    (a)

    (1) A written agreement entered into between a provider and an owner, establishing the terms under which compensation or any thing of value will be paid, which compensation or thing of value is less than the expected death benefit of the owner's policy or certificate, in return for the owner's assignment, transfer, sale, devise, or bequest of the death benefit or any portion of the policy or certificate for compensation, where the minimum value of the contract is greater than a cash surrender value or accelerated death benefit available under the policy or certificate at the time of an application for a life settlement contract;

    (2) The transfer for compensation or value of ownership or beneficial interest in a trust or other entity that owns such policy or certificate if the trust or other entity was formed or availed of for the principal purpose of acquiring one or more life insurance contracts, which life insurance contract insures the life of a person residing in this State; or

    (3)

    (A) A written agreement for a loan or other lending transaction, secured primarily by an individual or group policy; or

    (B) A premium finance loan made for a policy on or before the date of issuance of the policy where:

    (i) The loan proceeds are not used solely to pay premiums for the policy and any costs or expenses incurred by the lender or the borrower in connection with the financing;

    (ii) The owner receives on the date of the premium finance loan a guarantee of the future life settlement value of the policy; or

    (iii) The owner agrees on the date of the premium finance loan to sell the policy or any portion of its death benefit on any date following the issuance of the policy. See Hawaii Revised Statutes 431C-2

  • month: means a calendar month; and the word "year" a calendar year. See Hawaii Revised Statutes 1-20
  • Owner: means the owner of a policy or a certificate holder under a group policy, with or without a terminal illness, who enters or seeks to enter into a life settlement contract, but shall not be limited to an owner of a policy or a certificate holder under a group policy that insures the life of an individual with a terminal or chronic illness or condition, except where specifically addressed. See Hawaii Revised Statutes 431C-2
  • Person: means any natural person or legal entity, including but not limited to a partnership, limited liability company, association, trust, or corporation. See Hawaii Revised Statutes 431C-2
  • Policy: means an individual or group policy, certificate, contract, or arrangement of life insurance owned by a resident of this State, regardless of whether delivered or issued for delivery in this State. See Hawaii Revised Statutes 431C-2
  • Provider: means a person, other than an owner, who enters into or effectuates a life settlement contract with an owner. See Hawaii Revised Statutes 431C-2
  • Rescission: The cancellation of budget authority previously provided by Congress. The Impoundment Control Act of 1974 specifies that the President may propose to Congress that funds be rescinded. If both Houses have not approved a rescission proposal (by passing legislation) within 45 days of continuous session, any funds being withheld must be made available for obligation.
  • Right of rescission: Right to cancel, within three business days, a contract that uses the home of a person as collateral, except in the case of a first mortgage loan. There is no fee to the borrower, who receives a full refund of all fees paid. The right of rescission is guaranteed by the Truth in Lending Act (TILA). Source: OCC
  • Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
  • Terminally ill: means having an illness or sickness that can reasonably be expected to result in death in twenty-four months or less. See Hawaii Revised Statutes 431C-2
  • Trust account: A general term that covers all types of accounts in a trust department, such as estates, guardianships, and agencies. Source: OCC
  • Trustee: A person or institution holding and administering property in trust.
(1) If the owner is the insured, a written statement from a licensed attending physician that the owner is of sound mind and under no constraint or undue influence to enter into a life settlement contract; and
(2) A document in which the insured consents to the release of the insured’s medical records to a provider, broker, or insurance producer and, if the policy was issued less than two years from the date of application for a life settlement contract, to the insurance company that issued the policy.

The provider, broker, or its authorized representative shall be limited to contact for the purpose of determining the owner’s health status or to verify the owner’s address, once every three months if the insured has a life expectancy of more than one year, and no more than once per month if the insured has a life expectancy of one year or less.

(b) The insurer shall respond to a request for verification of coverage submitted by a provider, broker, or life insurance producer, not later than thirty calendar days of the date the request is received. The request for verification of coverage shall be made on a form approved by the commissioner. The insurer shall complete and issue the verification of coverage or indicate in which respects it is unable to respond. In its response, the insurer shall indicate whether, based on the medical evidence and documents provided, the insurer intends to pursue an investigation at this time regarding the validity of the insurance contract.
(c) Before or at the time of execution of the life settlement contract, the provider shall obtain a witnessed document in which the owner:

(1) Consents to the life settlement contract;
(2) Represents that the owner has a full and complete understanding of the life settlement contract;
(3) Represents that the owner has a full and complete understanding of the benefits of the policy;
(4) Acknowledges that the owner is entering into the life settlement contract freely and voluntarily; and
(5) For persons with a chronic or terminal illness or condition, acknowledges that the insured has a chronic or terminal illness and that the chronic or terminal illness or condition was diagnosed after the policy was issued.
(d) An insurer shall not unreasonably delay effecting change of ownership or beneficiary in connection with any life settlement contract lawfully entered into in this State or with a resident of this State.
(e) If a broker or life insurance producer performs any of the activities required of the provider under this section, the provider shall be deemed to have fulfilled the requirements of this section.
(f) If a broker performs those verification of coverage activities required of the provider, the provider is deemed to have performed those activities.
(g) Within twenty days after an owner executes the life settlement contract, the provider shall give written notice to the insurer that issued that policy that the policy has become subject to a life settlement contract. The notice shall be accompanied by the documents required by section 431C-32(c).
(h) All life settlement contracts entered into in this State shall provide that the owner may rescind the contract on or before fifteen days after the date it is executed by all parties thereto. Rescission, if exercised by the owner, is effective only if both notice of the rescission is given, and the owner repays all proceeds and any premiums, loans, and loan interest paid on account of the provider within the rescission period. If the insured dies during the rescission period, the contract shall be deemed to have been rescinded subject to repayment by the owner or the owner’s estate of all proceeds and any premiums, loans, and loan interest to the provider.
(i) Within three business days after receipt from the owner of documents to effect the transfer of the policy, the provider shall pay the proceeds of the settlement to an escrow or trust account managed by a trustee or escrow agent in a state or federally chartered financial institution pending acknowledgment of the transfer by the issuer of the policy. The trustee or escrow agent shall be required to transfer the proceeds due to the owner within three business days of acknowledgment of the transfer from the insurer.
(j) Failure to tender the life settlement contract proceeds to the owner by the date disclosed to the owner shall render the contract voidable by the owner for lack of consideration until the time the proceeds are tendered to and accepted by the owner. A failure to give written notice of the right of rescission hereunder shall toll the right of rescission until thirty days after the written notice of the right of rescission has been given.
(k) Any fee paid by a provider, party, individual, or an owner to a broker in exchange for services provided to the owner pertaining to a life settlement contract shall be computed as a percentage of the offer obtained, not the face value of the policy. Nothing in this section shall be construed as prohibiting a broker from reducing such broker’s fee below this percentage if the broker so chooses.
(l) The broker shall disclose to the owner anything of value paid or given to a broker and that relates to a life settlement contract.
(m) No person at any time prior to or at the time of the application for, or issuance of, a policy, or during a two-year period commencing with the date of issuance of the policy, shall enter into a life settlement contract regardless of the date the compensation is to be provided and regardless of the date the assignment, transfer, sale, devise, bequest, or surrender of the policy is to occur. This prohibition shall not apply if the owner certifies to the provider that:

(1) The policy was issued upon the owner’s exercise of conversion rights arising out of a group or individual policy; provided that the total of the time covered under the conversion policy plus the time covered under the prior policy is at least two years. The time covered under a group policy shall be calculated without regard to a change in insurance carriers; provided further that the coverage has been continuous and under the same group sponsorship; or
(2) The owner submits independent evidence to the provider that one or more of the following conditions have been met within the two-year period:

(A) The owner or insured is chronically or terminally ill;
(B) The owner or insured disposes of ownership interests in a closely-held corporation, pursuant to the terms of a buyout or other similar agreement in effect at the time the policy was initially issued;
(C) The owner’s spouse dies;
(D) The owner divorces the owner’s spouse;
(E) The owner retires from full-time employment;
(F) The owner becomes physically or mentally disabled and a physician determines that the disability prevents the owner from maintaining full-time employment; or
(G) A final order, judgment, or decree is entered by a court of competent jurisdiction, on the application of a creditor of the owner, adjudicating the owner bankrupt or insolvent, or approving a petition seeking reorganization of the owner or appointing a receiver, trustee, or liquidator to all or a substantial part of the owner’s assets.

Copies of the independent evidence required by paragraph (2) shall be submitted to the insurer when the provider submits a request to the insurer for verification of coverage. The copies shall be accompanied by a letter of attestation from the provider that the copies are true and correct copies of the documents received by the provider. Nothing in this section shall prohibit an insurer from exercising its right to contest the validity of any policy.

If the provider submits to the insurer a copy of independent evidence required by paragraph (2) when the provider submits a request to the insurer to effect the transfer of the policy to the provider, the copy shall be deemed to establish that the life settlement contract satisfies the requirements of this section.

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