Tenn. Comp. R. & Regs. 0780-01-71-.04 - DISCIPLINARY GROUNDS

(1) Pursuant to the provisions of T.C.A. § 56-50-104, the following are deemed "fraudulent or dishonest practices" by a licensee, applicant for renewal, or any officer, partner, member or key management personnel, without limiting those terms to the practices specified herein:

(a) Soliciting or encouraging a person to apply for a life insurance policy for the purpose of entering into a life settlement contract based upon the newly obtained life insurance policy;

(b) Entering into a life settlement contract based upon a life insurance contract within a two-year period commencing with the date of issuance of the insurance policy or certificate unless the owner certifies to the life settlement provider that one or more of the following conditions have been met within the two-year period:

1. The policy was issued upon the owner's exercise of conversion rights arising out of a group or individual policy, provided the total of the time covered under the conversion policy plus the time covered under the prior policy is at least twenty-four (24) months. The time covered under a group policy shall be calculated without regard to any change in insurance carriers, provided the coverage has been continuous and under the same group sponsorship;

2.

(i) The owner submits independent evidence to the life settlement provider that one or more of the following conditions have been met within the two-year period:

(I) The owner or insured was diagnosed as terminally or chronically ill after the issuance of the policy;

(II) The owner's spouse has died;

(III) The owner divorces his or her spouse;

(IV) The owner retires from full-time employment;

(V) The owner becomes physically or mentally disabled and a physician determines that the disability prevents the owner from maintaining full-time employment;

(VI) The owner experiences a significant decrease in income that is unexpected and that impairs the owner's reasonable ability to pay the policy premiums;

(VII) The owner disposes of his or her ownership interests in a closely held corporation.

(ii) Copies of the independent evidence described in Paragraph (i) of this subsection and documents required by § 56-50-109(a) shall be submitted to the insurer when the life settlement provider submits a request to the insurer for verification of coverage. The copies shall be accompanied by a letter of attestation from the life settlement provider that the copies are true and correct copies of the documents received by the life settlement provider.

3. If the life settlement provider submits to the insurer a copy of the owner's or insured's certification described in this subsection (b) when the provider submits a request to the insurer to effect the transfer of the policy or certificate to the life settlement provider, the copy shall be deemed to conclusively establish that the life settlement contract satisfies the requirements of this subsection and the insurer shall timely respond to the request.

(c) Entering into a life settlement contract based upon a life insurance policy which was issued to an owner as the result of an application which contained untrue information regarding the insured's medical history or health status;

(d) Encouraging or soliciting a person to provide untrue information regarding the person's medical history or health status;

(e) Accepting funds from individual investor sources to be used as consideration for a life settlement contract prior to identifying a life insurance policy available for settlement;

(f) Representing to any person that the life insurance policy upon which a life settlement contract is based, is guaranteed by the Tennessee Life and Health Guaranty Fund;

(g) Presenting, causing to be presented or preparing false material information, or concealing material information, as part of, in support of or concerning a fact material to one or more of the following:

1. An application for the issuance of a life settlement contract or insurance policy;

2. The underwriting of a life settlement contract or insurance policy;

3. A claim payment or benefit pursuant to a life settlement contract or insurance policy;

4. Premiums paid on a life insurance policy;

5. Payments and changes in ownership or beneficiary made in accordance with the terms of a life settlement contract or life insurance policy;

6. The reinstatement or conversion of a life insurance policy;

7. In the solicitation, offer, effectuation or sale of a life settlement contract or life insurance policy;

8. The issuance of written evidence of a life settlement contract or life insurance policy; or

9. A financing transaction.

(h) Removing, concealing, altering, destroying or sequestering from the commissioner the assets or records of a licensee, applicant for renewal, or other person engaged in the business of life settlements;

(i) Misrepresenting or concealing the financial condition of a licensee, applicant for renewal, financing entity, insurer or other person.

Notes

Tenn. Comp. R. & Regs. 0780-01-71-.04

Original rule filed February 7, 2003; effective April 23, 2003.

Authority: T.C.A. §§ 56-1-204, 56-12-218, 56-50-104, 56-50-106, 56-50-107, and 56-50-110.