It is a violation of this chapter for any person, provider, broker, or any other party related to the business of life settlements, to commit a fraudulent life settlement act.

For the purposes of this part, “fraudulent life settlement act” includes:

(1) Acts or omissions committed by any person who, knowingly and with intent to defraud, for the purpose of depriving another of property or for pecuniary gain, commits or permits its employees or agents to engage in acts, including but not limited to:

Terms Used In Hawaii Revised Statutes 431C-42

  • 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
  • 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
  • Business of life settlements: means an activity involved in but not limited to offering to enter into the soliciting, negotiating, procuring, effectuating, monitoring, or tracking of life settlement contracts. See Hawaii Revised Statutes 431C-2
  • Certificate: means a certificate issued pursuant to a group policy. 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.
  • Embezzlement: In most states, embezzlement is defined as theft/larceny of assets (money or property) by a person in a position of trust or responsibility over those assets. Embezzlement typically occurs in the employment and corporate settings. Source: OCC
  • 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.
  • Financing entity: means an underwriter, placement agent, lender, purchaser of securities, purchaser of a policy or certificate from a provider, credit enhancer, or any entity that has a direct ownership in a policy or certificate that is the subject of a life settlement contract, but:

    (1) Whose principal activity related to the transaction is providing funds to effect the life settlement contract or purchase of one or more policies; and

    (2) Who has an agreement in writing with one or more providers to finance the acquisition of life settlement contracts. See Hawaii Revised Statutes 431C-2

  • Fraud: Intentional deception resulting in injury to another.
  • 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 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

  • 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
  • Sequester: To separate. Sometimes juries are sequestered from outside influences during their deliberations.
  • 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.
  • Stranger-originated life insurance: means a practice or plan to initiate a policy for the benefit of a third party investor who, at the time of policy origination, has no insurable interest in the insured, and includes:

    (1) Arrangements in which life insurance is purchased with resources or guarantees from or through a person or entity who at the time of policy inception, could not lawfully initiate the policy by oneself or itself, and where, at the time of inception, there is an arrangement or agreement, whether verbal or written, to directly or indirectly transfer the ownership of the policy, the policy benefits, or both, to a third party; and

    (2) Trusts created to give the appearance of insurable interest and used to initiate policies for investors. See Hawaii Revised Statutes 431C-2

(A) Presenting, causing to be presented, or preparing with knowledge and belief that it will be presented to or by a provider, premium finance lender, broker, insurer, insurance producer, or any other person, 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:

(i) An application for the issuance of a policy or life settlement contract;
(ii) The underwriting of a policy or life settlement contract;
(iii) A claim for payment or benefit pursuant to a policy or life settlement contract;
(iv) Premiums paid on a policy;
(v) Payments and changes in ownership or beneficiary made in accordance with the terms of a policy or life settlement contract;
(vi) The reinstatement or conversion of a policy;
(vii) The solicitation, offer to enter into, or effectuation of a policy or life settlement contract;
(viii) The issuance of written evidence of a policy or life settlement contract;
(ix) Any application for or the existence of or any payments related to a loan secured directly or indirectly by any interest in a policy; or
(x) Entering into any practice or plan that involves stranger-originated life insurance;
(B) Failing to disclose to the insurer, where the insurer requests such disclosure, that the prospective insured has undergone a life expectancy evaluation by any person or entity other than the insurer or its authorized representatives in connection with the issuance of the policy;
(C) Employing any device, scheme, or artifice to defraud in the business of life settlements; or
(D) In the solicitation, application, or issuance of a policy, employing any device, scheme, or artifice in violation of state insurable interest laws;
(2) Acts or omissions committed by any person who, in the furtherance of a fraud or to prevent the detection of a fraud, commits or permits its employees or its agents to engage in to:

(A) Remove, conceal, alter, destroy, or sequester from the commissioner the assets or records of a licensee or other person engaged in the business of life settlements;
(B) Misrepresent or conceal the financial condition of a licensee, financing entity, insurer, or other person;
(C) Transact the business of life settlements in violation of laws requiring a license, certificate of authority, or other legal authority for the transaction of the business of life settlements;
(D) File with the commissioner or the chief insurance regulatory official of another jurisdiction a document containing false information or otherwise concealing information about a material fact from the commissioner;
(E) Engage in embezzlement, theft, misappropriation, or conversion of moneys, funds, premiums, credits, or other property of a provider, insurer, insured, owner, insurance, policy owner, or any other person engaged in the business of life settlements or insurance;
(F) Knowingly and with intent to defraud, enter into, broker, or otherwise deal in a life settlement contract, the subject of which is a policy that was obtained by presenting false information concerning any fact material to the policy or by concealing, for the purpose of misleading another, information concerning any fact material to the policy, where the owner or the owner’s agent intended to defraud the policy’s issuer;
(G) Attempt to commit, assist, aid, or abet in the commission of, or conspire to commit the acts or omissions specified in this section; or
(H) Misrepresent the state of residence of an owner to be a state or jurisdiction that does not have a law substantially similar to this chapter for the purpose of evading or avoiding the provisions of this chapter.
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