§ 23-81-814 - Fraud prevention and control.
23-81-814. Fraud prevention and control.
(a) Fraudulent Life Settlement Act, Interference, and Participation of Convicted Felons Prohibited.
(1) A person shall not commit a fraudulent life settlement act.
(2) A person shall not knowingly and intentionally interfere with the enforcement of this subchapter or investigations of suspected or actual violations of this subchapter.
(3) A person in the business of life settlements shall not knowingly or intentionally permit any person convicted of a felony involving dishonesty or breach of trust to participate in the business of life settlements.
(b) Fraud Warning Required.
(1) Life settlement contracts and applications for life settlement contracts, regardless of the form of transmission, shall contain the following statement or a substantially similar statement:
"Any person who knowingly presents false information in an application for insurance or life settlement contract is guilty of a crime and may be subject to fines and confinement in prison."
(2) The lack of a statement as required in subdivision (b)(1) of this section does not constitute a defense in any prosecution for a fraudulent life settlement act.
(c) Mandatory Reporting of Fraudulent Life Settlement Act.
(1) Any person engaged in the business of life settlements having knowledge or a reasonable belief that a fraudulent life settlement act is being, will be, or has been committed shall provide to the Insurance Commissioner the information required by and in a manner prescribed by the commissioner.
(2) Any other person having knowledge or a reasonable belief that a fraudulent life settlement act is being, will be, or has been committed may provide to the commissioner the information required by and in a manner prescribed by the commissioner.
(d) Immunity from Liability.
(1) Civil liability shall not be imposed on and a cause of action shall not arise from a person's furnishing information concerning suspected, anticipated, or completed fraudulent life settlement acts or suspected or completed fraudulent insurance acts if the information is provided to or received from:
(A) The commissioner or the commissioner's employees, agents, or representatives;
(B) Federal, state, or local law enforcement or regulatory officials or their employees, agents, or representatives;
(C) A person involved in the prevention and detection of fraudulent life settlement acts or that person's agents, employees, or representatives;
(D) Any regulatory body or its employees, agents, or representatives overseeing life insurance, life settlements, securities, or investment fraud;
(E) The life insurer that issued the life insurance policy covering the life of the insured; or
(F) The licensee and any agents, employees, or representatives of the licensee.
(2) (A) Subdivision (d)(1) of this section does not apply to statements made with actual malice.
(B) In an action brought against a person for filing a report or furnishing other information concerning a fraudulent life settlement act or a fraudulent insurance act, the party bringing the action shall plead specifically any allegation that subdivision (d)(1) of this section does not apply because the person filing the report or furnishing the information did so with actual malice.
(3) (A) A person identified in subdivision (d)(1) of this section shall be entitled to an award of attorney's fees and costs if he or she is the prevailing party in a civil cause of action for libel, slander, or any other relevant tort arising out of activities in carrying out the provisions of this subchapter and the party bringing the action was not substantially justified in doing so.
(B) For purposes of this section, a proceeding is "substantially justified" if it had a reasonable basis in law or fact at the time that it was initiated.
(4) This section does not abrogate or modify common law or statutory privileges or immunities enjoyed by a person described in subdivision (d)(1) of this section.
(e) Confidentiality.
(1) The documents and evidence provided pursuant to subsection (d) of this section or obtained by the commissioner in an investigation of suspected or actual fraudulent life settlement acts shall be privileged and confidential, shall not be a public record, and shall not be subject to discovery or subpoena in a civil or criminal action.
(2) Subdivision (e)(1) of this section does not prohibit release by the commissioner of documents and evidence obtained in an investigation of suspected or actual fraudulent life settlement acts:
(A) In administrative or judicial proceedings to enforce laws administered by the commissioner;
(B) To federal, state, or local law enforcement or regulatory agencies, to an organization established for the purpose of detecting and preventing fraudulent life settlement acts, or to the National Association of Insurance Commissioners; or
(C) At the discretion of the commissioner, to a person in the business of life settlements that is aggrieved by a fraudulent life settlement act.
(3) Release of documents and evidence under subdivision (e)(2) of this section does not abrogate or modify the privilege granted in subdivision (e)(1) of this section.
(f) Other Law Enforcement or Regulatory Authority.
This subchapter does not:
(1) Preempt the authority or relieve the duty of other law enforcement or regulatory agencies to investigate, examine, and prosecute suspected violations of law;
(2) Preempt, supersede, or limit any provision of any state securities law or any rule, order, or notice issued under a state securities law;
(3) Prevent or prohibit a person from disclosing voluntarily information concerning life settlement fraud to a law enforcement or regulatory agency other than the State Insurance Department; or
(4) Limit the powers granted elsewhere by the laws of this state to the commissioner or an insurance fraud unit to investigate and examine possible violations of law and to take appropriate action against wrongdoers.
(g) Life Settlement Antifraud Initiatives.
(1) Providers and brokers shall have in place antifraud initiatives reasonably calculated to detect, prosecute, and prevent fraudulent life settlement acts. At the discretion of the commissioner, the commissioner may order or a licensee may request and the commissioner may grant such modifications of the following required initiatives as necessary to ensure an effective antifraud program. The modifications may be more or less restrictive than the required initiatives so long as the modifications may reasonably be expected to accomplish the purpose of this section. Antifraud initiatives shall include:
(A) Fraud investigators who may be provider or broker employees or independent contractors; and
(B) (i) An antifraud plan that shall be submitted to the commissioner.
(ii) The antifraud plan shall include without limitation:
(a) A description of the procedures for detecting and investigating possible fraudulent life settlement acts and procedures for resolving material inconsistencies between medical records and insurance applications;
(b) A description of the procedures for reporting possible fraudulent life settlement acts to the commissioner;
(c) A description of the plan for antifraud education and training of underwriters and other personnel; and
(d) A description or chart outlining the organizational arrangement of the antifraud personnel who are responsible for the investigation and reporting of possible fraudulent life settlement acts and investigating unresolved material inconsistencies between medical records and insurance applications.
(2) Antifraud plans submitted to the commissioner shall be privileged and confidential, shall not be a public record, and shall not be subject to discovery or subpoena in a civil or criminal action.