§6811. Prohibited practices and provisions under policies








1. Assignment. 
The following provisions govern assignment.





A. A policy of individual or group life insurance that permits assignment issued or
delivered in this State may not, in any way, restrict a person from making an absolute
assignment of rights for consideration. Prohibited restrictions include, but are
not limited to, assignments only as a gift and without consideration, assignments
only to a limited class of persons and assignments only to a natural person and not
to a legal entity. [2003, c. 636, §13 (AMD).]










B. A life insurance company that acknowledges and records an absolute assignment of
life insurance policy or rights under a group life insurance policy may rely solely
on the authorization of the assignor to make the assignment and the life insurance
company is not obligated to inquire into the validity, sufficiency or terms of the
assignment. In acknowledging and recording an assignment, a life insurance company
acting in good faith and reliance on the presentation of the absolute assignment,
acts in a ministerial capacity and may exhibit no discretion as to whether an assignor
may make the assignment or whether the assignment conforms with applicable law. [1997, c. 430, §1 (NEW); 1997, c. 430, §2 (AFF).]








[
2003, c. 636, §13 (AMD)
.]








2. Rights under an assignment. 
The following provisions apply to an assignment.





A. For life insurance contracts that permit assignment:



(1) A person has the right to assign, transfer, sell or bequeath the ownership of
or death benefit payable under a life insurance policy or certificate at any time
for any remaining portion of that coverage after exercising any option for accelerated
benefits;






(2) A person also has the right to assign, transfer, sell, devise or bequeath the
ownership of or death benefit payable under a life insurance policy or certificate
if that coverage is on disability waiver of premium at any time; and






(3) The absolute assignee of an individual life insurance policy or of all rights
under a group life insurance policy has all rights at law or in equity as the assignor
held under that policy, including, but not limited to, the right to convert the coverage
to an individual policy, the right to timely notice of the right to that conversion
at the time that right accrues, the right to make premium payments or take such other
action as may be necessary under the policy in order to preserve the value of the
coverage assigned, the right to receive information concerning the coverage, the right
to receive notice of a lapse or discontinuation of coverage, the exclusive right to
exercise any options concerning the assigned coverage during an open enrollment period
and all such other rights and privileges initially granted to a person under the terms
of the individual or group life insurance policy. [2003, c. 636, §13 (AMD).]













B. A person has the right to exercise any option for accelerated benefits under the
terms of any individual or group life insurance policy at any time for any unassigned
portion of that policy or certificate. [2003, c. 636, §13 (AMD).]







[
2003, c. 636, §13 (AMD)
.]








3. Failure to give notice under group life insurance policy. 
If the rights under a group life insurance policy have been assigned and the administrator
of the policy fails to give notice to the assignee that a person is no longer a covered
person under the group and of the right to convert the policy to an individual life
insurance policy, the period of time during which the assignee must make application
for conversion under the terms of the group life insurance policy begins from the
date the notice is given to the assignee.


[
2003, c. 636, §13 (AMD)
.]








4. Riders and postsettlement increases or additions. 
With respect to policies containing a provision for double or additional indemnity
for accidental death or any other riders or additional death benefits, including the
increase in the death benefit in excess of the amount of the death benefits of the
date the settlement contract is effected at the time the policy is assigned, transferred,
sold, devised or bequeathed, unless otherwise mutually agreed to in writing by the
viator and the settlement provider, the additional amount remains payable to the beneficiary
last named by the viator prior to entering into the settlement contract or to such
other beneficiary other than the settlement provider as the viator may thereafter
designate or, in the absence of a designation, to the estate of the viator.


[
2003, c. 636, §13 (AMD)
.]








5. Prohibition on settlements. 
It is a violation of this chapter for any person to enter into a settlement contract
at any time prior to, or at the time of the application for, the issuance of a policy
or within a 2-year period commencing with the date of issuance of the insurance policy
or certificate unless the viator certifies to the settlement provider that one or
more of the following conditions have been met within the 2-year period:





A. The policy was issued upon the viator's exercise of conversion rights arising out
of a group or individual policy, as long as the total of the time covered under the
conversion policy plus the time covered under the prior policy is at least 24 months.
The time covered under a group policy must be calculated without regard to any change
in insurance carriers, as long as the coverage has been continuous and under the same
group sponsorship; and [2003, c. 636, §13 (NEW).]










B. The viator submits independent evidence to the settlement provider that one or more
of the following conditions have been met within the 2-year period:



(1) The viator or insured is terminally ill or chronically ill; or



(2) The viator or insured disposes of the viator's entire ownership interest in a
closely held corporation pursuant to the terms of a buyout or other similar agreement
in effect at the time the insurance policy was initially issued. [2003, c. 636, §13 (NEW).]








[
2007, c. 543, §6 (AMD)
.]








6. Submission of certification. 
If the settlement provider submits to the insurer a copy of the owner's or insured's
certification described in subsection 5 when the settlement provider submits a request
to the insurer to effect the transfer of the policy or certificate to the settlement
provider, the copy is deemed to conclusively establish that the settlement contract
satisfies the requirements of this section and the insurer shall timely respond to
the request.


[
2003, c. 636, §13 (NEW)
.]





SECTION HISTORY

1997, c. 430, §1 (NEW).
1997, c. 430, §2 (AFF).
2003, c. 636, §13 (AMD).
2007, c. 543, §6 (AMD).