Mass. Gen. Laws ch. 175, sec. 223B — MA Code / Part I / Title XXII / Chapter 175 / Section 223B
Control, prevention and reporting of fraud relating to life settlement contracts
Status: in_force

Section 223B. (a)(1) A person shall not knowingly and intentionally interfere with the enforcement or investigations of suspected or actual violations of sections 213 to 223E, inclusive. (2) 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)(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 a life settlement application or contract may be found guilty of a crime and may be subject to fines and confinement in prison.'' (2) The lack of a statement as required in paragraph (1) shall not constitute a defense in a prosecution for a fraudulent life settlement act. (c)(1) A 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 commissioner the information required by, and in a manner prescribed by, the commissioner. (2) A person not 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 may provide to the commissioner the information required by, and in a manner prescribed by, the commissioner. (d)(1) No civil liability shall be imposed on and no cause of action shall arise from a person furnishing information concerning suspected, anticipated or completed fraudulent life settlement acts or suspected or completed fraudulent insurance acts if the information is provided to: (i) the commissioner or the commissioner's employees, agents or representatives; (ii) federal, state or local law enforcement or regulatory officials or their employees, agents or representatives; (iii) a person involved in the prevention and detection of fraudulent life settlement acts or that person's agents, employees or representatives; (iv) a regulatory body or its employees, agents or representatives, overseeing life insurance, the business of life settlements, securities or investment fraud; (v) the insurer that issued the life insurance policy covering the life of the insured; or (vi) the licensee and its agents, employees or representatives. (2) Paragraph (1) shall not apply to statements made with actual malice. In an action brought against a person for filing a report or furnishing other information concerning a fraudulent life settlement act or insurance that was fraudulently obtained, the party bringing the action shall plead specifically any allegation that paragraph (1) should not apply because the person filing the report or furnishing the information did so with actual malice. (3) A person identified in paragraph (1) shall be entitled to an award of attorneys' fees and costs if the person 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 sections 213 to 223E, inclusive, and the party bringing the action was not substantially justified in doing so. For the purposes of this paragraph a proceeding shall be ''substantially justified'' if it had a reasonable basis in law or fact at the time that it was initiated. (4) This section shall not abrogate or modify common law or statutory privileges or immunities enjoyed by a person described in paragraph (1). (e)(1) The documents and evidence provided pursuant to subsection (d) 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) Paragraph (1) shall not prohibit release by the commissioner of documents and evidence obtained in an investigation of suspected or actual fraudulent life settlement acts: (i) in administrative or judicial proceedings to enforce laws administered by the commissioner; (ii) to federal, state or local law enforcement or regulatory agencies or to an organization established for the purpose of detecting and preventing fraudulent life settlement acts; or (iii) 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 paragraph (2) shall not abrogate or modify the privilege granted in paragraph (1). (f) Sections 213 to 223E, inclusive, shall not: (1) preempt the authority or relieve the duty of law enforcement or regulatory agencies to investigate, examine and prosecute suspected violations of law; (2) preempt, supersede or limit securities laws in the commonwealth or any rule, order or notice issued thereunder; (3) prevent or prohibit a person from disclosing voluntarily information concerning life settlement fraud to a law enforcement or regulatory agency other than the commissioner; or (4) limit the powers granted elsewhere by the laws of the commonwealth to the commissioner or an insurance fraud unit to investigate and examine possible violations of law and to take appropriate action against wrongdoers. (g)(1) Life settlement providers and life settlement brokers shall have antifraud initiatives in place 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 reasonably expect to accomplish the purpose of this section. Antifraud initiatives shall include: (i) fraud investigators, who may be life settlement provider or life settlement broker employees or independent contractors; and (ii) an antifraud plan, which shall be submitted to the commissioner; provided, however, that the antifraud plan shall include, but not be limited to: (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. (h) An insurer that issued a policy that is the subject of a life settlement contract shall not be responsible for any act or omission of a life settlement broker, life settlement provider or purchaser arising out of, or in connection with, the life settlement transaction, unless the insurer receives compensation for the placement of the life settlement contract from the life settlement provider, life settlement broker or purchaser.

Section 223B. (a)(1) A person shall not knowingly and intentionally interfere with the enforcement or investigations of suspected or actual violations of sections 213 to 223E, inclusive.

(2) 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)(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 a life settlement application or contract may be found guilty of a crime and may be subject to fines and confinement in prison.''

(2) The lack of a statement as required in paragraph (1) shall not constitute a defense in a prosecution for a fraudulent life settlement act.

(c)(1) A 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 commissioner the information required by, and in a manner prescribed by, the commissioner.

(2) A person not 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 may provide to the commissioner the information required by, and in a manner prescribed by, the commissioner.

(d)(1) No civil liability shall be imposed on and no cause of action shall arise from a person furnishing information concerning suspected, anticipated or completed fraudulent life settlement acts or suspected or completed fraudulent insurance acts if the information is provided to:

(i) the commissioner or the commissioner's employees, agents or representatives;

(ii) federal, state or local law enforcement or regulatory officials or their employees, agents or representatives;

(iii) a person involved in the prevention and detection of fraudulent life settlement acts or that person's agents, employees or representatives;

(iv) a regulatory body or its employees, agents or representatives, overseeing life insurance, the business of life settlements, securities or investment fraud;

(v) the insurer that issued the life insurance policy covering the life of the insured; or

(vi) the licensee and its agents, employees or representatives.

(2) Paragraph (1) shall not apply to statements made with actual malice. In an action brought against a person for filing a report or furnishing other information concerning a fraudulent life settlement act or insurance that was fraudulently obtained, the party bringing the action shall plead specifically any allegation that paragraph (1) should not apply because the person filing the report or furnishing the information did so with actual malice.

(3) A person identified in paragraph (1) shall be entitled to an award of attorneys' fees and costs if the person 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 sections 213 to 223E, inclusive, and the party bringing the action was not substantially justified in doing so. For the purposes of this paragraph a proceeding shall be ''substantially justified'' if it had a reasonable basis in law or fact at the time that it was initiated.

(4) This section shall not abrogate or modify common law or statutory privileges or immunities enjoyed by a person described in paragraph (1).

(e)(1) The documents and evidence provided pursuant to subsection (d) 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) Paragraph (1) shall not prohibit release by the commissioner of documents and evidence obtained in an investigation of suspected or actual fraudulent life settlement acts:

(i) in administrative or judicial proceedings to enforce laws administered by the commissioner;

(ii) to federal, state or local law enforcement or regulatory agencies or to an organization established for the purpose of detecting and preventing fraudulent life settlement acts; or

(iii) 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 paragraph (2) shall not abrogate or modify the privilege granted in paragraph (1).

(f) Sections 213 to 223E, inclusive, shall not:

(1) preempt the authority or relieve the duty of law enforcement or regulatory agencies to investigate, examine and prosecute suspected violations of law;

(2) preempt, supersede or limit securities laws in the commonwealth or any rule, order or notice issued thereunder;

(3) prevent or prohibit a person from disclosing voluntarily information concerning life settlement fraud to a law enforcement or regulatory agency other than the commissioner; or

(4) limit the powers granted elsewhere by the laws of the commonwealth to the commissioner or an insurance fraud unit to investigate and examine possible violations of law and to take appropriate action against wrongdoers.

(g)(1) Life settlement providers and life settlement brokers shall have antifraud initiatives in place 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 reasonably expect to accomplish the purpose of this section. Antifraud initiatives shall include:

(i) fraud investigators, who may be life settlement provider or life settlement broker employees or independent contractors; and

(ii) an antifraud plan, which shall be submitted to the commissioner; provided, however, that the antifraud plan shall include, but not be limited to:

(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.

(h) An insurer that issued a policy that is the subject of a life settlement contract shall not be responsible for any act or omission of a life settlement broker, life settlement provider or purchaser arising out of, or in connection with, the life settlement transaction, unless the insurer receives compensation for the placement of the life settlement contract from the life settlement provider, life settlement broker or purchaser.