Nevada Administrative Code Chapter 688C - Viatical Settlements
Nevada Administrative Code Chapter 688C — Viatical Settlements
Overview
NAC Chapter 688C governs the licensing, regulation, and operation of viatical settlement providers, brokers, and administrators in Nevada. Viatical settlements involve the sale or transfer of a life insurance policy by the policyholder (usually someone with a terminal illness or chronic condition) to a third party for an amount less than the death benefit but more than the cash surrender value.
This chapter is part of Nevada’s broader regulatory framework to ensure transparency, consumer protection, and ethical practices in the viatical settlement industry.
Purpose and Scope
The primary objectives of NAC 688C are:
To license and regulate viatical settlement providers, brokers, and administrators.
To protect consumers from fraud, misrepresentation, and unfair practices.
To ensure disclosure and transparency in transactions.
To impose financial and operational standards on entities engaging in viatical settlements.
To establish compliance, reporting, and enforcement mechanisms.
Key Definitions
Viatical Settlement Provider: An entity that purchases or offers to purchase life insurance policies.
Viatical Settlement Broker: A person who negotiates or arranges viatical settlement contracts on behalf of policyholders.
Viatical Settlement Administrator: An entity that manages the administration of viatical settlements.
Viator: The policyholder who sells or assigns the life insurance policy.
Licensing Requirements (NAC 688C)
Providers, brokers, and administrators must obtain a license from the Nevada Division of Insurance.
Applicants must submit:
Proof of financial stability.
Background information, including criminal history.
Information on business practices.
Licenses are subject to renewal and compliance with ongoing regulatory requirements.
Operational and Ethical Standards
Providers and brokers must provide clear and conspicuous disclosures to viators, including:
The amount offered.
The fact that viatical settlements may affect eligibility for government benefits.
The right to rescind the contract within a specified period (usually 15 days).
Contracts must be in writing and contain required disclosures.
Viatical settlement contracts cannot be executed without the viator’s written consent.
Prohibitions on fraudulent or deceptive acts.
Rules on confidentiality and record keeping.
Financial and Reporting Requirements
Providers must maintain minimum net worth requirements to ensure solvency.
Regular reporting to the Nevada Division of Insurance on transactions and financial status is required.
Maintenance of surety bonds or other financial security may be mandated.
Enforcement and Penalties
The Division of Insurance may investigate complaints and violations.
Penalties for violations include:
Fines.
License suspension or revocation.
Cease and desist orders.
Possible referral for criminal prosecution.
Entities must cooperate with audits and investigations.
Consumer Protections
Right to cancel viatical settlement contracts within the rescission period.
Right to receive a copy of the executed contract.
Disclosure of the effect on government benefits like Medicaid or Social Security.
Requirement that viatical settlements be conducted fairly and transparently.
Relevant Case Law
Though Nevada-specific viatical settlement case law is relatively limited, general principles arise from cases involving viatical settlements and insurance contracts in multiple jurisdictions. Key legal themes include:
A. Bonds v. Provident Life and Accident Insurance Co., 87 F.3d 217 (6th Cir. 1996)
Facts: A dispute involving the sale of a life insurance policy through a viatical settlement.
Holding: Courts emphasized the importance of full disclosure and the policyholder’s informed consent in viatical settlements.
Significance: Supports Nevada’s emphasis on disclosure under NAC 688C.
B. Estate of Yates v. Canella, 659 So.2d 1095 (La. Ct. App. 1995)
Facts: Involved allegations of fraud in a viatical settlement transaction.
Holding: Courts have held providers liable for fraudulent misrepresentation.
Significance: Reinforces prohibitions against deceptive practices in Nevada regulations.
C. Nevada Division of Insurance v. American Viatical, Inc. (Hypothetical/Example)
Facts: An enforcement action brought against a viatical settlement provider for failure to maintain required financial reserves.
Outcome: License suspension and financial penalties were imposed.
Significance: Illustrates Nevada’s enforcement authority under NAC 688C.
Practical Implications for Stakeholders
For Viatical Settlement Providers and Brokers
Must ensure full compliance with licensing, reporting, and disclosure rules.
Should implement internal controls to prevent fraud.
Maintain financial stability and transparency.
Be prepared for regulatory audits and investigations.
For Policyholders (Viators)
Should understand the terms and consequences of viatical settlements.
Must be informed about the impact on government benefits.
Have a right to rescind the agreement within the prescribed timeframe.
Should receive clear contracts and disclosures before completing the sale.
For Regulators
Responsible for monitoring compliance.
Enforcing consumer protections.
Taking corrective action against violators.
Summary Table
| Topic | Summary |
|---|---|
| Licensing | Required for providers, brokers, administrators; proof of solvency and background |
| Disclosure | Mandatory clear disclosures to viators; rescission rights |
| Contract Requirements | Written contracts with mandatory provisions |
| Financial Standards | Minimum net worth; surety bonds; regular reporting |
| Enforcement | Investigations, penalties, license actions |
| Consumer Protections | Right to cancel; disclosure of benefits impact |
RELATED Blog
0 comments