New York Life Settlement Act Applies Regardless of Investor Residence
InsuranceNewsNet
Dec. 8, 2010 -- Recent articles have incorrectly suggested that the New York Insurance Department’s Office of General Counsel (OGC) opinion, OGC Op. No. 10-10-01, issued Oct. 21, concluded that the New York Life Settlement Act does not apply to investors resident in Canada. In fact, the opinion reached the opposite conclusion.
The question posed to the OGC was whether the New York Life Settlement Act applies to an investor who resides in Canada and who wishes to purchase a life insurance policy from a New York resident who is a family member or friend of the Canadian investor. In concluding that the New York Life Settlement Act does not prohibit such a purchase, the OGC based its decision on two exemptions from the definition of a life settlement contract contained in the settlement act.
The OGC noted that the term “life settlement contract” in the act exempts certain specific categories of contracts from the definition of a life settlement contract, including a contract used by an individual to purchase no more than one life insurance policy a year; and, a contract for the purchase of a life insurance policy where all parties are closely related to the insured by blood or law or have a lawful, substantial economic interest in the continued life of the insured.
Based on the facts presented to it, the OGC concluded that if either of the circumstances listed above are applicable, then the contracts are not “life settlement contracts” under the act. However, far from concluding that Canadian investors are not subject to the New York act, the OGC specifically stated that “the location of the investor is irrelevant when determining whether the [act] and the regulations promulgated thereunder that govern life settlement contracts apply to investors who reside in Canada and wish to purchase a life insurance policy from a New York resident who is a family member or friend of the investors, because these provisions only apply to a life settlement contract made, proposed to be made, or solicited with a New York resident or any policy owner physically located in New York, regardless of the residence of the investor.”
Thus, the opinion confirms the generally accepted tenet that regardless of the state or country of the investor’s residence, it is the state of residence of the owner of the life insurance policy that is relevant for purposes of determining whether a state’s life settlements laws apply to a transaction. The conclusions reached by the OGC in the opinion are, therefore, consistent with the general requirements for jurisdiction over a party and serves to further the intended purpose of the act, which is to regulate life settlements occurring in New York or with New York residents.
Tony Roehl is a member of Morris, Manning & Martin, LLP’s Insurance and Reinsurance and Corporate Practices. Roehl’s principal areas of concentration are insurance regulation and corporate matters involving entities within the insurance industry. Roehl received his bachelor’s degree from the University of Florida and his law degree from the University of Michigan. He may be reached at 404-495-8477 or [email protected].
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