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INSURANCE BROKER ENGAGED IN UNTRUSTWORTHY CONDUCT STEMMING FROM A MISLEADING AD FOR VIATICAL SETTLEMENT AGREEMENTS AND WAS PROPERLY FINED.

The Third Department determined petitioner, a licensed insurance agent/broker, had engaged in untrustworthy conduct and was properly fined. Petitioner sold so-called viatical settlement agreements involving the purchase of interests in life insurance policies of elderly and terminally ill persons. Whether the purchased interests would return a profit depended on whether the amounts paid for the policies and premiums was less than the amount the policies paid out upon death. Petitioner took out an ad which was deemed misleading and there was evidence petitioner did not inform purchasers of the risks:

Insurance Law article 21 tasks respondent’s superintendent with, among other things, the dual responsibility of “ensuring that licenses are issued only to trustworthy and competent [insurance] producers” … and disciplining any insurance producer who demonstrates untrustworthiness or incompetence … . These statutory mandates are designed “to protect the public by requiring and maintaining professional standards of conduct on the part of all insurance brokers acting as such within this state” … . * * *

… [W]e agree with respondent’s determination that the subject advertisement was misleading. As a starting point, the language at issue indeed could be read as suggesting that an investor would receive a fixed rate of return at the end of a predetermined period of time — a representation that was not universally true, as the timing of the payout was entirely dependent upon when the viator died; more to the point, the promised fixed rate of return could effectively be diminished if the viator exceeded his or her life expectancy, i.e., did not die within the “plan” period, and the investor’s profit might be eliminated altogether if he or she was required to assume responsibility for paying the premiums due.  * * *

We reach a similar conclusion with respect to the finding that respondent failed to fully disclose the risks of viatical settlements to some of his clients. … [R]espondent’s finding that petitioner acted in an untrustworthy manner in this regard stems from petitioner’s failure to “sufficiently disclose the risks in his oral presentations to some of his clients.” Without recounting the extensive testimony adduced on this point, suffice it to say that the record contains conflicting evidence as to what petitioner did or did not say to investors regarding the nature and risks of viatical settlements. Matter of Nichols v New York State Dept. of Fin. Servs., 2017 NY Slip Op 01944m 3rd Dept 3-16-17

INSURANCE LAW (INSURANCE BROKER ENGAGED IN UNTRUSTWORTHY CONDUCT STEMMING FROM A MISLEADING AD AND WAS PROPERLY FINED)/UNTRUSTWORTHY CONDUCT (INSURANCE LAW, INSURANCE BROKER ENGAGED IN UNTRUSTWORTHY CONDUCT STEMMING FROM A MISLEADING AD AND WAS PROPERLY FINED)/VIATICAL SETTLEMENT AGREEMENTS (INSURANCE LAW, INSURANCE BROKER ENGAGED IN UNTRUSTWORTHY CONDUCT STEMMING FROM A MISLEADING AD AND WAS PROPERLY FINED)

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