KRS 304.15-726: Life settlement contracts for payments directly to long -term care

services providers -- Administrative regulations.

(1) For purposes of this section:

(a) "Long-term care services" means:

1. Home health care;

2. Assisted living;

3. Nursing home care; and

4. Any other service or support deemed a long -term care service pursuant

to administrative regulations promulgated by the Department for

Medicaid Services; and

(b) "Recipient" means the recipient of the long -term care services that are being

paid for from the proceeds of the life settlement contract entered into pursuant

to this section.

(2) The owner of a life insurance policy with a face value in excess of ten thousand

dollars ($10,000) may enter into a life settlement contract pursuant to KRS 304.1 5-

700 to 304.15 -720, in exchange for payments directly to a long -term care services

provider as of the effective date of the life settlement contract in accordance with

this section.

(3) (a) All proceeds of the life settlement contract entered into pursuan t to this

section shall:

1. Not be subject to any statute or administrative regulation relating to

minimum payments for a life settlement which conflict with the

provisions of this section; and

2. Be held in an irrevocable state or federally insured accoun t for the

benefit of the recipient of the long -term care services and administered

in accordance with this section.

(b) The type of long-term care services payable from the irrevocable account shall

be chosen only by the recipient of the services. Any attempt by any person to

require the use of a long -term care services provider to obtain long -term care

services pursuant to this section is prohibited and shall constitute an unfair or

deceptive act or practice in violation of KRS 304.12-010.

(c) In addition to the requirements in KRS 304.15 -700 to 304.15 -720, any life

settlement contract entered into pursuant to this section shall include the

following:

1. A provision in the contract that five percent (5%) of the face amount of

the life insurance policy, not to exceed seven thousand five hundred

dollars ($7,500), or five thousand dollars ($5,000), whichever is greater,

may be reserved and if reserved shall be payable to the owner's estate or

a named beneficiary of the irrevocable account upon the death of the

insured under the policy that is the subject of the life settlement contract

for final expenses; and

2. The balance of proceeds of the life settlement contract that are unpaid at

the death of the owner shall be paid to the owner's estate or a named

beneficiary of the irrevocable account.

(d) Any life settlement provider entering into a life settlement contract pursuant to

this section shall maintain one (1) of the following:

1. A surety bond executed and issued by an insurer authorized to issue

bonds in this state in the amount of five hundred thousand dollars

($500,000). Any surety bond issued shall be in favor of this state and

shall specifically authorize recovery by the commissioner on behalf of

any person in this state who sustained damages as the result of erroneous

acts, failure to act, conviction of fraud, or conviction of unfair practices

by the life settlement provider; or

2. A policy of errors and omissions insurance covering legal liability

resulting from erroneous acts or failure to act in their capacity as a life

settlement provider in the sum of no less than five hundred thousand

dollars ($500,000) per occurrence and in the aggregate.

(e) For purposes of this section, in addition to any requirements of KRS 304.15 -

700 to 304.15-720:

1. Life settlement contract forms entered into pursuant to this section shall

be filed and approved by the department; and

2. Advertising and marketing materials used by a life settlement provider

pursuant to this section shall be filed with the department.

(f) Any claim against a life settlement provider from an owner of a policy, the

owner's estate, any beneficiary, or any other person wit h respect to the life

settlement contract shall not exceed the face amount of the policy, less the

proceeds paid under the life settlement contract, the total amount of premiums

paid subsequent to entering into the life settlement contract, and any other

reasonable costs or expenses associated with the acquisition or maintenance of

the policy that is the subject of a life settlement contract. Any payment of a

claim by a life settlement provider shall be made from the funds established

pursuant to paragraph (a)2. of this subsection.

(g) The department shall conduct periodic market examinations of each life

settlement provider regarding the life settlement contracts entered into

pursuant to this section in accordance with KRS 304.15-705.

(4) Nothing in this se ction shall be the exclusive method for a life insurance policy to

be excluded as a resource or asset in determining the applicant's or recipient's

eligibility for Medicaid.

(5) The commissioner may promulgate administrative regulations to implement this

section.