GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1991

S	1 

SENATE BILL 51

Short Title:  Funeral and Burial Trust Act.	(Public)
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Sponsors: Senators Conder; and Carpenter.
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Referred to:  Human Resources.
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February 11, 1991

A BILL TO BE ENTITLED
AN ACT TO MODIFY THE FUNERAL AND BURIAL TRUST FUND ACT.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 90-210.30 reads as rewritten:
"§ 90-210.30. Definitions.
As used in this Article, unless the context requires otherwise:
(1)	 ‘Board' means the North Carolina Board of Mortuary Science, as created pursuant to Article 13A of Chapter 90 of the General Statutes.  
(2)	‘Financial institution' means a bank, trust company or savings and loan association authorized by law to do business in this State;
(3)	‘Preneed funeral contract' means any contract, agreement, or mutual understanding, or any series or combination of contracts, agreements, or mutual understandings, whether funded by trust deposits or prearrangement insurance policies, or any combination thereof, which has for a purpose the furnishing or performance of funeral services, or the furnishing or delivery of personal property, merchandise, or services of any nature in connection with the final disposition of a dead human body, to be furnished or delivered at a time determinable by the death of the person whose body is to be disposed of, but does not mean the furnishing of a cemetery lot, crypt, niche, mausoleum, grave marker or monument. 
(4)	‘Prearrangement insurance policy' means a life insurance policy, annuity contract, or other insurance contract, or any series of contracts or agreements in any form or manner, issued by an insurance company authorized by law to do business in this State, which, whether by assignment or otherwise, has for a purpose the funding of a preneed funeral contract or an insurance-funded funeral or burial prearrangement, the insured being the person for whose service the funds were paid.
	(5)	‘Insurance company' means any corporation, association, partnership, society, order, individual or aggregation of individuals engaging in or proposing or attempting to engage as principals in any kind of insurance business, including the exchanging of reciprocal or interinsurance contracts between individuals, partnerships and corporations.
	(6)	‘Preneed licensee' means a funeral establishment which has applied for and has been granted a license to sell preneed funeral contracts under the Article.  Such license is also referred to in this Article as a ‘preneed funeral establishment license.'
(7)	‘Preneed funeral planning' means offering to sell or selling preneed funeral contracts, as defined in G.S. 90-210.30(3), or making other arrangements prior to death for the providing of funeral services or merchandise."
Sec. 2.  G.S. 90-210.31 reads as rewritten:
"§ 90-210.31.  Deposit of trust funds.
(a)	Except as provided in this section, all payments of money made to any person, partnership, association, corporation, or other entity upon any preneed funeral contract or any other agreement, contract, or prearrangement insurance policy, or any series or combination of preneed funeral contracts or any other agreements, contracts, or prearrangement insurance policies, but excluding the furnishing of cemetery lots, crypts, niches, mausoleums, grave markers  and monuments, which have for a purpose or which by operation provide for the furnishing or performance of funeral or burial services, or the furnishing or delivery of personal property, merchandise, or services of any nature in connection with the final disposition of a dead human body, to be furnished or delivered at a time determinable by the death of the person whose body is to be disposed of, or the providing of the proceeds of an insurance policy for such use are held to be preneed funeral funds, and their receipt, application, and disposition shall be deposited or applied as follows:  
							(1)	Any payment of money made by a preneed funeral contract purchaser who chooses to have such funds placed in a financial institution shall, within the required period of time, be deposited by the preneed licensee in the manner hereinafter provided in a financial institution, in trust, in the preneed licensee's name as trustee.  Thereafter, all of the interest, dividends, increases or accretions of whatever nature earned by the funds shall remain with the principal and shall become a part thereof, subject to all of the requirements  concerning the principal hereinafter contained.  Consistent with applicable tax laws, the trust fund may be charged with any taxes on said fund and its income, and for the reasonable charges paid by the trustee to itself or others for the preparation of fiduciary tax returns reporting such income.  Penalties charged by a financial institution for early withdrawal of a deposit caused by a transfer pursuant to G.S. 90-210.35(b) shall be paid by the preneed licensee.  Penalties charged as a result of all other early withdrawals as permitted by this Article shall be paid from the trust fund, and the financial institution shall give the purchaser prompt notice of all such penalties.  The preneed licensee, as trustee, may establish an individual trust for each preneed contract or a common trust fund for all preneed funeral contracts.  The trust accounts shall be carried in the name of the preneed licensee as trustee, but accounting records shall be maintained showing the amounts deposited and invested, and interest, dividends, increases and accretions earned thereon, with respect to each purchaser's contract.
(2)	Notwithstanding any other provision of law, a preneed licensee who enters into a preneed funeral contract with a purchaser who funds such contract with a trust deposit pursuant to subsection (a)(1) hereof may retain, free of the trust, up to ten percent (10%) of any payments made on such contract, provided that:
a.	The preneed licensee fully discloses in writing to the contract purchaser in advance the percentage in intends to retain from any payments made on the contract.
b.	If the preneed licensee thereafter performs any services or provides any goods or merchandise under such contract, the preneed licensee shall give the purchaser credit for the amount retained.
(3)	Any payment received by a preneed licensee from a purchaser of a preneed funeral contract who chooses to purchase a prearrangement insurance policy, shall within the required period of time, be applied by the preneed licensee to the purchase of such policy.
(b)	Except as provided by subsection (a)(2) hereof or by G.S. 90-210.32, all payments made by the purchaser of a preneed funeral contract or prearrangement insurance policy are and shall remain trust funds within a financial institution or as paid insurance premiums with an insurance company, as the case may be, until the death of the person for whose service the funds were paid and until delivery of all merchandise and full performance of all services called for by the preneed funeral contract or prearrangement insurance policy.   
(c)	Each preneed licensee may establish and maintain with a financial institution of its choice, a preneed funeral fund clearing account.  Preneed funeral funds received by a preneed licensee may be deposited and held in such an account until disbursed by the preneed licensee to fund a preneed funeral contract pursuant to subsection (a)(1) or (a)(3) hereof.  Such account shall be maintained and used solely for the receipt and disbursement of preneed funeral funds.
(d)	Funds deposited in trust under a revocable standard preneed funeral contract entered into on or after January 1, 1992, may, with the written permission of the contract purchaser, be withdrawn and used to purchase prearrangement insurance policies.  Except as provided in this subsection, no funds deposited in trust in a financial institution pursuant to this Article shall be withdrawn to purchase prearrangement insurance policies."
Sec. 3. Chapter 90 is amended by adding a new section to Article 13B to read: 
"§ 90-210.31A.  Types of preneed contracts; revocability; disposition of funds; substitution of licensees; forms.
(a)	A preneed licensee may make preneed arrangements available through standard and inflation-proof preneed funeral contracts.  Standard preneed funeral contracts apply all monies paid by or for the contract beneficiary, together with any increases to the trust fund and all insurance proceeds, for the purchase of funeral services and merchandise without a guarantee against price increases.  Inflation-proof contracts establish a fixed price for funeral services and merchandise without regard to price increases.  Upon written disclosure, inflation-proof contracts may permit the preneed licensee to retain all of the preneed funeral contract trust funds on deposit, and all insurance proceeds, even those in excess of the retail cost of goods and services provided, when the preneed licensee has fulfilled the contract obligation.
(b)	At the option of the preneed funeral contract purchaser, such contracts may be made revocable or irrevocable.  If the contract is made irrevocable, the purchaser, and after his death the beneficiary, or the beneficiary's legal representative, may, upon written notice given to the financial institution or insurance company and the preneed licensee which is a party to the contract, direct the substitution of a different preneed licensee to furnish funeral services and merchandise.  Such substitution may be made either before or after the death of the beneficiary of the preneed funeral contract; provided, however, if the substitution is made after the death of the preneed funeral contract beneficiary, a funeral establishment providing any funeral services or merchandise need not be a preneed licensee under this Article to receive payment for such services or merchandise.  Provided, further, if a substitution of trustee occurs after the death of the contract beneficiary, the original contracting preneed licensee shall be entitled to payment for any services or merchandise provided pursuant to G.S. 90-210.32(d).
Upon receipt of such notice, the financial institution shall immediately pay the funds held therein pursuant to G.S. 90-210.31(a)(1), together with all accumulated interest, dividends, increases and accretions thereon, to the preneed licensee which is a party to the preneed funeral contract.  If the preneed funeral contract is funded by a prearrangement insurance policy, the insurance company shall not pay any of the funds until the death of the beneficiary of the contract.  The preneed licensee which is party to the preneed funeral contract shall immediately pay all such funds received to the successor funeral establishment so designated; provided, however, the contracting preneed licensee shall not be required to give credit for the amount retained pursuant to G.S. 90-210.31(a)(2).  Provided further, if the contracting preneed licensee did not retain any portion of payments made to it as is permitted by G.S. 90-210.31(a)(2), then such preneed licensee may retain up to ten percent (10%) of said funds received from the financial institution.
Upon making payments pursuant to this subsection, the financial institution and the preneed licensee which is a party to the preneed funeral contract shall be relieved from all further contractual liability thereon.
The person giving notice of this substitution of preneed licensee and the successor preneed licensee shall enter into a new preneed funeral contract for the funds transferred, and this Article shall apply, including the duty of the successor preneed licensee to deposit funds in a financial institution if the death of the beneficiary of the preneed funeral contract has not occurred.  Nothing in this subsection shall be construed to permit an irrevocable preneed funeral contract to be made revocable or to result in the payment of any of the transferred funds to the purchaser or to the beneficiary of the preneed funeral contract or his estate, except as provided by subsection (c)	hereof.
(c)	When a preneed licensee has fulfilled its contractual obligation upon the death of a preneed funeral contract beneficiary, the preneed licensee shall promptly complete a certificate of performance and present the same to the financial institution which holds funds in trust under G.S. 90-210.31(a)(1), or to the insurance company which issued a preneed insurance policy pursuant to G.S. 90-210.31(a)(3).  The financial institution or insurance company on receipt of the certificate of performance shall pay to the preneed licensee which is a party to the contract the trust funds or policy proceeds.
Unless otherwise specified in the preneed funeral contract, the preneed licensee shall have no obligation to deliver merchandise or perform any services for which payment in full has not yet been deposited with a financial institution or which shall not be provided by the proceeds of a prearrangement insurance policy, and any such amounts received which do not constitute payment in full shall be refunded to the estate of the deceased contract beneficiary or credited against the cost of merchandise or services contracted for by a representative of the deceased; and any balance remaining in the fund or policy after payment for the merchandise and services as set forth in the preneed funeral contract or the insurance beneficiary named to receive any such balance.  Provided, however, unless the parties agree to the contrary, there shall be no refund to the estate of a deceased beneficiary of an inflation-proof preneed funeral contract.
(d)	In the event that any person, partnership or corporation, other than the contracting preneed licensee, shall perform any funeral service or provide any merchandise under a preneed funeral contract upon the death of the beneficiary thereof, the trust funds held on deposit with a financial institution pursuant to G.S. 90-210.31(a)(1), or preneed insurance proceeds held by an insurance company pursuant to G.S. 90-210.31(a)(3), shall be paid by the contracting preneed licensee to such provider upon submission to the contracting preneed licensee and the financial institution or insurance company, as the case may be, of a certified copy of the contract beneficiary's death certificate, a copy of the statement of charges for the services and merchandise provided and a certificate of performance.
In the event that a credit for a retention is due a preneed funeral contract beneficiary from a contracting preneed licensee which has retained any portion of preneed payments made on such contract pursuant to G.S. 90-210.31(a)(2), and that credit is not given upon the death of the contract beneficiary, G.S. 90-210.31B shall apply.
(e)	This Article does not apply to contracts for funeral services or merchandise sold as preneed burial insurance policies which are regulated by Part 13 of Article 10 of Chapter 143B of the North Carolina General Statutes.
(f)	The board shall approve all forms for preneed funeral contracts.  All such contracts must be in writing, and no form shall be used without prior approval of the Board.  Any use or attempted use of any oral preneed funeral contract or any written contract in a form not approved by the Board shall be deemed a violation of this Article by the person selling the services or merchandise thereunder.
(g)	Whenever any balance of a preneed funeral fund shall be payable to the estate of a deceased contract beneficiary and there has been no representative of the estate appointed to whom payment may be made, the same may be paid into the office of the clerk of superior court in the county wherein probate proceedings could be filed for the deceased beneficiary."
Sec. 4. Chapter 90 is amended by adding a new section to Article 13B to read: 
"§ 90-210.31B.  Recovery fund.
(a)	There is established the Preneed Recovery Fund.  The Fund shall be administered by the Board under rules adopted by it.  The purpose of the Fund is to reimburse purchasers of preneed funeral contracts who have suffered financial loss as a result of the malfeasance, misfeasance, default, failure or insolvency of any licensee under this Article.
(b)	From the fee of fifteen dollars ($15.00) for each contract as  required by G.S. 90-210.34(c) the Board will deposit two dollars ($2.00) per contract into the Fund.  The Board may suspend the fee at any time and for any period for which the Board determines that a sufficient amount is available to meet likely disbursements and that an adequate reserve will remain after such disbursements.
(c)	All sums received by the Board pursuant to this section shall be held in a separate account known as the Preneed Recovery Fund.  Deposits to and disbursements from the Fund account shall be subject to the written direction of the Board under rules established by it.
(d)	The Board shall adopt rules governing management of the Fund account, presentation and processing of applications for reimbursement, and subrogation or assignment of the rights of any reimbursed applicant.
(e)	The Board may use or otherwise expend monies in the Fund for the following purposes:
(1)	To make reimbursements on approved applications;
(2)	To purchase insurance to cover such losses, in whole or in part, deemed appropriate by the Board and not inconsistent with the purposes of the Fund;
(3)	To invest such portions of the Fund as are not currently needed to reimburse losses and maintain adequate reserves, and as are permitted to be made by fiduciaries under State law; and
(4)	To pay the expenses of the Board to administer the Fund, including employment of legal counsel to prosecute subrogation claims.
(f)	Reimbursements from the Fund shall be made only to the extent to which such losses are not bonded or otherwise covered, protected or reimbursed and only after the applicant has complied with all applicable rules of the Board.
(g)	The Board shall investigate all applications made and may reject or allow such claims in whole or in part based on and to the extent that monies are available in the Fund.  The Board shall have complete discretion to determine the order and manner of payment of approved applications.  All such payments shall be a matter of privilege and not of right, and no person shall have any right in the Fund as a third party beneficiary or otherwise.  No attorney shall be compensated by the Board for prosecuting an application before it.
(h)	In the event reimbursement is made to an applicant under this section, the Board shall be subrogated in the reimbursed amount and may bring such action as deemed advisable against any person or corporation, including the licensee.  The Board may enforce any claims it may have for restitution or otherwise and may employ and compensate consultants, agents, legal counsel, accountants and other such persons as it deems appropriate to carry out its authority under this section."
Sec. 5.  G.S 90-210.32 reads as rewritten:
"§ 90-210.32. Refund of deposit.
(a)	Within 30 days of receipt of a written request from the purchaser of a revocable preneed funeral contract who has contract funds deposited with a financial institution pursuant to G.S. 90-210.31(a)(1), the financial institution holding such funds in trust shall refund to the contract purchaser the entire amount deposited with the financial institution together with all interest, dividends, increases, or accretions earned on such fund.
	(b1)	Within 30 days of receipt of a written notice of cancellation of any prearrangement insurance policy purchased pursuant to G.S. 90-210.31(a)(3), the issuing insurance company shall refund to the prearrangement insurance policy purchaser any unearned premiums.  
(c)	After making refund pursuant to this section and giving notice of the refund to the preneed licensee, the financial institution shall be relieved from all further liability. 
(c1)	Notwithstanding any other provision of this Article, if a preneed funeral contract is revoked or transferred following the death of the beneficiary, the purchaser may be charged according to the contracting preneed licensee's price lists for any services performed or merchandise provided prior to revocation or transfer.
(d)	This section shall not apply if the pre-need funeral contract provides that it is irrevocable.  Such contracts may not be revoked or any proceeds thereof refunded except by order of a court of competent jurisdiction."
Sec.  6.  G.S. 90-210.33 reads as rewritten:
"§ 90-210.33. Deposit within 30 days of receipt.
	(a) Except as provided in this Article, all preneed funeral funds received by a preneed licensee pursuant to the provisions of G.S. 90-210.31(a)(1) shall, within 10 days after receipt thereof, be deposited by such licensee in a financial institution, in trust, in the preneed licensee's name as trustee.
(b)	Premiums received by a preneed licensee in payment for prearrangement insurance policies pursuant to the provisions of G.S. 90-210.31(a)(3) shall be applied to the purchase of such policies within 10 days of receipt of the same.  
(c)	If a preneed funeral contract purchaser elects to fund such contract with a trust deposit, the preneed licensee, at the time of making the deposit as trustee, shall furnish to the financial institution the name of each payor and the amount of payment on each for which the deposit is being made.
(d)	If a preneed funeral contract purchaser elects to fund such contract with a prearrangement insurance policy, the preneed licensee shall notify the insurance company of the name of each payor and the amount of each payment when such policy or policies have been purchased.
(e)	Except as provided by G.S. 90-210.31(c), at no time before making a deposit or purchasing a prearrangement insurance policy may a preneed licensee, or its agents or employees, deposit in its or their own account or the account of any other person, partnership, association, corporation, or entity any monies coming into its or their hands for the purpose of purchasing services, merchandise, or prearrangement insurance under the provisions of this Article."
Sec. 7. G.S. 90-210.34 reads as rewritten:
"§ 90-210.34. Application for license.
(a)	No person, firm, partnership, association or corporation may offer or sell preneed funeral contracts or offer to make or make any funded funeral prearrangements, whether funded by prearrangement insurance policies, trust deposits or otherwise, without first securing a license from the Board.  There shall be two types of licenses:  a preneed funeral establishment license and a preneed sales license.  Only funeral establishments holding a valid establishment permit pursuant to G.S. 90-210.25(d) shall be eligible for a preneed funeral establishment license hereunder.  Employees and agents of such entities, upon meeting the qualifications to engage in preneed funeral planning as established by the Board, shall be eligible for a preneed sales license.  Such employees and agents may sell preneed funeral contracts, prearrangement insurance policies and make funded funeral prearrangements only on behalf of and to be performed by one employer or one principal; provided, however, such employees and agents may sell preneed funeral prearrangements for any number of funeral establishments licensed under this Article which are wholly-owned by or affiliated, through common ownership or contract, with the same entity; provided further, in the event such agents and employees engage in prearrangement insurance sales, these agents shall meet the licensing requirements of the Commissioner of Insurance.  Every preneed funeral contract shall be signed by a person licensed as a funeral director or funeral service licensee pursuant to Article 13A of Chapter 90 of the General Statutes.
	Application for a license shall be in writing, signed by the applicant and duly verified on forms furnished by the Board. Each application shall contain at least the following: the full names and address (both residence and place of business) of the applicant, and every officer and director thereof if the applicant is a firm, partnership, association or corporation and any other information as the Board shall deem necessary. A preneed funeral establishment license shall be valid only at the address stated in the application for the applicant or at a new address approved by the Board.
(b)	An application for a preneed funeral establishment license shall be accompanied by a nonrefundable application fee of not more than two hundred fifty dollars ($250.00) and an application for a preneed sales license shall be accompanied by a nonrefundable application fee of not more than one hundred dollars ($100.00). If the license is granted, the application fee shall be applied to the respective annual license fee for the first year or part thereof. Upon receipt of the application and payment of the application fee, the Board shall issue a renewable preneed funeral establishment license unless it determines that the applicant has made false statements or representations in the application, or is insolvent, or has conducted, or is about to conduct, his business in a fraudulent manner, or is not duly authorized to transact business in this State. Upon receipt of the application and payment of the application fee, the Board shall issue a renewable preneed sales license provided the applicant has met the qualifications to engage in preneed funeral planning as established by the Board pursuant to subsection (a) hereof. Each licensee under this Article shall pay annually to the Board on or before June 30 of each year, a license fee of not more than two hundred fifty dollars ($250.00) for a preneed funeral establishment license and not more than one hundred dollars ($100.00) for a preneed sales license.
(c)	Any person selling a pre-need funeral contract, whether funded by a trust deposit or a prearrangement insurance policy, shall remit to the Board, within 10 days following the sale of such contract, a contract fee of fifteen dollars ($15.00) for each sale.  Such fee shall not be remitted in cash.  
(d)	The fees collected under this Article, except for monies used pursuant to G.S. 90-210.31b., shall be used for the expenses of the Board in carrying out the provisions of this Article.  Any funds remaining with the Board after all expenses under this Article for the current fiscal year have been fully provided for shall be paid over to the General Fund of the State of North Carolina.  Provided, however, the Board shall have the right to maintain an amount, the cumulative total of which shall not exceed twenty percent (20%) of gross receipts under this Article for the previous fiscal year of its operations, as a maximum contingency or emergency fund."
Sec. 8. G.S 90-210.35 reads as rewritten:
"§ 90-210.35. Licensee's books and records; notice of transfers, assignments and terminations.
(a)	Every preneed licensee shall keep for examination by the Board accurate accounts, books, and records in this State of all preneed funeral contract and prearrangement insurance policy transactions, copies of all agreements, insurance policies, instruments of assignment, the dates and amounts of payments made and accepted thereon, the names and addresses of the contracting parties, the persons for whose benefit funds are accepted, and the names of the financial institutions holding preneed funeral trust funds and insurance companies issuing prearrangement insurance policies. The Board, its inspectors appointed pursuant to G.S. 90-210.24 and its examiners, which the Board may appoint to assist in the enforcement of this Article, may at any time investigate the books, records, and accounts of any licensee under this Article with respect to trust funds, preneed funeral contracts, and prearrangement insurance policies, and for that purpose the Board may require the attendance of and examine under oath all persons whose testimony it may require.
(b)	A preneed licensee may transfer preneed funds held by it as trustee from the financial institution which is a party to a preneed funeral contract to a substitute financial institution that is not a party to the contract.  Within 10 days after the transfer, the preneed licensee shall notify the Board, in writing, of the name and address of the transferee financial institution.  Before  the transfer may be made, the transferee financial institution shall agree to make disclosures required under the pre-need funeral contract to the Board or its inspectors or examiners. If the contract is revocable, the licensee shall notify the contracting party of the intended transfer.
(c)	In the event that any preneed licensee should transfer or assign its assets or stock to a successor funeral establishment or terminate its business as a funeral establishment, the preneed licensee and assignee shall notify the Board within 15 days prior to the effective date of said transfer, assignment or terminations:  provided, however, the successor funeral establishment must be a preneed licensee or shall be required to apply for and be granted such license by the Board before accepting any preneed funeral contracts, whether funded by trust deposits or preneed insurance policies.  Provided further, a successor funeral establishment shall be liable to the preneed funeral contract purchasers for the amount of contract payments retained by the assigning or transferring funeral home pursuant to G.S. 90-210.31(a)(2).
(d)	Financial institutions which accept preneed funeral trust funds pursuant to G.S. 90-210.31(a)(1) and insurance companies which issue prearrangement insurance policies pursuant to G.S. 90-210.31(a)(3), shall, upon request by the Board or its inspectors or examiners, disclose any information regarding preneed funeral trust accounts held or prearrangement insurance policies issued by it for a preneed licensee.
(e)	In the event that any preneed licensee is unable or unwilling or is for any reason relieved of its responsibility to perform as trustee or to perform any preneed funeral contract, the Board, with the written consent of the purchaser, or after the purchaser's death or incapacity, the beneficiary of the preneed funeral contract, may order the contract to be assigned to a substitute preneed licensee provided that the substitute licensee agrees to accept such assignment."
Sec. 9.  G.S. 90-210.36 reads as rewritten:
"§ 90-210.36. Enforcement of Article.
	(a)	The Board shall enforce the provisions of this Article and has the power to make investigations, subpoena witnesses, require audits and reports and order hearings as to violations of any provisions of this Article.  The Board shall have the authority to refuse to issue or to suspend or revoke a preneed funeral establishment license and a preneed sales license when the applicant or holder thereof has been convicted of a felony or any crime involving fraud or moral turpitude, or when the applicant or holder thereof has violated any provision of this Article or the rules adopted pursuant thereto.  The Board shall have the authority to require such reports and information and to adopt such rules and regulations as are necessary to carry out the provisions of this Article."
Sec. 10.  G.S. 90-210.37 reads as rewritten:
"§ 90-210.37. Penalties.
(a)	Anyone who embezzles or who fraudulently, or knowingly and willfully misapplies, or in any manner converts preneed funeral funds to his own use, or for the use of any partnership, corporation, association, or entity for any purpose other than as authorized by this Article; or anyone who takes, makes away with or secretes, with intent to embezzle, or fraudulently, or knowingly and willfully misapply or in any manner convert preneed funeral funds for his own use or the use of any corporation, partnership, association, or entity for any purpose other than as authorized by this Article shall be punished as a Class H felon.  Each such embezzlement, conversion, or misapplication shall constitute a separate offense and may be prosecuted individually.  Upon conviction, all licenses issued under this Article shall be revoked.
(b)	Any person who willfully violates any other provision of this Article shall be guilty of a misdemeanor and shall be fined not less than five hundred dollars ($500.00) nor more than one thousand dollars ($1,000), or shall be imprisoned for not less than 10 days nor more than six months, or both.  Each such violation shall constitute a separate offense and may be prosecuted individually.
(c)	If a corporation embezzles or fraudulently or knowingly and willfully misapplies or converts preneed funeral funds as provided in subsection (a) hereof or otherwise violates any provision of this Article, the officers, directors, agents, or employees responsible for committing the offense shall be fined or imprisoned as herein provided.
(d)	The Board shall deliver to the Attorney General all evidence of violations pursuant to this section, and the Attorney General may initiate criminal actions to be prosecuted by the district attorneys as provided by law."
Sec. 11.  Chapter 90 is amended by adding a new section to read:
"§ 90-210.38.  Nonregulation of insurance sales.  
The provisions of this Article do not regulate the issuance and sale of insurance policies, but apply only to the underlying preneed funeral contracts, whether funded by insurance or trust deposits."
Sec. 12. G.S. 90-210.18(b) reads as rewritten:
"§ 90-210.18. Construction of Article; State Board; members; election; qualifications; term; vacancies.
(b)	The North Carolina Board of Mortuary Science is created as a continuation of the North Carolina Board of Embalmers and Funeral Directors. The Board is the agency for regulation of the practice of funeral service in this State. The Board shall have nine members as follows:
(1)	Four funeral service licensees or persons holding both funeral director's license and an embalmer's license,
(2)	Two persons holding a funeral director's license or a funeral service license, and
(3) Three public members.
A member's term shall be three years and shall expire on December 31 or when his successor has been duly elected or appointed. No member may serve more than two complete consecutive terms.
The six seats on the Board for licensees shall be filled in an election in which every person licensed to practice embalming, funeral directing, or funeral service in this State may vote. No licensee may be nominated, elected, or serve unless he holds a North Carolina license in the class designated for the seat and unless he is engaged in full-time employment in this State in a practice authorized by his license. Any vacancy occurring in an elective seat on the Board shall be filled for the unexpired term by majority vote of the remaining Board members.
The public members of the Board shall have full voting authority. They shall be appointed by the Governor and may neither be licensed under this Article nor employed by a person who is. A vacancy occurring in a public member's seat shall be filled for the unexpired term by the Governor."
Sec. 13. G.S. 90-210.22 reads as rewritten:
"§ 90-210.22. Required meetings of the Board.
The Board shall hold at least two meetings in each year at which examinations shall be given to qualified applicants for licenses. In addition, the Board may meet as often as the proper and efficient discharge of its duties shall require. Five members shall constitute a quorum.”
Sec. 14.  (a) This act becomes effective January   1, 1992, and shall apply to preneed funeral contracts and funded funeral prearrangements made and entered into on or after that date.  G.S. 90-210.31b. shall apply to losses which arise after the effective date of this act.
(b) Any entity licensed by the Commissioner of Banks under Article 13B of Chapter 90 of the General Statutes before the effective date of this act shall be entitled to have its license renewed notwithstanding that it is not a funeral establishment, provided it otherwise satisfies the requirements of this Article.