GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1995

S	1 

SENATE BILL 345

Short Title:  Insurance Omnibus Changes/AB.	(Public)

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Sponsors: Senator Soles.

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Referred to:  Pensions and Retirement/Insurance/State Personnel

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March 9, 1995

A BILL TO BE ENTITLED
AN ACT TO MAKE SUBSTANTIVE CHANGES TO THE INSURANCE LAWS.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 58-2-70 reads as rewritten:
"§ 58-2-70.  Civil penalties or restitution for violations; summary suspension of license or certificate.
(a)	This section applies to any person who is subject to licensure or certification under this Chapter.
(b)	Whenever the Commissioner has reason to believe that any person has violated any of the provisions of this Chapter, any rules adopted under this Chapter, or any order of the Commissioner, the Commissioner may issue and serve upon that person a written statement of charges and a written notice of hearing, to be held at a time and place fixed in the notice. The date for the hearing shall not be less than 10 days after the date of service. It shall be sufficient to give such notice either by delivering it to the person charged or by sending the notice to the last known address of that person by certified mail, return receipt requested. At the time and place fixed for the hearing the person charged shall have an opportunity to answer the charges against him and present evidence on his behalf. Upon good cause shown, the Commissioner may permit any adversely affected person to intervene, appear, and be heard at the hearing by counsel or in person. The Commissioner may consolidate a hearing under this section with a hearing allowed under G.S. 58-63-25 where there is common subject matter involved and subject to procedural requirements set out in both sections being followed.
(c)	In any case where a hearing pursuant to subsection (b) of this section results in the findings by the Commissioner of a violation of any statute, rule, or order specified in subsection (b) of this section, the Commissioner may, in addition to or in lieu of suspending or revoking the license or certification, order the payment of a monetary penalty as provided in subsection (d) of this section or apply to the Superior Court of Wake County for an order directing payment of restitution as provided in subsection (e) of this section, or both. Each day during which a violation occurs shall constitute a separate offense.
(d)	Upon a finding by the Commissioner of a violation as specified in subsection (c) of this section, the Commissioner shall direct the payment of a penalty of not less than one hundred dollars ($100.00) nor more than one thousand dollars ($1,000).  In determining the amount of the penalty, the Commissioner shall consider the degree and extent of harm caused by the violation, the amount of money that inured to the benefit of the violator as a result of the violation, whether the violation was committed willfully, and the prior record of the violator in complying or failing to comply with statutes, rules, or orders applicable to the violator.  The penalty shall be payable to the Commissioner, who shall then forward the clear proceeds of which to the State Treasurer for deposit in the General Fund of the State. Payment of the civil penalty under this section shall be in addition to payment of any other penalty for a violation of the criminal laws of this State.
(e)	Upon application of the Commissioner and a finding by the court of a violation as specified in subsection (c) of this section, the court may order the person who committed the violation to make restitution in an amount that would make whole any person harmed by the violation.
(f)	Restitution to any State agency for extraordinary administrative expenses incurred in the investigation and hearing of the violation may also be ordered by the court in such amount that would reimburse the agency for the expenses.
(g)	Nothing in this section shall prevent the Commissioner from negotiating a mutually acceptable agreement with any person as to the status of the person's license or certificate or as to any civil penalty or restitution.
	."
Sec. 2.  G.S. 58-2-161(a) reads as rewritten:
"(a)	For the purposes of this section 'insurer' includes an entity under Articles 49 and 65 through 67 of this Chapter, the Teachers' and State Employees' Comprehensive Major Medical Plan under Chapter 135 of the General Statutes, and an employer or group of employers that insures its workers' compensation liability under Chapter 97 of the General Statutes."
Sec. 3.  Article 2 of Chapter 58 of the General Statutes is amended by adding a new section to read:
"§ 58-2-171.  Qualifications of actuaries and accountants.
The Commissioner may adopt rules setting forth the qualifications of actuaries and accountants who may certify in financial statements filed by entities under this Chapter as to the financial conditions of those entities.  The qualifications shall be commensurate with the degree of complexity of the actuarial or financial principles applicable to the various statements required."
Sec. 4.  G.S. 58-3-90 reads as rewritten:
"§ 58-3-90.  Revocation, suspension, or restriction of license of foreign company; publication of notice.
(a)	If the Commissioner is of the opinion, upon examination or other evidence, that a foreign insurance company is in an unsound condition; or, if a life insurance company, that its actual funds, exclusive of its capital, are less than its liabilities; or that the company has failed to comply with the statutes, rules, or orders applicable to it; or if the company, its officers, employees, agents, or other representatives refuse to submit to examination or to perform any legal obligation in relation to an examination, he shall revoke or suspend all licenses and authority to do business granted to the company or its agents, and shall give written notification of the revocation or suspension to all of the company's agents in this State; and no new business may thereafter be done by the company or its agents in this State until the company's license and authority to do business is restored by the Commissioner.
(b)	The Commissioner may, after considering the standards under G.S. 58-30-60(b), restrict a foreign insurer's license by prohibiting or limiting the kind or amount of insurance written by that insurer in this State.  The Commissioner shall remove any restriction under this subsection once the Commissioner determines that the operations of the insurer are no longer hazardous to the public or to the insurer's policyholders or creditors."
Sec. 5.  Article 7 of Chapter 58 of the General Statutes is amended by adding a new section to read:
"§ 58-7-22.  Reinsurance agreements in writing.
(a)	Under G.S. 58-7-21 and G.S. 58-7-26, no reinsurance agreement or amendment to any reinsurance agreement may be used to reduce any liability or to establish any asset in any financial statement filed with the Commissioner, unless the reinsurance agreement, amendment, or a binding letter of intent has been duly executed by the parties to the reinsurance agreement no later than the 'as of date' of the financial statement.  In the case of a letter of intent, a reinsurance agreement or an amendment to a reinsurance agreement must be executed within a reasonable period of time, but no later than 90 days after the execution date of the letter of intent, in order for credit to be granted for the reinsurance ceded.
(b)	Every reinsurance agreement executed under G.S. 58-7-21 and G.S. 58-7-26 shall provide that:
(1)	The reinsurance agreement constitutes the entire reinsurance agreement between the parties with respect to the business being reinsured under the agreement and that there are no understandings between or among the parties other than those expressed in the reinsurance agreement; and
(2)	Any change in or modification of the reinsurance agreement is not valid and binding unless it is effected by a written amendment to the reinsurance agreement that is executed and signed by each party to the reinsurance agreement."
Sec. 6.  G.S. 58-7-170(c) reads as rewritten:
"(c)	The cost of investments made by insurers in mortgage loans, authorized by G.S. 58-7-179, with any one person or in mortgage pass-through securities authorized by G.S. 58-7-173(17) that are backed by a  single mortgage pool shall not exceed the lesser of five percent (5%) of the insurer's admitted assets or ten percent (10%) of the insurer's capital and surplus. An insurer shall not invest in additional mortgage loans or in any mortgage pass-through securities without the Commissioner's consent if (i) the admitted value of all the investments held by the insurer exceeds an aggregate of sixty percent (60%) of the admitted assets of the insurer, or if (ii) the admitted value of all mortgage pass-through securities permitted by G.S. 58-7-173(17) exceeds twenty-five percent (25%) of the admitted assets of the insurer, or if (iii) the admitted value of other mortgage loans permitted by G.S. 58-7-179 exceeds forty percent (40%) of the admitted assets of the insurer.
An insurer that, as of October 1, 1995, has mortgage investments that exceed the aggregate limitation specified in this subsection shall submit to the Commissioner no later than January 31, 1996, a plan to bring the amount of mortgage investments into compliance with the limitations by January 1, 2001."
Sec. 7.  G. S. 58-12-30 reads as rewritten:
"§ 58-12-30.  Hearings.
Upon (i)	notification to an insurer by the Commissioner of an adjusted risk-based capital report; or (ii) notification to an insurer by the Commissioner that the insurer's risk-based capital plan or revised risk-based capital plan is unsatisfactory, and the notification constitutes a regulatory action level event with respect to the insurer; or (iii) notification to any insurer by the Commissioner that the insurer has failed to adhere to its risk-based capital plan or revised risk-based capital plan and that the failure has a substantial adverse effect on the ability of the insurer to eliminate the company action level event with respect to the insurer in accordance with its risk-based capital plan or revised risk-based capital plan; or (iv) notification to an insurer by the Commissioner of a corrective order with respect to the insurer, the insurer has a right to a confidential hearing, at which the insurer may challenge any determination or action by the Commissioner. The insurer shall notify the Commissioner of its request for a hearing within five days after the notification by the Commissioner under this section. Upon receipt of the insurer's request for a hearing, the Commissioner shall set a date for the hearing, which date shall be no less than 10 days nor more than 30 days after the date of the insurer's request."
Sec. 8.  G.S. 58-16-5(3) is repealed.
Sec. 9.  Article 16 of Chapter 58 of the General Statutes is amended by adding a new section to read:
"§ 58-16-6.  Conditions of continued licensure.
In order for a foreign insurance company to continue to be licensed, it shall report any changes in the documents filed under G.S. 58-16-5(1)	or G.S. 58-16-5(5), maintain the amounts of capital and surplus specified in G.S. 58-16-5(2), and remain in substantial compliance with the statutes listed in G.S. 58-16-5(6) and G.S. 58-16-5(7)."
Sec. 10.  G.S. 58-19-5(2) reads as rewritten:
"(2)	'Control', including the terms 'controlling', 'controlled by', and 'under common control with', means the direct or indirect possession of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise.  Control is presumed to exist if any person directly or indirectly owns, controls, holds with the power to vote, or holds proxies representing, ten percent (10%) or more of the voting securities of any other person.  This presumption may be rebutted by a showing made in the manner provided by G.S. 58-19-25(j) that control does not exist in fact.  The Commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect."
Sec. 11.  G.S. 58-19-5(5) reads as rewritten:
"(5)	'Person' means an individual, corporation, partnership, association, joint stock company, trust, unincorporated organization, or any similar entity or any combination of the foregoing acting in concert.  "
Sec. 12.  G.S. 58-30-180(b)(1) reads as rewritten: 
"(1)	Reserving amounts for the payment of expenses of administration and the payment of claims of secured creditors, to the extent of the value of the security held, and claims falling within the priorities established in G.S. 58-30-220(1) and (6);".
Sec. 13.  G.S 58-30-220 reads as rewritten:
"§ 58-30-220.  Priority of distribution.
					The priority of distribution of claims from an insurer's estate shall be in accordance with the order in which each class of claims is set forth in this section.  Every claim in each class shall be paid in full; or adequate funds shall be retained for payment before the members of the next class receive any payment.  No subclasses shall be established within any class.  The order of distribution of claims shall be:
(1)	The receiver's costs and expenses of administration.
(2)	All claims under policies for losses incurred, including claims of third parties under liability policies, and all covered claims against the insurer paid by a guaranty association or foreign guaranty association.  All claims under life insurance and annuity policies, whether for death proceeds, annuity proceeds, or investment values, and all claims for funds or consideration held under funding agreements, as defined in G.S. 58-7-16, shall be treated as loss claims under policies.
(3)	The reasonable expenses of a domestic or foreign guaranty association in handling covered claims.
(4)	Claims of insurance pools and underwriting associations; and claims of reinsureds arising out of reinsurance agreements.
(5)	Claims of the federal or any state or local government or taxing authority, including claims for taxes incurred either before or after the entry of an order of liquidation against the insurer.
(6)	Debts due to employees for services performed while in the employ of the insurer to the extent that they do not exceed one thousand dollars ($1,000) and represent payment for services performed within one year of the date of the filing of a successful petition for an order of liquidation against the insurer.  Officers and directors are not entitled to the benefit of this priority.  This priority is in lieu of any other similar priority that may be authorized by law as to wages or compensation of employees.
(7)	Claims of general creditors.
(8)	Claims filed after the date set for the filing of claims by the liquidator or by the court.
(9)	Claims of shareholders or other owners."
Sec. 14.  Article 31 of Chapter 58 of the General Statutes is amended by adding a new section to read:
"§ 58-31-52.  State motor vehicle safety program.
(a)	Findings, Policy, and Purpose. – Motor vehicle accidents exact a terrible toll of human tragedy and suffering as well as national resources within the United States.  The same is true, on a smaller scale, within North Carolina State government.  Every year State employees or members of the general public are killed or injured, and a significant portion of the State's financial resources is expended as a direct result of accidents involving State-owned vehicles.  Accordingly, it is North Carolina policy that the State-owned motor vehicle fleet and vehicles used on behalf of the State be operated and maintained in such a manner as to minimize deaths, injuries, and costs.  The purpose of this section is to direct the Commissioner of Insurance to develop a program to provide policy, requirements, procedures, technical information, and standards for administering a State vehicle safety program, which will apply to all State personnel involved in the administration and operation of vehicles on behalf of the State.
(b)	The Commissioner shall develop and adopt a State Motor Vehicle Safety Program to assure that State-owned motor vehicles are operated and maintained in a safe manner.
(c)	In developing the program, the Commissioner shall include the following:
(1)	Basic criteria concerning qualifications, screening, and education of drivers.
(2)	Required and prohibited driving practices.
(3)	Safety maintenance requirements.
(4)	Accident reporting and review procedures.
(d)	The requirements and procedures established under the program shall apply to all agencies and persons operating vehicles on behalf of the State, unless specifically exempted by the Commissioner.  Agencies may adopt more stringent requirements and procedures than those adopted by the Commissioner under this section.  The administration of the program in each agency shall be the responsibility of each agency head or a designee of the agency head.
(e)	The provisions of Chapter 150B of the General Statutes do not apply to the program developed and adopted under this section."
Sec. 15.  G.S. 58-33-25(e) reads as rewritten:
"(e)	A limited representative may receive qualification for one or more licenses without examination for the following kinds of insurance:
(1),	(2)  Repealed by Session Laws 1989, c. 485, s. 19.
	(3)	Credit Life, Accident and Health.
(4)	Credit, as specified in G.S. 58-7-15(17).
(5)	Travel Accident and Baggage.
(6)	Motor Club.
(7)	Dental Services.
(8)	Credit Property Insurance and Single Interest Automobile Physical Damage Insurance when either is made in connection with a loan.
(9)	Bail bonds executed or countersigned by surety bondsmen under Article 71 of this Chapter.
(10)	Credit unemployment.
(11)	Vehicle service agreements and mechanical breakdown insurance."
Sec. 16.  Article 33 of Chapter 58 of the General Statutes is amended by adding a new section to read:
"§ 58-33-132.  Qualifications of instructors.
The Commissioner may adopt rules setting forth the requisite qualifications for instructors of prelicensing and continuing education courses under this Article."
Sec. 17.   G.S. 58-42-55 reads as rewritten:
"§ 58-42-55.  Expiration.
This Article shall expire on July 1, 1997."
Sec. 18.  G.S. 58-45-35(b) reads as rewritten:
"(b)	If the Association determines that the property is insurable and that there is no unpaid premium due from the applicant for prior insurance on the property, the Association, upon receipt of the premium, or part of the premium, as is prescribed in the plan of operation, shall cause to be issued a policy of essential property insurance and shall offer additional extended coverage, optional perils endorsements, crime insurance, separate policies of windstorm and hail insurance, or their successor forms of coverage, for a term of one year or three years.  Any policy issued under the this section shall be renewed, upon application, as long as the property "is insurable property."
Sec. 19.  Article 45 of Chapter 58 of the General Statutes is amended by adding a new section to read:
"§ 58-45-95.  Beach Plan reserve fund.
(a)	The Association shall administer a separate fund for the purpose of adjusting and paying losses incurred under this Article.  All Association member insurers shall make contributions to the fund in accordance with rules and procedures adopted by the Association and approved or modified by the Commissioner.  The fund is for the purpose of paying losses incurred by risks insured under policies issued by the Association.  The fund shall comprise investments of the same character and quality as those that are eligible investments for fire and marine insurance companies.
(b)	The fund shall be administered by the Association in accordance with the provisions of G.S. 58-3-75.  With respect to the reserving requirements of Association member insurers, all contributions to the fund shall be credited to the reserves required by G.S. 58-3-75.
(c)	Neither the principal of the fund nor any investment income accruing to the assets of the fund shall be subject to any tax.
(d)	The principal and investment income of the fund specified in subsection (c) of this section remain the property of the member insurers of the Association commensurate with their respective contributions to the fund.  The Association shall serve only as the administrator of the fund."
Sec. 20.  Article 46 of Chapter 58 of the General Statutes is amended by adding a new section to read:
"§ 58-46-65.  FAIR Plan reserve fund.
(a)	The Association shall administer a separate fund for the purpose of adjusting and paying losses incurred under this Article.  All Association member insurers shall make contributions to the fund in accordance with rules and procedures adopted by the Association and approved or modified by the Commissioner.  The fund is for the purpose of paying losses incurred by risks insured under policies issued by the Association.  The fund shall comprise investments of the same character and quality as those that are eligible investments for fire and marine insurance companies.
(b)	The fund shall be administered by the Association in accordance with the provisions of G.S. 58-3-75.  With respect to the reserving requirements of Association member insurers, all contributions to the fund shall be credited to the reserves required by G.S. 58-3-75.
(c)	Neither the principal of the fund nor any investment income accruing to the assets of the fund shall be subject to any tax.
(d)	The principal and investment income of the fund specified in subsection (c) of this section remain the property of the member insurers of the Association commensurate with their respective contributions to the fund.  The Association shall serve only as the administrator of the fund."
Sec. 21.  Article 50 of Chapter 58 of the General Statutes is amended by adding a new section to read:
"§ 58-50-149.  Limit on cessions to the Reinsurance Pool.
In addition to any individual or group previously reinsured in accordance with G.S. 58-50-150(g)(1), the Pool shall only reinsure a health benefit plan issued or delivered for original issue by a reinsuring carrier on or after October 1, 1995, if the health benefit plan provides coverage to a small employer with no more than 25 eligible employees, including self-employed individuals."
Sec. 22.  G.S. 58-53-60 reads as rewritten:
"§ 58-53-60.  Premium.
(a)	The premium for the converted policy or group conversion trust certificate shall be determined in accordance with the insurer's table of premium rates applicable to the age and class of risk to be covered under that policy and to the type and amount of insurance provided.
(b)	All insurers licensed to do business in this State, who issue conversion policies or group conversion trust certificates under this Part, shall have the right to increase that element of the premium that applies to hospital room and board benefit increases provided for in G.S. 58-53-95(5) by an amount proportionate to the increase promulgated by the Commissioner. Such premium increases shall be filed with the Commissioner.
(c)	All premium rates and adjustments to premium rates for converted policies or group conversion trust certificates shall be reasonable and must be filed with and approved by the Commissioner prior to use. A premium rate shall be deemed to be reasonable if it can be demonstrated by the insurer that the premium charged is expected to produce an incurred loss ratio to earned premiums of not less than sixty percent (60%) for all policies or group conversion trust certificates providing similar benefits offered and issued by the insurer. If an insurer experiences an incurred loss ratio of greater than eighty percent (80%) for all such policies, it shall be deemed reasonable for that insurer to increase premium rates to a level that will produce a prospective incurred loss ratio of no greater than eighty percent (80%), and the insurer shall file such new rates with the Commissioner not more often than once a year."
Sec. 23.  (a)	Article 58 of Chapter 58 of the General Statutes is amended by adding the following new sections to read:
"§ 58-58-12.  Universal life insurance defined.
Universal life insurance means any individual or group life insurance policy under the provisions of which separately identified interest credits, other than in connection with dividend accumulations, premium deposit funds, or other supplementary accounts, and mortality and expense charges are made to the policy.  A universal life insurance policy may provide for other credits and charges, such as charges for the cost of benefits provided by rider.
"§ 58-58-13.  Variable life insurance defined.
Variable life insurance means any individual or group policy or contract that provides for life insurance, the amount or duration of which varies according to the investment experience of any separate account or accounts established and maintained by the insurer as to the policy or contract under G.S. 58-7-95 or under the corresponding law of the state of domicile of a foreign or alien insurer."
(b)	Article 58 of Chapter 58 of the General Statutes is further amended by adding the following new sections to read:
"§ 58-58-22.  Individual policy standard provisions.
No policy of individual life insurance shall be delivered in this State unless it contains in substance the following provisions, or provisions that in the Commissioner's opinion are more favorable to the person insured:
(1)	Grace Period. – A provision that the insured is entitled to a grace period of 31 days for the payment of any premium due except the first, during which grace period the death benefit coverage shall continue in force.  The policy may provide that if a claim arises under the policy during the grace period, the amount of any premium due or overdue may be deducted from any amount payable under the policy in settlement.
(2)	Incontestability. – A provision that the validity of the policy shall not be contested, except for nonpayment of premium, once it has been in force for two years after its date of issue; and that no statement made by any person insured under the policy about that person's insurability shall be used during the person's lifetime to contest the validity of the policy after the insurance has been in force for two years.
(3)	Misstatement of Age or Gender. – A provision specifying an equitable adjustment of premiums or benefits, or both, to be made if the age or gender of the person insured has been misstated; the provision to contain a clear statement of the method of adjustment to be used.
(4)	Suicide. – A provision that may not limit payment of benefits for a period more than two years after the date of issue of the policy because of suicide and that provides for at least the return of premiums paid on the policy if there is suicide during the two-year period.
(5)	Reinstatement. – A provision that, unless the policy has been surrendered for its cash surrender value, or its cash surrender value has been exhausted, the policy will be reinstated at any time within five years after the date of premium default upon written application therefor, the production of evidence of insurability satisfactory to the insurer, the payment of all overdue premiums and the payment of reinstatement of any other indebtedness to the insurer upon the policy, all with interest at the rate specified.
"§ 58-58-23.  Standard provisions for annuity and pure endowment contracts.
No annuity or pure endowment contract, except a reversionary or survivorship annuity and except a group annuity contract, shall be delivered or issued for delivery in this State unless it contains in substance the following provisions or provisions that in the opinion of the Commissioner are more favorable to the holders of the contracts:
(1)	Grace Period. – A provision for a grace period of not less than 31 days within which any stipulated payment to the insurer falling due after the first payment may be made.  During the grace period the contract shall continue in full force.  If a claim arises under the contract because of death before the expiration of the grace period and before the overdue payment to the insurer is made, the amount of the payments, with interest on any overdue payments, may be deducted from any amount payable under the contract.
(2)	Incontestabliity. – If any statements are required as a condition of issue, there shall be a provision that the contract shall be incontestable during the lifetime of the person or of each of the persons as to whom the statements are required after it has been in force for a period of two years after its date of issue; except for nonpayment of stipulated payments to the insurer.
(3)	Misstatements of Age or Gender. – A provision that if the age or gender of any person upon whose life the contract is made has been misstated, the amount payable or benefits accruing under the contract shall be such as the stipulated payment or payments to the insurer would have been according to the correct age or gender; and if the insurer makes an overpayment because of the misstatement, that amount with interest at the rate specified in the contract may be charged against any current or subsequent payment by the insurer under the contract.
(4)	Reinstatement. – A provision that the contract may be reinstated at any time within one year after a default in making stipulated payments to the insurer, unless the cash surrender value has been paid; but all overdue stipulated payments and any indebtedness to the insurer on the contract shall be paid or reinstated with interest at a rate specified in the contract.  When applicable, the insurer may also require evidence of insurability satisfactory to the insurer."
(c)	Article 58 of Chapter 58 of the General Statutes is further amended by adding a new section to read:
"§ 58-58-42.  Viatical settlements.
(a)	Definitions. – As used in this section:
(1)	'Broker' means a person who, for consideration and on behalf of another,  offers or advertises the availability of viatical settlements, introduces viators to providers, or offers or attempts to negotiate viatical settlement contracts between a viator and one or more providers; but does not mean an attorney, accountant, or financial planner retained to represent a viator and whose compensation is not paid by a provider.
(2)	'Policy' means an individual life insurance policy or a certificate under a group life insurance policy.
(3)	'Provider' means a person who enters into a viatical settlement contract with a viator. 'Provider' does not mean:
a.	A licensed lending institution that takes an assignment of a policy as collateral for a loan.
b.	The issuer of a policy providing accelerated benefits under 11 NCAC 12.1200.
c.	A natural person who enters into no more than one agreement in a calendar year for the transfer of a policy for any value less than the expected death benefit.
(4)	'Viatical settlement contract' or 'contract' means a written agreement entered into between a provider and a viator that establishes the terms under which the provider will pay consideration that is less than the expected death benefit of the viator's policy in return for the viator's assignment, transfer, sale, devise, or bequest of the death benefit or ownership of the policy to the provider.
(5)	'Viator' means the owner or holder of a policy who has a catastrophic or life-threatening illness or condition and who enters into a viatical settlement contract.
(b)	Registration. – No person may act as a provider or enter into or solicit a contract without first registering with the Commissioner.  Registration shall be completed by the applicant on a form prescribed by the Commissioner.  The Commissioner may require the applicant to fully disclose the identity of all stockholders, partners, officers, and employees.  The Commissioner may refuse registration of any partnership, corporation, or other business entity if not satisfied that any officer, employee stockholder, or partner who may materially influence the applicant's conduct meets the standards of this section.  Registration of a partnership, corporation, or other business entity authorizes all members, officers, and designates employees to act as providers under the registration; and all of those persons must be named in the application and any supplements to the application.  Before any registration is complete, the Commissioner shall make an investigation of each applicant and may register the applicant if the Commissioner finds that the applicant:
(1)	Has provided a detailed plan of operation.
(2)	Is competent and trustworthy and intends to act in good faith in the capacity involved by the license applied for.
(3)	Has a good business reputation and has had experience, training, or education so as to be qualified in the business for which the license is applied.
(4)	If a corporation is incorporated under the laws of this State or a foreign corporation authorized to transact business in this State.
No registration is complete for any nonresident applicant, unless a written designation of an agent for service of process is filed and maintained with the Commissioner or the applicant has filed with the Commissioner the applicant's written irrevocable consent that any action against the applicant may be commenced against the applicant by service of process on the Commissioner.
(c)	Enforcement. – The Commissioner may issue a cease and desist order upon any provider if the Commissioner finds that:
(1)	There was any misrepresentation in the application for registration;
(2)	The provider has been guilty of fraudulent or dishonest practices, is subject to a final administrative action, or is otherwise shown to be untrustworthy or incompetent to act as a provider;
(3)	The provider demonstrates a pattern of unreasonable payments to policyowners;
(4)	The provider has been convicted of a felony or any misdemeanor of which criminal fraud is an element; or
(5)	The provider has violated a provision of this section.
(d)	Approval of Contracts. –  No provider may use any viatical settlement contract in this State unless it has been filed with and approved by the Commissioner.  Any contract form filed with the Commissioner is deemed to be approved if it has not been disapproved within 90 days after the filing.  The Commissioner shall disapprove a contract form if, in the Commissioner's opinion, any provision of the contract is unreasonable, contrary to the interest of the public, or otherwise misleading or unfair to the policy owner.
(e)	Reporting Requirements. – Each provider shall file with the Commissioner on or before March 1 of each year a statement containing the information required by the rules adopted by the Commissioner.
(f)	Examination. – The Commissioner may, when the Commissioner deems it to be reasonably necessary to protect the interests of the public, examine the business and affairs of any provider or applicant for registration.  The Commissioner may order any provider or applicant to produce records, books, files, or other information that is necessary to ascertain whether or not the provider or applicant is acting or has acted in violation of this section or otherwise contrary to the public interest.  The expenses incurred in conducting an examination shall be paid by the provider or applicant.  Names and individual identification data for all viators are confidential and shall not be disclosed by the Commissioner.  Records of all transactions of contracts shall be maintained by the provider and shall be available to the Commissioner for inspection during reasonable business hours.
(g)	Disclosure. – A provider shall disclose the following information to the viator no later than the date the contract is signed by all parties:
(1)	Options other than the contract for a person with a catastrophic or life-threatening illness, including, but not limited to, accelerated benefits offered by the issuer of the policy.
(2)	The fact that some or all of the contract consideration may be taxable, and that assistance should be sought from a personal tax advisor.
(3)	The fact that the contract consideration could be subject to the claims of creditors.
(4)	The fact that receipt of the contract consideration may adversely affect the viator's eligibility for Medicaid or other government benefits or entitlements; and that advice should be obtained from the appropriate government agencies.
(5)	The viator's right to rescind a contract within 30 days after the date it is executed by all parties or within 15 days after the receipt of the contract consideration by the viator, whichever is less, as provided in subsection (h) of this section.
(6)	The date by which the contract consideration will be available to the viator and the source of the consideration.
(h)	General Rules. – A provider entering into a contract with a viator shall first obtain:
(1)	A written statement from a licensed attending physician that the viator is of sound mind and under no constraint or undue influence.
(2)	A witnessed document in which the viator (i) consents to the contract, (ii) acknowledges the catastrophic or life-threatening illness, (iii) represents that the viator has a full and complete understanding of the contract, (iv) represents that the viator has a full and complete understanding of the benefits of the policy, and (v) releases the medical records and acknowledges that the contract has been entered into freely and voluntarily.
All medical information solicited or obtained by any provider is subject to all State laws relating to confidentiality of medical information.  All contracts entered into in this State shall contain an unconditional refund provision for at least 30 days after the date of the contract, or 15 days after the receipt of the viatical settlement proceeds, whichever is less.
(i)	Contract Consideration. – Immediately upon receipt from the viator of documents to effect the transfer of the policy, the provider shall direct the contract consideration to an escrow or trust account managed by a trustee or escrow agent in a bank approved by the Commissioner, pending acknowledgment of the transfer by the issuer of the policy.  The trustee or escrow agent shall transfer the proceeds that are due to the viator immediately upon receipt of acknowledgment of the transfer from the insurer.  Failure to tender the contract consideration by the date disclosed to the viator renders the contract null and void.
(j)	Authority to Adopt Standards. – The Commissioner may:
(1)	Adopt rules to implement this section.
(2)	Establish standards for evaluating reasonableness of payments under contracts.  This authority includes regulation of discount rates used to determine the amount paid in exchange for assignment, transfer, sale, devise, or bequest of a benefit under a policy.
(3)	Establish appropriate registration and other regulatory requirements for brokers.
(4)	Require a bond.
(k)	Unfair Trade Practices. – A violation of this section shall be considered an unfair trade practice under Article 63 of this Chapter."
Sec. 24.  G.S. 90-21.20 reads as rewritten:
"§ 90-21.20.  Reporting by physicians and hospitals of wounds, injuries and illnesses.
(a)	Such cases of wounds, injuries or illnesses as are enumerated in subsection (b) shall be reported as soon as it becomes practicable before, during or after completion of treatment of a person suffering such wounds, injuries, or illnesses. If such case is treated in a hospital, sanitarium or other medical institution or facility, such report shall be made by the Director, Administrator, or other person designated by the Director or Administrator, or if such case is treated elsewhere, such report shall be made by the physician or surgeon treating the case, to the chief of police or the police authorities of the city or town of this State in which the hospital or other institution, or place of treatment is located. If such hospital or other institution or place of treatment is located outside the corporate limits of a city or town, then the report shall be made by the proper person in the manner set forth above to the sheriff of the respective county or to one of his deputies.
(b)	Cases of wounds, injuries or illnesses which shall be reported  by physicians, and hospitals include every case of a bullet wound, gunshot wound, powder burn or any other injury arising from or caused by, or appearing to arise from or be caused by, the discharge of a gun or firearm, every case of illness apparently caused by poisoning, every case of a burn-related injury from fire, every case of a wound or injury caused, or apparently caused, by a knife or sharp or pointed instrument if it appears to the physician or surgeon treating the case that a criminal act was involved, and every case of a wound, injury or illness in which there is grave bodily harm or grave illness if it appears to the physician or surgeon treating the case that the wound, injury or illness resulted from a criminal act of violence.  As used in this section, 'burn-related injury from fire' means, regardless of the degree of burn, a burn injury to five percent (5%) or more of the body or any burn to the upper respiratory tract.
(c)	Each report made pursuant to subsections (a) and (b) of this section shall state the name of the wounded, ill or injured person, if known,  and the age, sex, race, residence or present location, if known, and the character and extent of his injuries.  In cases of burn-related injuries from fires, the law enforcement authorities to whom reports are made under subsection (a) of this section shall, within five working days after receiving those reports, forward copies of those reports to the Attorney General, who may investigate the injuries under Article 1 of Chapter 69 of the General Statutes.
(d)	Any hospital, sanitarium, or other like institution or Director, Administrator, or other designated person, or physician or surgeon participating in good faith in the making of a report pursuant to this section shall have immunity from any liability, civil or criminal, that might otherwise be incurred or imposed as the result of the making of such report."
Sec. 25.  Section 208(d) of Chapter 757 of the 1985 Session Laws, as amended by Section 1 of Chapter 480 of the 1991 Session Laws, is repealed.
Sec. 26.  If any section or provision of this act is declared unconstitutional or invalid by the courts, it does not affect the validity of the act as a whole or any part other than the part so declared to be unconstitutional or invalid.
Sec. 27.  Sections 1, 2, 5, 8 through 12, 18 through 20, 23, and 24 become effective October 1, 1995, and apply to claims submitted, agreements and settlements entered into, and actions occurring on or after that date.  The remainder of this act is effective upon ratification.