First District Court of Appeal rules in favor of Florida’s Office of Insurance Regulation Regarding Viaticals
|Media Notice — 1st DCA Coventry Opinion and Chronology of Litigation|
|Wednesday, June 16, 2010|
On June 9, the First District Court of Appeal ruled in favor of the Office of Insurance Regulation (Office) in its litigation with Coventry First, LLC, Florida (Coventry). The Court issued an opinion which affirmed the Office’s right to review non-Florida related records for viatical settlement providers.
A viatical settlement, also referred to as a life settlement, is the sale of a life insurance policy by the policy owner before the policy matures. Such a sale, at a price discounted from the face amount of the policy but usually in excess of the premiums paid or current cash surrender value, provides the seller an immediate cash settlement. Generally, viatical settlements involve insured individuals with a shorter life expectancy. This is a practical way to pay extremely high health insurance premiums that severely ill people with short life expectancy face. A life settlement is a similar transaction but involves insureds with longer life expectancies. From the viewpoint of the investor, purchasing a viatical settlement is similar to buying a zero coupon bond with an uncertain maturity date. The return depends on the seller’s life expectancy and when he or she dies. The viatical settlements grew in popularity in the United States in the late 1980s, when the AIDS epidemic peaked. Viatical settlements offered a way to extract value from the policy while the policyholder was still alive. At that time, the AIDS mortality rate was very high, and life expectancy after diagnosis was typically short. The investors were reasonably sure that they would collect in a relatively short time. This combination of events caused an increase in viatical settlements as both investors and viators saw an opportunity for mutual benefit. Viatical settlements developed a bad reputation in the investing community. The companies that purchased them from policy holders typically resold them to individual investors. Salespeople were paid large commissions to push the settlements, which were not conventional investments and which were misunderstood by many investors. The government regulatory agencies had little experience and few regulations dealing with viatical settlements, and the industry attracted some unscrupulous dealers.
Attorney Lars Soreide, a Florida based securities lawyer, said recently, “It is of utmost importance that you do your research before investing in viaticals. They can be very risky investments and end up costing you, the investor, a lot of money.” Soreide Law Group represents clients who are victims of investment fraud.
If you feel you’ve been defrauded by a viatical sale that your broker or your insurance agent sold you, contact Soreide Law Group. For more information about our services please visit: www.stockmarketlawsuit.com or call and speak to an attorney at: (888) 760-6552.
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