SB-1534, As Passed Senate, November 13, 2008

SUBSTITUTE FOR

SENATE BILL NO. 1534

     A bill to amend 1956 PA 218, entitled

"The insurance code of 1956,"

by amending section 2080 (MCL 500.2080), as amended by 1986 PA 318.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 2080. (1) It shall be is unlawful for any life or

accident insurer authorized to do business in this state to own,

manage, supervise, operate, or maintain a mortuary or undertaking

establishment, or to permit its officers, agents, or employees to

own or maintain any such funeral or undertaking establishment.

     (2) Except as otherwise provided in subsection (6), it shall

be is unlawful for any life insurance, sick or funeral benefit

company, or any company, corporation, or association engaged in a

similar business to contract or agree with any funeral director,

undertaker, or mortuary to the effect that such the funeral

director, undertaker, or mortuary shall conduct conducts the

funeral of any person insured by such the company, corporation, or

association.

     (3) A funeral establishment, cemetery, or seller shall not be

licensed as an insurance agent producer under chapter 12 other than

as a limited licensee pursuant to this subsection and chapter 12. A

funeral establishment, cemetery, or seller shall not be a limited

life insurance agent producer unless that funeral establishment,

cemetery, or seller provides a written assurance to the

commissioner at the time of application for the limited licensure

and with each license renewal thereof that he or she has read and

understands the conditions contained in subsection (9) and agrees

to comply with those conditions. A person licensed as a limited

life insurance agent producer under this subsection and chapter 12

shall be is authorized and licensed to sell only an associated life

insurance policies policy or annuity contracts contract and shall

is not be authorized or licensed to sell any other type of

insurance policy or annuity contract. A person licensed as a

limited life insurance agent producer under this subsection and

chapter 12 to sell associated life insurance policies or annuity

contracts shall not sell cemetery goods or services or funeral

goods or services unless all of the conditions provided in

subsection (9) are met. A person licensed as a life insurance agent

producer, other than a limited life insurance agent producer, shall

not sell cemetery goods or services or funeral goods or services or

be associated with a funeral establishment, cemetery, or seller.

Notwithstanding any other provision in this act, a funeral

establishment, cemetery, or seller may advise customers or

potential customers of the availability of life insurance, the

proceeds of which may be assigned pursuant to subsection (6), and

may provide application forms and other information in regard to

such that life insurance. If an application form is provided, the

funeral establishment, cemetery, or seller shall also provide to

the person a list annually prepared by the commissioner setting

forth the life insurance companies offering in Michigan associated

life insurance policies or annuity contracts. The list shall

include the name, address, and telephone number of an agent a

producer for each of the life insurance companies listed. The list

also shall include a statement that a person who is insured under

any life insurance policy or annuity contract may assign all or a

portion of the proceeds, not to exceed the amount provided in

subsection (6)(g), of the existing life insurance policy or annuity

contract for the payment of funeral services and or goods or

cemetery services or goods to any funeral establishment, cemetery,

or seller which that has accepted any other assignment of an

associated life insurance policy or annuity contract during that

calendar year. The funeral establishment, cemetery, or seller shall

accept an assignment on the proceeds from any associated or

nonassociated life insurance policy or annuity contract pursuant to

subsection (6), and this requirement on the funeral establishment,

cemetery, or seller shall be set forth in the statement prepared by

the insurance commissioner. The assignor or the person or persons

legally entitled to make funeral arrangements for the person whose

life was insured may contract with the funeral establishment,

cemetery, or seller of his or her choice for the rendering of the

funeral goods or services or cemetery goods or services. Each

Except as otherwise provided in this subsection, each associated

life insurance policy or annuity contract delivered or issued for

delivery in this state shall have a death benefit that is

sufficient to cover the initial contract price of the cemetery

goods or services or funeral goods or services and that increases

at an annual rate of not less than the consumer price index.

However, a life insurer may provide an associated life insurance

policy or annuity contract with a limited death benefit to an

insured who does not meet insurance requirements for a policy that

provides immediate full coverage or who chooses not to answer

medical questions required for a policy that provides immediate

full coverage. An associated life insurance policy or annuity

contract with a limited death benefit shall disclose in boldfaced

type that the death benefit will not be sufficient to cover the

initial contract price for the cemetery goods and services or

funeral goods and services for a period of up to 2 years if the

premium is not paid in full and that during this period the price

for those goods and services may increase at a rate higher than the

increase in the consumer price index for this period.

     (4) A person shall not be designated as the beneficiary in any

policy of life or accident insurance whereby the beneficiary,

directly or indirectly, shall, in return for all or a part of the

proceeds of such the policy of insurance, furnish cemetery services

or goods or funeral services or goods in connection therewith.

     (5) Except as otherwise provided in subsection (6), it shall

be unlawful for any life or accident, or sick or funeral benefit

company, or any person, company, corporation, or association, to

offer or furnish goods or services or anything but money to its

insureds or to his or her heirs, representatives, attorneys,

relatives, associates, or assigns in any connection with, or by way

of encumbrance, assignment, payment, settlement, satisfaction,

discharge, or release of any insurance policy. However, this

subsection shall does not prohibit any company, corporation, or

association from furnishing medical, surgical, or hospital service.

     (6) Notwithstanding any other provision in this act, a life

insurer may write a life insurance policy or annuity contract which

that is subject to an assignment of the proceeds of the insurance

policy or annuity contract as payment for cemetery services or

goods or funeral services or goods as provided in this subsection

regardless of the relationship between the life insurer and the

assignee. An assignment of the proceeds of the insurance policy or

annuity contract pursuant to this subsection shall be in writing on

a form approved by the commissioner. A predeath assignment of the

proceeds of a life insurance policy or annuity contract as payment

for cemetery services or goods or funeral services or goods is void

unless all of the following conditions and criteria are met:

     (a) The assignment is an inseparable part of the contract for

the cemetery services or goods or funeral services or goods for

which the assigned proceeds serve as payment.

     (b) The assignment is revocable by the assignor, assignor's

successor, or if the assignor is the insured by the representative

of the insured's estate prior to the provision of the cemetery

services or goods or funeral services or goods.

     (c) The contract for funeral services or goods or cemetery

services or goods and the assignment provide that upon revocation

of the assignment, the contract for the cemetery services or goods

or funeral services or goods is revoked and cemetery services or

goods or funeral services or goods may be obtained from any

cemetery, funeral establishment, or seller.

     (d) The assignment contains the following disclosure in

boldfaced type:

     "This assignment may be revoked by the assignor or assignor's

successor or, if the assignor is also the insured and deceased, by

the representative of the insured's estate before the rendering of

the cemetery services or goods or funeral services or goods. If the

assignment is revoked, the death benefit under the life insurance

policy or annuity contract shall be paid in accordance with the

beneficiary designation under the insurance policy or annuity

contract."

     (e) The assignment provides for all of the following:

     (i) That the actual price of the cemetery services or goods or

funeral services or goods delivered at the time of death may be

more than or less than the price set forth in the assignment.

     (ii) For the assignment of an associated life insurance policy

or annuity contract, that any increase in the price of the cemetery

services or goods or funeral services or goods shall does not

exceed the ultimate death benefit under the life insurance policy

or annuity contract. This requirement does not apply to an

insurance policy or annuity contract with a limited death benefit

during the period that the limited death benefit is in effect.

During this period, neither the beneficiary nor the seller is

obligated to fulfill the terms of the contract for the cemetery

services or goods or funeral services or goods for which the

assigned proceeds serve as payment and the assignment of the

associated life insurance policy or annuity contract may be

revoked.

     (iii) For the assignment of a nonassociated life insurance

policy or annuity contract, that any increase in the price of the

cemetery services or goods or the funeral services or goods shall

not exceed the consumer price index or the retail price list in

effect when the death occurs, whichever is less.

     (iv) That if the ultimate death benefit under a life insurance

policy or annuity contract exceeds the price of the cemetery

services or goods or funeral services or goods at the time of

performance, the excess amount shall be distributed to the

beneficiary designated under the life insurance policy or annuity

contract or the insured's estate.

     (v) That any addition to or modification of the contract for

cemetery services or goods or funeral services or goods does not

revoke the assignment or the contract for the cemetery services or

goods or funeral services or goods which that are not affected by

the addition or modification for which the assigned proceeds are

payment unless the assignment is revoked.

     (f) The assignment is limited to that portion of the proceeds

of the life insurance policy or annuity contract which that is

needed to pay for the cemetery services or goods or funeral

services or goods for which the assignor has contracted.

     (g) In the case of For an associated life insurance policy or

annuity contract, the death benefit of the life insurance policy or

annuity contract which is subject to the assignment does not exceed

$5,000.00 when the first premium payment is made on the life

insurance policy or annuity contract. In the case of For a

nonassociated life insurance policy or annuity contract, the

initial amount of proceeds assigned does not exceed $5,000.00. The

maximum amounts in this subdivision shall be adjusted annually in

accordance with the consumer price index.

     (h) The assignment shall contain the dispute resolution rights

set forth in subsection (8). After the death of the insured but

before the cemetery services or goods or funeral services or goods

are provided, the funeral establishment, cemetery, or seller shall

provide to a representative of the insured's estate a separate

document entitled, "dispute resolution disclosure statement," which

shall clearly set forth the dispute resolution rights set forth in

subsection (8). The dispute resolution disclosure statement shall

be filed with the commissioner and shall be considered approved

unless disapproved within 30 days after the submission. The

language used to set forth the dispute resolution rights in

subsection (8) shall be written in a manner calculated to be

understood by a person of ordinary intelligence.

     (i) The assignor and not the assignee is responsible for

making the premium payments due on the life insurance policy or

annuity contract. This subdivision does not apply to an insurance

agent producer when acting as a fiduciary pursuant to section 1207.

     (j) After the death of the insured but before the cemetery

services or goods or funeral services or goods are provided, the

representative of the insured's estate is provided with a current

price list for the cemetery services or goods or funeral services

or goods provided pursuant to the assignment.

     (k) At the time the assignment is made, the assignee complies

with the price disclosure rules of the federal trade commission

prescribed in 16 C.F.R., CFR part 453 , whether or not the rules by

their own terms apply to the offering.

     (l) At the time the assignment is made, the assignor certifies

that the insured does not have in effect other life insurance

policies or annuity contracts that have been assigned as payment

for cemetery goods or services or funeral goods or services which

together with the additional assignment would have an aggregate

face value in excess of the limitation provided in subdivision (h)

(g).

     (m) For the assignment of a nonassociated life insurance

policy or annuity contract, the assignment complies with both of

the following:

     (i) The assignment is sufficient to cover the initial contract

price of the cemetery goods or services or funeral goods or

services.

     (ii) The assignment provides that any increase in the price of

the cemetery services or goods or the funeral services or goods

shall not exceed the consumer price index or the retail price list

in effect when the death occurs, whichever is less.

     (7) An insurer or an insurance agent producer shall not make a

false or misleading statement, oral or written, regarding an

assignment subject to subsection (6) or regarding the rights or

obligations of any party or prospective party to such an the

assignment. An insurer or an insurance agent producer shall not

advertise or promote an assignment subject to subsection (6) in a

manner which that is false, misleading, deceptive, or unfair. The

commissioner shall promulgate rules regulating the solicitation of

plans promoting assignments subject to subsection (6) to protect

against solicitations which that are intimidating, vexatious,

fraudulent, or misleading, or which take unfair advantage of a

person's ignorance or emotional vulnerability.

     (8) After the cemetery services or goods or funeral services

or goods are provided, the funeral establishment, cemetery, or

seller shall provide to a representative of the insured's estate a

statement to be signed by the representative of the insured's

estate authorizing the release of the assignment proceeds for the

payment of the cemetery services or goods or funeral services or

goods. The insurer shall release to the funeral establishment,

cemetery, or seller the assignment proceeds upon receipt of the

authorization statement signed by a representative of the insured's

estate. If a representative of the insured's estate fails to sign

the authorization statement, the following shall take place:

     (a) The funeral establishment, cemetery, or seller shall

provide the representative of the insured's estate with a dispute

resolution notice, a copy of which is to be sent to the insurer and

the insurance commissioner that states all of the following:

     (i) That the funeral establishment, cemetery, or seller has

provided the cemetery services or goods or funeral services or

goods.

     (ii) That a representative of the insured's estate has refused

to authorize the insurer to release the assignment proceeds for the

payment of the cemetery services or goods or funeral services or

goods.

     (iii) That a representative of the insured's estate may seek

arbitration to resolve the payment dispute.

     (b) Upon the receipt of the dispute resolution notice

described in subdivision (a), the insurer shall retain the

assignment proceeds for 30 days. The insurer shall release the

assignment proceeds to the funeral establishment, cemetery, or

seller if after the expiration of the 30 days the insurer is not

informed that arbitration proceedings have been commenced, or

pursuant to the award of the arbitrator.

     (c) The funeral establishment, cemetery, seller, or a

representative of the insured's estate may commence arbitration

proceedings to determine the disposition of the assignment

proceeds. Arbitration shall be conducted pursuant to the rules and

procedures of the American arbitration association. Expenses of the

arbitration shall be shared equally by the insured's estate and the

assignee unless otherwise ordered by the arbitrator.

     (d) Nothing in this subsection shall limit limits the right of

any party involved in the payment dispute to seek other recourse

permitted by law.

     (9) A life insurance agent producer shall not sell or solicit

the sale of a life insurance policy or annuity contract with the

intention of having the purchaser assign the proceeds of the policy

or contract to a funeral establishment, cemetery, or seller with

which the agent producer is associated unless all of the following

conditions are met:

     (a) The agent shall disclose producer discloses in writing to

the purchaser the nature of his or her association with the funeral

establishment, cemetery, or seller and that both the funeral

establishment, cemetery, or seller and the agent producer will or

may profit from the transaction, if that is the case.

     (b) A funeral establishment, cemetery, or seller which that

accepts assignments pursuant to subsection (6) shall also offer to

sell or provide cemetery goods or services or funeral goods or

funeral services pursuant to prepaid funeral contracts as provided

in the prepaid funeral contract funding act and cemetery sales act,

1986 PA 255, MCL 328.211 to 328.235, or pursuant to the trust

provisions of the cemetery regulation act, Act No. 251 of the

Public Acts of 1968, being sections 456.521 to 456.543 of the

Michigan Compiled Laws 1968 PA 251, MCL 456.521 to 456.543.

     (c) If the contemplated assignment is to be made to pay the

cost of cemetery goods or services or funeral goods or funeral

services, the agent producer shall disclose in writing to the

purchaser that the cemetery goods or services or funeral goods or

services may also be purchased prior to death by making payment

directly to a funeral establishment, cemetery, or seller who will

hold funds in escrow for the benefit of the purchaser pursuant to

the prepaid funeral contract funding act and cemetery sales act,

1986 PA 255, MCL 328.211 to 328.235, or in trust pursuant to the

provisions of the cemetery regulation act, Act No. 251 of the

Public Acts of 1968 1968 PA 251, MCL 456.521 to 456.543. The

written disclosure shall also state that upon cancellation of the

prepaid funeral contract, the purchaser is entitled to a refund of

at least 90% of the principal and income earned.

     (d) The sale of cemetery goods or services or funeral goods or

services shall not be conditioned on the purchaser buying or

agreeing to buy a life insurance policy or annuity contract or on

the assignment of the proceeds of the policy or contract to that

funeral establishment, cemetery, or seller.

     (e) The sale of a life insurance policy or annuity contract

shall not be conditioned on the purchaser buying or agreeing to buy

cemetery goods or services or funeral goods or services from the

funeral establishment, cemetery, or seller with which the agent

producer is associated or on the assignment of the proceeds of the

policy or contract to that funeral establishment, cemetery, or

seller.

     (f) A discount from the current price of cemetery goods or

services or funeral goods or services shall not be offered as an

inducement to purchase or assign a life insurance policy or annuity

contract.

     (g) The life insurance policy or annuity contract sold by the

agent producer may be canceled by the purchaser within 10 days

after the receipt of the policy or annuity contract, in which event

a full refund of all premiums shall be paid to the purchaser.

     (h) The agent producer shall disclose in writing to the

purchaser that the funeral establishment, cemetery, or seller with

which the agent producer is associated will accept assignments of

life insurance policies or annuity contracts sold by any other

licensed agent producer.

     (10) The commissioner or any other person, in order to force

compliance with subsection (6) or (7), may bring an action in a

circuit court in any county in which the assignee or insurance

agent producer or any other person has solicited or sold a life

insurance policy or annuity contract that is assigned pursuant to

subsection (6), whether or not that person has purchased the life

insurance policy or annuity contract or is personally aggrieved by

a violation of this section. The court may award damages and issue

equitable orders in accordance with the Michigan court rules to

restrain conduct in violation of this section.

     (11) Any person violating any of the provisions of this

section shall be deemed is guilty of a misdemeanor, and each

violation thereof shall be a separate offense and upon conviction

shall be punished by a fine not exceeding $1,000.00 or by

imprisonment for not more than 6 months, or both such fine and

imprisonment within the discretion of the courts.

     (12) In addition to the penalty provided in subsection (11),

if, after a hearing conducted pursuant to the administrative

procedures act of 1969, Act No. 306 of the Public Acts of 1969,

being sections 24.201 to 24.328 of the Michigan Compiled Laws 1969

PA 306, MCL 24.201 to 24.328, the commissioner determines a person

has violated this section, the commissioner may order the person to

pay a civil fine of not more than $10,000.00 for each violation and

may also impose other sanctions provided pursuant to chapter 12.

The money collected under this subsection shall be deposited in the

funeral consumers education and advocacy fund. The funeral

consumers education and advocacy fund is created within the

insurance bureau office of financial and insurance regulation. The

fund shall be administered by the commissioner. The money in the

fund shall be used to do both of the following:

     (a) To promote the education of consumers with regard to

concerning the prearrangement and purchase of cemetery or funeral

services or goods through the purchase and assignment of life

insurance or annuity contracts.

     (b) To provide legal assistance to persons who were injured as

a result of a violation of this section.

     (13) For purposes of this section, a life insurance agent

producer is associated with a funeral establishment, cemetery, or

seller if any of the following apply:

     (a) The agent producer is a funeral establishment, cemetery,

or seller.

     (b) The agent producer owns an interest, directly or

indirectly, in a corporation or other entity which that holds an

interest in a funeral establishment, cemetery, or seller.

     (c) The agent producer is an officer, employee, or agent of a

funeral establishment, cemetery, or seller.

     (d) The agent producer is an officer, employee, or agent of a

corporation or other entity which that holds an interest, either

directly or indirectly, in a funeral establishment, cemetery, or

seller, or in a corporation or other entity which that holds an

interest, directly or indirectly, in a corporation or other entity

which that holds an interest in a funeral establishment, cemetery,

or seller.

     (14) As used in this section:

     (a) "Associated life insurance policy or annuity contract" is

a life insurance policy or annuity contract that is marketed,

designed, and intended to be assigned as payment for cemetery goods

or services or funeral goods or services.

     (b) "Casket" means any box or container consisting of 1 or

more parts in which a dead human body is placed prior to interment,

entombment, or cremation which may or may not be permanently

interred, entombed, or cremated with the dead human body. A

permanent interment or entombment receptacle which is designed or

intended for use without a cemetery burial vault or other outside

container shall also be considered a casket.

     (c) "Catafalque" means an ornamental or decorative object or

structure which is placed beneath, over, or around a casket, vault,

or a dead human body prior to final disposition of the dead human

body.

     (d) "Cemetery" means that term as defined in but not

necessarily regulated under section 2 of the cemetery regulation

act, Act No. 251 of the Public Acts of 1968, being section 456.522

of the Michigan Compiled Laws 1968 PA 251, MCL 456.522, or an

officer, agent, or employee thereof.

     (e) "Cemetery burial vault or other outside container" means a

box or container which is used solely at the place of interment to

permanently surround or enclose a casket and to support the earth

above the casket after burial.

     (f) "Cemetery goods" means land or interests in land, crypts,

lawn crypts, mausoleum crypts, or niches that are sold by a

cemetery. In addition, cemetery goods shall include cemetery burial

vaults or other outside containers, markers, monuments, urns, and

merchandise items used for the purpose of memorializing a decedent

and placed on or in proximity to a place of interment or entombment

of a casket, catafalque, or vault or to a place of inurnment which

are sold by a cemetery.

     (g) "Cemetery services" means those services customarily

performed by a cemetery.

     (h) "Combination unit" means any product consisting of a unit

or a series of units which are designed or intended to be used

together as both a casket and as a permanent burial receptacle.

     (i) "Consumer price index" means the annual average percentage

increase in the Detroit consumer price index for all items for the

prior 12-month period as reported by the United States department

of labor and as certified by the commissioner.

     (j) "Funeral establishment" means a funeral establishment or a

person who is engaged in the practice of mortuary science as those

terms are defined in section 1801 of the occupational code, Act No.

299 of the Public Acts of 1980, being section 339.1801 of the

Michigan Compiled Laws 1980 PA 299, MCL 339.1801, or an officer,

agent, or employee thereof.

     (k) "Funeral goods" means items of merchandise which will be

used in connection with a funeral or an alternative to a funeral or

final disposition of human remains including, but not limited to,

caskets, other burial containers, combination units, and

catafalques. Funeral goods does not include cemetery goods.

     (l) "Funeral services" means services customarily performed by

a person who is licensed pursuant to sections 1801 to 1812 of the

occupational code, Act No. 299 of the Public Acts of 1980, being

sections 339.1801 to 339.1812 of the Michigan Compiled Laws 1980 PA

299, MCL 339.1801 to 339.1812. Funeral services includes, but is

not limited to, care of human remains, embalming, preparation of

human remains for final disposition, professional services relating

to a funeral or an alternative to a funeral or final disposition of

human remains, transportation of human remains, limousine services,

use of facilities or equipment for viewing human remains,

visitation, memorial services, or services which are used in

connection with a funeral or alternative to a funeral, coordinating

or conducting funeral rites or ceremonies, and other services

provided in connection with a funeral, alternative to a funeral, or

final disposition of human remains.

     (m) "Limited death benefit" means the sum payable upon the

insured's death during not more than the first 2 years that an

associated life insurance policy or annuity contract is in effect

that is less than the amount necessary to cover the initial

contract price of cemetery goods and services or funeral goods and

services, but that provides for a minimum benefit as follows:

     (i) During the first year of the contract, not less than 25% of

the initial contract price of cemetery goods and services or

funeral goods and services.

     (ii) During the second year of the contract, not less than 50%

of the initial contract price of cemetery goods and services or

funeral goods and services.

(n) (m) "Nonassociated life insurance policy or annuity

contract" means a life insurance policy or annuity contract that is

not marketed to be assigned, designed to be assigned, or intended

to be assigned as payment for cemetery goods or services or funeral

goods or services.

(o) (n) "Representative of insured's estate" means the person

or persons legally entitled to make the funeral arrangements for

the person whose life was insured.

(p) (o) "Seller" means a person who offers to sell cemetery

goods or services or funeral goods or services or any agent,

officer, or employee thereof.