DOAH Judge Dismisses Viatical Settlement Provider’s Challenge to Office of Insurance Regulation’s Viatical Exam Procedures
– The Florida Office of Insurance Regulation (Office) today announced Administrative Law Judge (ALJ) Suzanne F. Hood of the Division of Administrative Hearings (DOAH) issued a Final Order
dismissing Coventry First LLC’s (Coventry) allegations that the Office’s exam manuals and procedures are equivalent to rules, but not adopted as such, and are therefore in violation of Florida law.
The ALJ stated in the Order that the Office’s viatical exam procedures fall under the classification of “internal management memoranda,” an exception to the rulemaking requirements of Florida law. In the Order, Judge Hood further stated, “In giving [the Office] authority to examine all books and records, the statute does not differentiate between in-state and out-of-state records.”
A viatical settlement or life settlement contract is a financial arrangement in which a person sells his or her life insurance policy to investors, who continue to pay the policy premiums and collect the payout upon the insured’s death. There has been extensive growth of the life settlement market – doubling in value since 2006 to a worth of $12 billion. The industry is expected to exceed $160 billion within a few decades. Having a large elderly population, Florida has been at the forefront of attempts to adequately regulate these transactions.
“This is the second time, in both state and federal court, that Coventry has resisted the Office’s efforts to examine its out-of-state viatical settlement contracts that reportedly do not involve Florida residents,” said Insurance Commissioner Kevin McCarty. “And this is the second legal opinion that affirms our statutory duty to obtain information about Coventry’s overall business practices.”
Earlier this year in federal court, Coventry asserted the Office had no authority to review Coventry’s out-of-state policies that the company alleged did not involve Florida residents. U.S. District Court Judge Stephan P. Mickle ruled that Coventry is a licensed Florida viatical settlement provider; it is subject to Florida law as it relates to allowing state regulator review of its business records.
The court also ruled that although the Florida Viatical Settlement Act does not govern or control the transactions that occur in other states, the Office does have the right to review Coventry’s business records, in part to confirm that the transactions are truly non-Florida transactions.
Coventry is expected to appeal the DOAH ruling to the District Court.