What are the Legal Implications of Buying or Selling a Viatical Settlement Contract in Florida?

Florida is a key state in the viatical settlement industry, given its large population of retirees and individuals with life insurance policies. A viatical settlement allows a policyholder, often someone facing a terminal illness, to sell their life insurance policy to a third party for a lump sum payment. This transaction can provide much-needed financial relief, but it also carries potential legal risks, especially under Florida's specific legal framework.

Understanding Viatical Settlements in Florida

A viatical settlement in Florida involves the sale of a life insurance policy by the policyholder (the viator) to a third party (the viatical settlement provider). The provider pays the viator a percentage of the policy’s death benefit and takes over the responsibility of paying premiums. Upon the viator's death, the provider collects the full death benefit. While this can be a beneficial arrangement for those needing immediate funds, it is important to understand the legal landscape in Florida, which has unique regulations governing these transactions.

Florida’s Regulatory Framework

Florida has one of the most comprehensive regulatory frameworks for viatical settlements in the United States. The Florida Viatical Settlement Act governs these transactions and is designed to protect the interests of the policyholders, ensuring they are fully informed and not exploited. The Florida Office of Insurance Regulation (OIR) oversees the licensing of viatical settlement providers and brokers, and enforces compliance with state laws.

Potential Legal Claims Under Florida Law

1. Fraud and Misrepresentation

Florida law prohibits fraud and misrepresentation in viatical settlements. A provider must fully disclose all material facts, and a provider cannot mislead the viator about the settlement terms. A failure to comply can lead to the contract being voided.

2. Breach of Contract

A breach of contract can occur if either party fails to uphold the terms of the viatical settlement agreement. For example, if the viatical settlement provider fails to make the agreed-upon payment to the viator, the viator may pursue a breach of contract claim in Florida courts.

3. Violations of the Florida Viatical Settlement Act

The Florida Viatical Settlement Act includes specific provisions that protect viators, such as the requirement for providers to give a detailed disclosure statement outlining the terms of the settlement, the viator's rights, and any alternatives to the viatical settlement. Failure to comply with these provisions can lead to legal claims. For instance, if a provider fails to disclose all required information, the viator may seek damages for any losses incurred as a result of the non-disclosure.

Conclusion

While viatical settlements can provide much-needed financial relief for those facing terminal illness, they come with a range of legal risks, particularly under Florida’s stringent regulatory framework. Fraud and breach of contract claims are just a couple of the potential legal claims that can arise. By understanding Florida's specific laws and regulations and taking proactive steps to ensure compliance, both viators and viatical settlement providers can better protect themselves from legal disputes.

Please contact Joel Ewusiak for legal help with disputes concerning viatical settlement contracts.