Viatical settlements or Los Angeles life settlements involve the situation where a third party buys an existing life insurance policy on someone unrelated to him or her (generally for cash).
One situation is where someone simply buys a life insurance policy for his or her family and then later on, usually much later, he or she becomes unable to pay for the policy and someone suggests that he or she could sell the policy, particularly if his or her health has declined.
Recently, a market has developed in which brokers will solicit life insurance sales from seniors with the promise of a free life insurance policy for the first two years (the contestability period), with the understanding that the policy will be sold thereafter for a profit.
Insurance Broker Fraud
It is important to realize that anybody who buys a life insurance policy from an insurance company has to have (at the time that the policy is issued/applied for) an insurable interest in the life of the insured person. The people who would have an insurable interest would include the insured, his or her family, a charity, business partner, or anybody who would financially suffer if that person died.
Anybody who does not have an insurable interest in the life of a person could not take a life insurance policy on that person. That said, there is an existing investment community that invests in life insurance policies on people because it can be a profitable investment — indeed, it can return considerably more than a treasury bond. It is important to realize, however, that the longer the insured lives, the worse the return is, because the policyholder must continue to pay premiums.
The way that many brokers will try to get around the insurable interest requirement is by having the person take out the policy in his or her own name or a trust but to secretly pay for it with funds lent or advanced by those who intend to later buy the policy. The insurance companies have found ways to get try to smoke these types of sales out by asking lots of questions on the application, whether someone else is paying, whether one has agreed to sell at a later date, etc. However, in many cases, sales agents will encourage their clients not to tell the truth.
The legal issues that result have been hotly debated and contested, and different courts have held different rulings in different jurisdictions. As such, it is critical to partner with a lawyer who can efficiently and effectively determine your situation and help you reach an ideal outcome.
If you had a life insurance policy and a controversy has arisen regarding your policy, I am prepared to bring nearly 40 years of experience to understand all issues and advocate for you. I have extensive experience litigating against brokers, insurance companies and others. I will bring my comprehensive knowledge to obtain everything to which you are entitled.