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+#REDIRECT [[Life settlement]]
-{{Refimprove|date=April 2010}}
-A '''viatical settlement''' (from the Latin "viaticum")<ref name="def">Entry for "Viatical Settlement" at Merriam-Webster On-Line Dictionary, retrieved November 12, 2012, at http://www.merriam-webster.com/dictionary/viatical settlement</ref> is the sale of a policy owner's existing [[life insurance]] policy to a third party for more than its [[cash surrender value]], but less than its net death benefit.<ref>What is a Life Settlement?, Life Insurance Settlement Association, retrieved March 4, 2012, at http://www.lisa.org/content/13/What-is-a-Life-Settlement.aspx</ref>  Such a sale provides the policy owner with a lump sum.<ref name="LISA History">Life Settlement History, Life Insurance Settlement Association, retrieved March 4, 2012, at http://www.lisa.org/content/51/Life-Settlement-History.aspx</ref>  The third party becomes the new owner of the policy, pays the monthly premiums, and receives the full benefit of the policy when the insured dies.<ref name="LISA History" />
+{{R from merge}}
-"Viatical settlement" typically is the term used for a settlement involving an insured who is terminally or chronically ill.<ref name="LISA History" />  A person generally is chronically ill if the person (1) is unable to perform at least two activities of daily living, such as eating, using the toilet, bathing oneself, or dressing oneself; (2) requires substantial supervision to protect himself or herself from threats to health and safety due to severe cognitive impairment; or (3) has a level of disability similar to that described in (1) as determined by the U.S.   [[Secretary of Health and Human Services]].<ref name="def" />  A person generally is terminally ill if the person has an illness or sickness that can reasonably be expected to result in death within two years.
+[[Category:Life insurance]]
-As medical advancements improved the lives of those persons living with terminal or chronic illnesses, the [[life settlement]] industry emerged.<ref name="LISA History" />
-==History==
-Viatical settlements grew in popularity in the [[United States]] in the late 1980s, when the [[AIDS]] epidemic peaked.<ref name="LISA History" />  The early victims of [[AIDS]] in the U.S. were largely gay men, many of whom were not particularly old.  They often had no wives or children (the traditional [[beneficiaries]] under a life insurance policy), but they had life insurance policies through employment or as a result of investments.  The beneficiaries under the policies were often their parents who did not need the money.  Viatical settlements offered a way to extract value from the policy while the policy owner was still alive.
-At the time, the AIDS mortality rate was very high, and life expectancy after diagnosis was typically short.<ref name="LISA History" />  Investors were reasonably sure that they would collect in a relatively short time.  This combination of events caused a surge in viatical settlements as both investors and viators saw an opportunity for mutual benefit.
-A [[U.S. Supreme Court]] decision from 1911 provides the legal basis for viatical settlements.<ref name="LISA History" />  In Grigsby v. Russell, 222 U.S. 149 (1911), Dr. A. H. Grigsby treated a patient named John C. Burchard.<ref name="LISA History" /> Mr. Burchard, being in need of a particular surgical operation, offered to sell Dr. Grigsby his life insurance policy in return for $100 and for agreeing to pay the remaining premiums.<ref name="LISA History" /> Dr. Grigsby agreed and as a result, the first viatical settlement transaction was created.<ref name="LISA History" /> When Mr. Burchard died, Dr. Grigsby attempted to collect the benefits.<ref name="LISA History" /> An executor of Burchard’s estate challenged Dr. Grigsby in Appeals Court and won.<ref name="LISA History" /> The case eventually reached the U.S. Supreme Court where Justice [[Oliver Wendell Holmes Jr.]] delivered the opinion of the court.<ref name="LISA History" /> He stated in relevant part that “So far as reasonable safety permits, it is desirable to give to life policies the ordinary characteristics of property. To deny the right to sell except to persons having such an interest is to diminish appreciably the value of the contract in the owner’s hands.”<ref name="LISA History" />
-The Supreme Court's decision set forth the fundamental principle upon which the viatical settlement and later, the life settlement industry were based: a life insurance policy is private property, which can be assigned at the will of the owner.<ref name="LISA History" />  Viatical settlements were rare for almost eight decades until the onset of the AIDS epidemic.<ref name="LISA History" />
-Early improper activities among a few bad actors produced a fear among consumers regarding viatical settlements.<ref name="LISA History" />  Life insurers became concerned about individuals purchasing policies purely for speculative purposes.<ref name="LISA History" />  Today, many states regulate viatical and life settlements and many more are developing legislation and regulations.<ref name="LISA History" />  As of June 2011, the states that do not regulate viatical settlements are [[Wyoming]], [[South Dakota]], [[Missouri]], [[Alabama]], and [[South Carolina]].<ref name="map">Regulation, Life Insurance Settlement Association, retrieved March 4, 2012, at http://www.lisassociation.org/vlsaamembers/legislative_maps/images/Reg-of-viatical-and-life-se.jpg</ref>  All other states regulate viatical settlements.<ref name="map" />
-Despite the bad experience of some investors, viatical settlements remain an often valuable tool for the personal financial management of many ill people.  A 2002 study showed that among hospice financial counselors who have had experience with viatical settlements, most report positive experiences.<ref name=ign>{{cite journal |vauthors=Badreshia S, Bansal V, Houts PS, Ballentine N |title=Viatical settlements: effects on terminally ill patients |journal=Cancer Pract |volume=10 |issue=6 |pages=293–6 |year=2002 |pmid=12406051 |url=http://www3.interscience.wiley.com/resolve/openurl?genre=article&sid=nlm:pubmed&issn=1065-4704&date=2002&volume=10&issue=6&spage=293}}</ref>
-==Notable cases==
-===Mutual Benefits===
-One of the most infamous viaticals cases involved the Mutual Benefits company headed by Peter Lombardi in [[Florida]], which had 28,000 investors and had focused on paying HIV clients.  In 2003, the [[Securities Exchange Commission]] closed the firm saying it was involved in a $1 billion [[Ponzi scheme]].  Lombardi is now serving a 20-year prison sentence.<ref>Lawyers' Indictment in $1 Billion Ponzi Scheme Shocks Legal Circles - New York Lawyer - January 26, 2009</ref>
-===Kelco===
-In another high-profile case, Kelco, Inc., a viatical settlement company once based in [[Lexington, Kentucky]], has been at the center of a 10-year-long legal battle involving insurers, such as AIG.
-In August 2008, Michael S. Pasano, attorney for Stephen L. Keller, the former CEO of Kelco Inc., filed a motion in the [[United States District Court]] for the Eastern District of Kentucky, with Judge [[Karl S. Forester]], to dismiss Keller’s convictions for conspiracy, fraud, and money laundering.  Keller’s convictions resulted from Kelco purchasing life insurance policies from HIV/AIDS patients who lied on their applications.  While Kelco’s actions were not illegal, the patients committed fraud in obtaining these policies.  The burden falls on the insurance companies to exercise due diligence and to properly evaluate applicants before issuing a policy. Two appellate courts have affirmed through the [[McCarran-Ferguson Act]] that states, and not the federal government, have jurisdiction over regulation of viatical settlement companies and the insurance industry. Because Kelco operated within the bounds of Kentucky law, no crime was committed, and Keller has yet to receive a decision on his motion.
-Two landmark appellate cases back up Keller’s motion. The crucial intervening case was a 2006 decision of the Fourth Circuit Court of Appeals in ''Life Partners, Inc. v. Morrison''.<ref>http://caselaw.findlaw.com/us-4th-circuit/1043714.html</ref> The appellate court ruled that [[Virginia]]'s Viatical Settlements Act, a direct analogue of Kentucky's Act and derived from the same model law, came within the scope of the McCarran-Ferguson Act. The Fourth Circuit held that “the viatical settlement is not collateral to the life insurance policy. Rather, it modifies it, changing the parties' obligations and benefits, while yet leaving the insurance i.e., the transfer of the specific risk in place. At its essence, a viatical settlement is transaction that fractures the two-part insurance contract between the insurer and the insured and creates a new tripartite arrangement among the insurer, the insured, and the insured's assignee the viatical settlement provider. All of these matters, and more, regulated by the Virginia Viatical Settlements Act surely 'relate to' the business of insurance in that they regulate the new ordering of the tripartite insurance arrangement involving the insurer, the insured, and the viatical settlement provider.”
-The Fourth Circuit's holding was reinforced by the consonant decision of the [[United States District Court for the Northern District of Georgia|Northern District of Georgia]] in ''National Viatical, Inc. v. Oxendine'', which was affirmed on appeal by the Eleventh Circuit in 2007.<ref>http://www.naic.org/documents/legal_amicus_briefs_viaticals_v_oxendine_2006.pdf</ref> The court determined that the McCarran-Ferguson Act applied to Georgia's implementation of the Model Life Settlement Act, the model upon which the Kentucky Viatical Act was based and which is a precursor to the Life Settlement Act.
-Two appellate courts have handed down decisions that should exonerate Keller, yet Circuit Judge [[Karl S. Forester]], the judge who has presided over the case through its inception, has yet to rule on Keller’s motion. Forester ironically approved the forfeiture of Kelco-owned policies that were fraudulently-obtained by HIV/AIDS patients. The Government ultimately resold the policies on the living patients and collected death benefits on the deceased patients.
-Keller’s motion was denied on November 12, 2010.  His appeal of that denial was also denied, on February 28, 2011.<ref>http://ky.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20110228_0000161.EKY.htm/qx</ref>
-== References ==
-{{reflist}}
-== See also ==
-* [[Life settlement]]
-* [[Death Bond]]
-[[Category:Insurance]]
 [[Category:Insurance in the United States]]