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Viatical Settlement Broker Facing Charges of Dealing in Fraudulent Life Insurance Policies

1/17/2003

TALLAHASSEE – A Winter Park-based viatical settlement broker is facing possible revocation or suspension of its license following charges filed by the Department of Financial Services that the company brokered more than two dozen fraudulently obtained life insurance policies.

"By failing to report the fraud as alleged in the complaint, The Medical Escrow Society put hundreds of thousands of investor dollars at risk," said Florida's Chief Financial Officer Tom Gallagher, who oversees the Department of Financial Services. "Many of these investors are senior citizens who invested their life savings in these policies."


This is not the first time that The Medical Escrow Society, Inc., has been charged with improper conduct relating to its viatical business. In May 1999, The Medical Escrow Society paid a $5,000 administrative penalty and $2,500 in investigative costs for using documents that indicated it was a licensed viatical settlement provider.

Viatical settlement brokers help find buyers for life insurance policies sold by insured individuals who may be terminally ill or otherwise have a shortened life expectancy. The policies, bought for a percentage of the face value, are then resold by viatical settlement providers to investors who collect the death benefit when the insured dies. The State of Florida has regulated viaticals since 1996, the same year The Medical Escrow Society, Inc. was licensed.

The complaint alleges that at least 13 individuals purchased 26 different life insurance policies by lying about their health conditions on their applications. All 13 had serious medical conditions which they disclosed on their applications to The Medical Escrow Society. Licensees in the insurance industry are required by Florida law to report to the department any knowledge or suspicion of a fraudulent insurance act, and the department's complaint alleges Medical Escrow failed to do so.

For more information, consumers can call the Department of Financial Services Helpline at 1-800-342-2762 or visit the department's web site at www.fldfs.com. Copies of the complaint may be obtained by calling 850-413-2690.