MISSISSIPPI LEGISLATURE

1999 Regular Session

To: Insurance

By: Senator(s) Nunnelee, Browning

AN ACT TO CREATE THE "PRE-NEED CEMETERY AND FUNERAL CONSUMER PROTECTION ACT"; TO DEFINE CERTAIN TERMS; TO REQUIRE ALL PRE-NEED FUNERAL CONTRACTS SOLD TO BE EVIDENCED IN WRITING ON FORMS REGISTERED WITH THE COMMISSIONER OF BANKING AND CONSUMER FINANCE; TO PRESCRIBE THE CONTENTS OF SUCH WRITTEN PRE-NEED CONTRACT; TO PROVIDE FOR RECORD-KEEPING REQUIREMENTS; TO PROVIDE TRUSTING REQUIREMENTS IF THE PRE-NEED CONTRACT IS FUNDED BY A TRUST; TO PROVIDE CERTAIN REQUIREMENTS IF THE PRE-NEED CONTRACT IS FUNDED BY INSURANCE; TO REQUIRE LICENSURE OF ALL PERSONS AND ESTABLISHMENTS SELLING PRE-NEED FUNERAL CONTRACTS AND TO PROVIDE LICENSING FEES THEREFOR; TO PROVIDE REPORTING REQUIREMENTS TO THE COMMISSIONER OF BANKING AND CONSUMER FINANCE; TO AUTHORIZE EXAMINATIONS OF THE BOOKS AND RECORDS OF LICENSED ESTABLISHMENTS; TO PROVIDE CIVIL AND CRIMINAL PENALTIES FOR VIOLATIONS OF THIS ACT; TO CLARIFY THAT NOTHING IN THE ACT SHALL BE CONSTRUED TO AUTHORIZE THE SALE OF LIFE INSURANCE POLICIES BY UNLICENSED AGENTS; TO REPEAL SECTIONS 75-63-1, 75-63-3, 75-63-5, 75-63-7, 75-63-9, 75-63-11, 75-63-13, 75-63-15, 75-63-17, 75-63-18, 75-63-19, 75-63-21 AND 75-63-23, MISSISSIPPI CODE OF 1972, WHICH REGULATE THE PRE-NEED SALES OF CEMETERY MERCHANDISE AND FUNERAL SERVICES; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. This act shall be known and may be cited as the "Pre-need Cemetery and Funeral Consumer Protection Act."

SECTION 2. As used in this act, unless the context requires otherwise:

(a) "Buyer" means the person who purchases the pre-need contract.

(b) "Cash advance item" means any item of service or merchandise described to a purchaser as a "cash advance," "accommodation," "cash disbursement," or similar term. A cash advance item is also any item obtained from a third party and paid for by the funeral provider on the purchaser's behalf. Cash advance items may include, but are not limited to: cemetery or crematory services; pallbearers; public transportation; clergy honoraria; flowers; musicians or singers; nurses; obituary notices; gratuities and death certificates.

(c) "Commissioner" means the Commissioner of Banking and Consumer Finance of the State of Mississippi.

(d) "Cemetery" means an organization as defined in Section 41-43-33, Mississippi Code of 1972.

(e) "Contract beneficiary" means the person upon whose death will initiate the performance of the pre-need contract. This person may also be the contract purchaser.

(f) "Contract provider" means the funeral home or cemetery indicated in the pre-need contract that will be responsible for performing the pre-need funeral contract.

(g) "Financial institution" means a bank, trust company, savings bank, or savings and loan association authorized by law to do business in this state.

(h) "Funeral home" means a business licensed under Section 73-11-55, Mississippi Code of 1972.

(i) "Inflation proof contract" means a pre-need contract that establishes a fixed price for funeral services and merchandise without regard to future price increases.

(j) "Insurance" means a life insurance policy or annuity contract, or other insurance contract or agreement in any form, issued by an insurance company authorized by law to do business in this state which, by assignment to a contract provider, has for a purpose the funding of a pre-need funeral contract.

(k) "Merchandise" means personal property associated with the disposal of or memorializing a deceased human being such as a casket, burial vault, burial clothes, urn or monument.

(l) "Pre-need contract" means any contract, agreement or mutual understanding, or any series or combination of contracts, agreements or mutual understandings, whether funded by trust deposits or insurance, or any combination thereof, which has for a purpose the furnishing or performance of funeral services, or the furnishing of delivery of merchandise, of any nature in connection with the final disposition of a dead human body, to be furnished or delivered at a time determinable by the death of the person whose body is to be disposed of, but shall not mean the furnishing of a cemetery lot, crypt, niche or mausoleum.

(m) "Seller" means the person who sells the pre-need funeral contract.

(n) "Services" means services of any nature in connection with the final disposition of a dead human body.

(o) "Standard contract" means a pre-need contract that applies the trust funds or insurance proceeds to the purchase price of funeral services and merchandise at the time of death of the contract beneficiary without a guarantee against future price increases.

(p) "Trust" means an express trust created by a trust instrument whereby a trustee has the duty to administer a trust asset for the benefit of a named beneficiary.

(q) "Trustee" means an original, added, or successor trustee including its successor by merger or consolidation.

SECTION 3. (1) No person, firm, partnership, association or corporation may directly or indirectly, or through an agent, engage in the sale of pre-need funeral contracts except as authorized under this act. All pre-need funeral contracts sold shall be evidenced in writing on forms registered with the commissioner. These forms shall be in twelve-point type and clearly indicate the names and addresses of the buyer, contract beneficiary, contract provider and seller.

(2) The contract shall clearly indicate all merchandise covered by the contract and the total cost of all merchandise covered by the contract. The contract shall list all services covered by the contract and the total cost for all services covered by the contract. The contract price shall not exceed the sum of the total cost for all merchandise, the total cost for all services and any interest.

(3) All pre-need funeral contracts sold shall be funded by trust or by insurance as defined in this act.

(4) If the pre-need contract is funded by insurance, the following information shall be adequately disclosed at the time the contract is executed:

(a) The fact that a life insurance policy is involved or being used to fund the contract, and the name, address and telephone number of the insurance company issuing the insurance;

(b) The nature of the relationship among the soliciting agent or agents, the provider of the funeral or cemetery merchandise or service, the administrator and any other person;

(c) The relationship of the life insurance policy to the funding of the pre-need contract and the nature and existence of any guarantees relating to the pre-need contract;

(d) The impact on the pre-need contract:

(i) Of any changes in the life insurance policy including, but not limited to, changes in the assignment, beneficiary designation or use of the proceeds;

(ii) Of any penalties to be incurred by the policy holder as a result of failure to make premium payments; and

(iii) Of any penalties to be incurred or monies to be received as a result of cancellation or surrender of the life insurance policy.

(e) A list of the merchandise and services which are applied or contracted for in the pre-need contract and all relevant information concerning the price of the funeral services, including an indication that the purchase price is either guaranteed at the time of purchase or to be determined at the time of need;

(f) All relevant information concerning what occurs and whether any entitlements or obligations arise if there is a difference between the proceeds of the life insurance policy and the amount actually needed to fund the pre-need contract; and

(g) Any penalties or restrictions, including, but not limited to, geographic restrictions or the inability of the provider to perform, on the delivery of merchandise, services or the pre-need guarantees.

(5) If the pre-need contract is funded by trust, the contract shall indicate the name, address and telephone number of the trustee; the amount to be paid; the frequency of payment; and the length of time payments will be paid into the trust. In addition, the contract should clearly indicate any exclusions or limitations of the pre-need contract including, but not limited to, any additional payments that may be owed if the contract beneficiary dies before the agreed upon payment period is completed.

(6) The pre-need contract shall indicate whether it is a standard contract or an inflation proof contract, and whether it is revocable or irrevocable. The contract shall clearly indicate which merchandise and services are guaranteed as to price, and which cash advance items are not guaranteed as to price. Upon written disclosure to the buyer, inflation-proof contracts may permit the contract provider to retain all of the pre-need funeral contract trust funds or all insurance proceeds, even those in excess of the retail cost of the merchandise and services provided when the contract provider has fully performed the pre-need funeral contract.

(7) The pre-need contract shall contain the address and phone number of the Commissioner of Banking and Consumer Finance with instructions that consumer complaints may be filed with the commissioner.

(8) If the pre-need contract is paid in multiple payments, the contract should indicate the amount, frequency and duration of the payments and the amount of any interest charged. The contract shall also include the impact on the contract if payments are not made.

(9) Any use or attempted use of any oral pre-need contract, or any written contract in a form not registered with the commissioner, shall be a violation of this act.

SECTION 4. (1) The contract provider or its successor shall maintain a copy of all pre-need funeral contracts entered into by the contract provider for a period of the lifetime of each contract beneficiary and for two (2) years after the death of a contract beneficiary. In addition, the contract provider shall maintain a log of pre-need contracts in force. The contracts in this log shall be sequentially numbered and the number of the pre-need contract in the log shall correspond to the number on the pre-need contract.

(2) The log shall indicate whether the pre-need contract is standard or inflation proof, whether the contract is funded with trust or insurance, and whether the contract is revocable or irrevocable. If the contract is funded by trust, the log shall indicate the trustee. If the contract is funded with insurance, the log shall indicate the name of the insurance company and the policy number of the insurance policy.

(3) The commissioner shall promulgate rules and regulations to ensure that the copies of the pre-need contract and the log kept by the contract provider are stored in a secure place.

SECTION 5. (1) If the funds are placed in trust, the contract beneficiary shall be given a copy of the trust document and shall be informed in writing as to how the assets of the trust are held. In the event of any change in the assets of the trust, or change in the trustee, the contract beneficiary shall be informed of these changes within ten (10) days.

(2) The trustee shall not be the contract provider, the seller, or an officer or director of the contract provider if the contract provider is a corporation.

(3) Within ten (10) days from receipt of the funds, the contract seller shall place in a trust account at least eighty percent (80%) of the funds received, except for funds received from the pre-need sale of monuments and burial vaults of which the contract seller shall place at least fifty percent (50%) in a trust account. If the contract seller places less than one hundred percent (100%) in the trust account, the pre-need contract shall fully disclose to the contract purchaser the amount deposited in trust and the amount withheld by the contract seller.

(4) The trustee shall obtain a surety bond for the full amount of deposits in the trust account. If the trust funds are held in a financial institution whose deposits are insured by an agency of the United States government, the trustee shall be exempt from the bonding requirement to the extent these deposits are insured.

(5) Reasonable annual trust fees including any income taxes owed to the State of Mississippi or the United States Treasury, as approved by the commissioner, may be withheld from the earnings of the trust.

(6) At the time of death, if the contract provider actually provides the merchandise and services indicated in the contract, the contract provider shall furnish to the trustee a letter of performance indicating the contracted merchandise and services were provided by the contract provider to the contract beneficiary. Upon receipt of the letter of performance, the trustee shall pay to the contract provider all funds plus accumulated interest in the trust.

(7) If the contract provider does not furnish merchandise and services as provided in the pre-need contract, the trustee shall pay to the estate of the contract beneficiary or the substitute provider the amount deposited in trust plus any accumulated interest in the trust within ten (10) days from notification of the death of the contract beneficiary.

SECTION 6. (1) If the pre-need funeral contract is funded with insurance, within ten (10) days from the receipt of funds, the contract seller shall send to the insurance company a completed application for insurance and all premiums collected from the contract purchaser.

(2) At the time of death, the proceeds of the policy shall be settled in accordance with the policy. If the contract provider furnishes merchandise and services as indicated in the contract, the contract provider is entitled to retain the proceeds of the policy in accordance with the pre-need contract. If the contract provider does not furnish merchandise and services as provided in the pre-need contract, the contract provider shall pay to the estate of the contract beneficiary or the substitute provider of the merchandise and services the entire proceeds of the policy within ten (10) days of receipt of these proceeds.

SECTION 7. At any time prior to the performance of the contract, the contract beneficiary or his representatives may name a substitute provider for the pre-need contract. The naming of the substitute provider shall be in writing. If the pre-need contract is funded by trust, the notice of substitution shall be made in writing to the trustee. If the pre-need contract is funded by insurance, the notice of substitution shall be made in writing to the insurance company. Upon receipt of the notice of substitute provider, the original provider shall be relieved of all obligations to perform the contract including all obligations of reporting and accounting, and the substitute provider shall assume all obligations to perform the contract including all obligations of reporting and accounting.

SECTION 8. (1) No person may offer or sell pre-need funeral contracts or offer to make or make any funded funeral pre-arrangements without first being licensed by the commissioner. (2) There shall be two (2) types of license: a pre-need establishment license and a pre-need sales license. The commissioner shall establish regulations to license each funeral home or cemetery selling pre-need. No establishment shall be licensed to sell pre-need merchandise or services that the establishment cannot lawfully provide at the time of a person's death. The commissioner shall also maintain a record of all individuals who are licensed to sell pre-need through the registered establishment. With each initial application for an establishment license, the applicant shall pay the commissioner at the time of making the application a reasonable license fee in an amount not to exceed Two Hundred Fifty Dollars ($250.00), and on or before February 1 of each year thereafter, an annual renewal fee in an amount not to exceed One Hundred Fifty Dollars ($150.00). If the annual fee remains unpaid twenty-eight (28) days after February 1, the license shall thereupon expire, but not before February 28 of any year for which the annual fee has been paid.

(3) The commissioner shall establish regulations to license each person selling pre-need contracts, including the establishment through which the seller will be selling. No person shall be registered to sell pre-need contracts without indicating which establishment he or she is selling. The commissioner shall establish activities that are permitted and activities that are prohibited under the pre-need sales license. With each initial application for a sales license, the applicant shall pay the commissioner at the time of making the application a reasonable license fee in an amount not to exceed One Hundred Dollars ($100.00), and on or before February 1 of each year thereafter, an annual renewal fee in an amount not to exceed Fifty Dollars ($50.00). If the annual fee remains unpaid twenty-eight (28) days after February 1, the license shall thereupon expire, but not before February 28 of any year for which the annual fee has been paid.

(4) If any person or establishment engages in the activities provided for in this act without paying the required license fee prior to commencing business or prior to the expiration for such person's or establishment's current license, as the case may be, then such person or establishment shall be liable for the full amount of such license fee plus a penalty in an amount not to exceed Fifty Dollars ($50.00) for each day that the person or establishment has engaged in such activities without a license or after the expiration of a license.

(5) All licensing fees and penalties collected pursuant to this section shall be deposited into the Department of Banking and Consumer Finance, "Consumer Finance Fund."

SECTION 9. Every pre-need establishment licensee shall annually submit a written report to the commissioner of its pre-need funeral contract sales and performance of such contracts. This report shall be filed on or before March 31 of each year for the calendar year ending the preceding December 31. The commissioner shall adopt regulations concerning the content and filing procedure of this report.

SECTION 10. The commissioner or his representative may examine the books and records of each establishment licensed under this act as frequent as necessary to ensure compliance with this act and any rules and regulations promulgated hereunder. The commissioner may charge the licensee an examination fee in an amount not less than Fifty Dollars ($50.00) nor more than Three Hundred Dollars ($300.00) per examination of each office or location within the State of Mississippi plus any actual expenses incurred while examining the licensee's records or books that are located outside the State of Mississippi. The examination fee shall be deposited into the Department of Banking and Consumer Finance, "Consumer Finance Fund."

SECTION 11. (1) The commissioner may, after notice and hearing, suspend or revoke any pre-need establishment or sales license for violation of statutes or regulations established under this act.

(2) Any person, partnership or, if a corporation, the officers and directors who sell or offer to sell a pre-need contract with a suspended or revoked license or without a license shall be guilty of a misdemeanor and upon conviction thereof, shall be punishable by a fine not less than Two Hundred Dollars ($200.00) nor more than Five Hundred Dollars ($500.00) or by imprisonment for a term of not less than one (1) year nor more than two (2) years, or both fine and imprisonment.

(3) Any person, partnership or, if a corporation, the officers and directors who embezzles or fraudulently or knowingly and willfully misapplies or converts pre-need funeral funds shall, upon conviction, be punished by imprisonment in the custody of the Mississippi Department of Corrections for a term of not less than ten (10) years, or be fined not more than One Thousand Dollars ($1,000.00) and imprisoned in the county jail not more than one (1) year, or both fine and imprisonment. Each such violation shall constitute a separate offense.

(4) Upon reasonable belief that a person or corporation is acting in violation of the portions of this act requiring fines or imprisonment, the commissioner shall immediately report this violation accompanied by all relevant records to the district attorney in the county where the violations may have taken place. If the violations may have taken place in multiple counties, the case shall be reported to the county of residence of the violator, or if not a resident of the State of Mississippi, the District Attorney of Hinds County.

(5) The commissioner may, after notice and a hearing, impose an administrative fine against any licensee adjudged by the commissioner to be in violation of the provisions of this act. Such administrative fine shall not exceed Five Hundred Dollars ($500.00) per violation and shall be deposited into the Department of Banking and Consumer Finance, "Consumer Finance Fund."

SECTION 12. The commissioner, for the purpose of discovering violations of this act and for the purpose of determining whether persons are subject to the provisions of this act, is hereby authorized to examine persons or establishments licensed under this act and persons or establishments reasonably suspected by the commissioner of engaging in activities which require a license under this act, including all relevant books, records and papers employed by such persons or establishments in the transaction of their business, and to summon witnesses and examine them under oath concerning matters relating to the business of such persons or establishments, or such other matters as may be relevant to the discovery of violations of this act.

SECTION 13. Nothing in this act shall be construed to authorize the sale of life insurance policies by unlicensed agents which is prohibited by Section 83-17-105, Mississippi Code of 1972.

SECTION 14. The commissioner may employ the necessary permanent full-time employees in addition to the number of permanent full-time employees authorized for the Department of Banking and Consumer Finance for Fiscal Year 2000 to carry out and enforce the provisions of this act.

SECTION 15. Sections 75-63-1, 75-63-3, 75-63-5, 75-63-7, 75-63-9, 75-63-11, 75-63-13, 75-63-15, 75-63-17, 75-63-18, 75-63-19, 75-63-21 and 75-63-23, Mississippi Code of 1972, which regulate the sales of cemetery merchandise and funeral services, are hereby repealed.

SECTION 16. This act shall take effect and be in force from and after July 1, 1999.