Contracts entered into after June 30, 1999
Sec. 12.5. (a) This section applies to the following contracts
entered into or established under this chapter after June 30, 1999:
(1) Contracts for prepaid services.
(2) Contracts for prepaid merchandise.
(3) Trusts or escrows established to hold consideration paid for
services or merchandise subject to a contract entered into under
this chapter.
(b) A contract between a purchaser and a seller must:
(1) specify that the consideration for the contract is:
(A) cash, payable either in lump sum or installments; or
(B) an insurance policy that is:
(i) newly issued in conjunction with and integral to the
contract;
(ii) issued previously in a transaction separate and distinct
from the contract; or
(iii) both.
If a contract is funded with an insurance policy, the
ownership of the policy must be irrevocably assigned to a
trustee, and the seller may not borrow against, pledge,
withdraw, or impair the cash value of the policy;
(2) specify that only the purchaser, acting by written notice to
the seller, may revoke the contract within thirty (30) days after
the date the contract is signed by the purchaser and the seller
and that the contract becomes irrevocable upon the expiration
of the thirty (30) day period;
(3) specify that, if the contract is revoked, the seller shall refund
and return to the purchaser, without interest, the cash or
insurance policy used to fund the contract;
(4) specify that not more than thirty (30) days after the contract
is signed by the purchaser and the seller, the whole of the cash
or insurance policy serving as consideration for the contract
must be deposited into a trust or escrow authorized by
subsection (c) or (d). However, a seller may elect to serve as
trustee of a previously existing life insurance contract;
(5) except as provided in subsection (f), unconditionally require
that the seller shall deliver all services or merchandise, or both,
specified in the contract and receive as consideration for the
delivery of services or merchandise, or both, only the cash or
insurance policy held in trust or escrow without regard to the
solvency of the insurer or the adequacy or loss in value of any
cash deposit or insurance policy used to fund a contract;
(6) except as provided in subsection (f), prohibit a seller from
imposing additional charges to recover any shortage or
difference between the retail prices for services or merchandise,
or both, in effect on the date of delivery of the services or
merchandise, or both, and the value of the trust or escrow
applicable to the contract on the date of delivery;
(7) require that a seller accepting the transfer of a contract
permitted under section 13 of this chapter shall honor the
requirements and obligations of the contract;
(8) permit the seller to assess a finance charge on a contract
sold on an installment basis and require that the seller disclose
to the purchaser the applicable requirements of federal and
Indiana law;
(9) provide that the contract must comply with the following
requirements:
(A) The contract must be made in a form that is:
(i) written in clear and understandable language; and
(ii) printed in a size and style of type that is easy to read.
(B) The contract must describe the services, merchandise, or
cash advance items being purchased.
(C) The contract must identify the following by name,
address, and telephone number:
(i) The seller.
(ii) The purchaser.
(iii) The contract beneficiary if the beneficiary is an
individual other than the purchaser.
(D) The contract must contain the seller's certificate of
authority number and the date of the contract.
(E) The contract must provide that if an item of the
particular services or merchandise specified in the contract
is unavailable at the time of delivery, the seller shall deliver
services or merchandise similar in style, quality, and of
equal value to the unavailable item in the place of the item.
(F) The contract must disclose the precise manner in which
the contract is to be funded by:
(i) identifying the consideration for the contract;
(ii) identifying the name, number, if known, and issuer of
any insurance policy used to fund the contract; and
(iii) including the identity and location of the trustee or
escrow agent who is to hold the trust or escrow.
(G) The contract must disclose that the seller reserves the
right to assess an extra charge for:
(i) transportation costs;
(ii) services or merchandise incurred in the transport of
human remains a distance greater than twenty-five (25)
miles from the seller's place of business; and
(iii) service charges necessarily incident to the transport of
human remains and in excess of those service charges
specified in the contract.
(H) The contract must disclose the following:
(i) The amount, if any, the seller has elected to receive
under subsection (c)(1) or subsection (d)(6).
(ii) That a commission or fee may be paid to the seller or
the seller's agent on a contract funded under subsection
(b)(1)(B)(i).
(10) specify that a purchaser has the unrestricted right to
designate one (1) or more successor sellers to whom the
contract may be transferred under section 13 of this chapter, but
that such a transfer is effective only with the consent of the
newly designated seller and upon the fulfillment of the other
requirements of section 13 of this chapter;
(11) specify that if cash advance items are funded in the
contract, the seller agrees to deliver the cash advance items
under one (1) of the following alternatives:
(A) Delivery is unconditionally guaranteed at the option of
the seller.
(B) Delivery is conditionally guaranteed for a seller and will
be equal in value to the total value of the trust or escrow
account maintained for the purchaser multiplied by the
percentage of the total original contract price represented by
cash advance items;
(12) specify that a release from trust or escrow shall occur only
upon the seller's delivery of services or merchandise, or both;
(13) permit, at the option of the seller, the incorporation of the
trust or escrow language contained in subsection (c) or (d)
directly into the contract;
(14) prohibit the seller from charging any service, transaction,
or other type of fee or charge unless the fee is:
(A) authorized under subsections (c)(1) and (d)(6) and
section 27 of this chapter; or
(B) included within the definitions contained in section 8 or
11.5 of this chapter.
(c) A trust account authorized and established under this chapter
must do all of the following:
(1) Be irrevocable and require either of the following:
(A) The seller deposit the insurance policy used to fund the
contract into the trust account. However, for contracts
funded after June 30, 1995, with a previously issued
insurance policy, the seller may serve instead of a trustee if
the seller is qualified to do so under section 11(c) of this
chapter.
(B) The seller deposit the cash used to fund the contract into
the trust account. However, as consideration for the sale of
the contract and any expense incurred by the seller in
conjunction with the sale of the contract, the contract must
permit the seller to notify, within a ten (10) day period
following the date the contract becomes irrevocable, the
trustee of its election to receive only up to ten percent (10%)
of the seller's original contract price for services or
merchandise, or both.
(2) Designate the seller as the beneficiary of the trust.
(3) Designate a trustee qualified under this chapter and
authorize the trustee to assess the charges authorized under
section 18 of this chapter.
(4) Require that a separate account be maintained in the name
of each purchaser.
(5) Require that any interest, dividend, or accumulation in the
account be reinvested and added to the principal.
(6) Permit the assets of the several, separate accounts to be
commingled for investment purposes.
(7) Require that on receipt of the seller's proof of delivery of
services or merchandise the trustee shall remit to the seller the
full amount in trust applicable to the purchaser's contract and all
of the accumulated interest.
(8) Permit the seller to retain the remaining amount if the
amount in the trust account is greater than the seller's total
current retail price of all services and merchandise subject to
the contract at the time of delivery of all services or
merchandise subject to the contract. However, in the case of a
contract funded under subsection (b)(1)(B)(ii), the seller may
not retain the remaining amount but must pay the remaining
amount to the entity or individual designated by the insured as
the beneficiary of the death benefit proceeds not later than sixty
(60) days after the receipt and deposit of the proceeds by the
seller. The seller may not qualify as a beneficiary of the
remaining amount or the insurance death benefit. In the case of
all other contracts funded under this chapter, the seller may opt
to return the remaining amount to the individual designated by
the purchaser to receive the remainder or to the purchaser's
estate.
(d) An escrow account authorized and established under this
chapter must do all of the following:
(1) Be irrevocable and require that the seller deposit all cash or
the insurance policy used to fund the contract into the escrow
account.
(2) Designate the seller as the recipient of the escrow funds.
(3) Designate an escrow agent qualified under this chapter to
act as escrow agent and authorize the escrow agent to assess the
charges authorized under section 18 of this chapter.
(4) Require that the escrow account be maintained in the name
of the seller and serve as a depository for all cash or insurance
policies used to fund contracts sold by the seller.
(5) Permit the investment of and commingling of cash for
investment purposes.
(6) Permit the seller to receive an administrative or service fee
at the option of the seller. The seller may opt to receive the fee
after the day following the date the contract becomes
irrevocable. The amount of the fee may not exceed ten percent
(10%) of the seller's total contract price for services or
merchandise or both.
(7) Require that on delivery of services or merchandise, the
escrow agent shall remit to the seller an amount equal to:
(A) the seller's original retail price as set forth in the contract
for the services or merchandise delivered; minus
(B) the amount, if any, received by the seller under
subdivision (6).
(8) Permit the seller to receive monthly payments of the interest
earned and the appreciation in the value of the escrow assets to
the extent that the total value of the escrow after a payment
authorized under this subdivision is not less than:
(A) the original contract value of all services or merchandise
under the contracts, or parts of the contracts that remain
undelivered; minus
(B) the amounts, if any, received by the seller under
subdivision (6).
(e) A trust account or an escrow account established under this
section must contain a concise written description of all the
provisions of this chapter that apply to the account.
(f) A seller's guarantee of delivery of all services or merchandise
subject to a contract sold by the seller or transferred to a seller is
unconditional except in the instance of one (1) of the following
circumstances:
(1) An installment contract funded with cash or an insurance
policy issued in conjunction with the contract is guaranteed to
the extent of the cash paid or death benefits available at the time
of death of the individual for whom services or merchandise are
to be provided.
(2) A contract funded with an insurance policy issued
previously and not in conjunction with the contract is
guaranteed to the extent of the death benefit proceeds available
at the time of the individual for whom services or merchandise
are to be provided.
(3) A contract funded with an insurance policy issued in
conjunction with the contract, but having a limited or qualified
death benefit period, is guaranteed to the extent of the death
benefit proceeds available at the time of the death of the
individual for whom services or merchandise are to be
provided.
(4) A transportation expense incurred by the seller while
transporting human remains a distance greater than twenty-five
(25) miles from the seller's place of business, plus any charge
for services or merchandise necessarily incident to the transport
of the human remains.
(5) The seller agrees to conditionally guarantee the delivery of
cash advance items under subsection (b)(11)(B).
In the instance of unguaranteed delivery, the seller may reduce the
value or number of the services or merchandise subject to the
contract or cash advance items delivered or deliver the services or
merchandise in full on the condition that the seller receives adequate
consideration to compensate the seller for the unguaranteed part of
the contract.
(g) The entire value of an escrow or trust established under this
chapter may not be considered as a resource in determining a
person's eligibility for Medicaid under IC 12-15-2-17.
(h) This chapter does not prohibit a purchaser from immediately
making the trust or escrow required under this chapter irrevocable
and assigning ownership of an insurance policy used to fund a
contract to obtain favorable consideration for Medicaid,
Supplemental Security Income, or another public assistance program
under federal or state law.
(i) A seller may not accept or deposit into a trust or escrow
account cash, an insurance policy, or any other property as
consideration for services or merchandise to be provided in the future
except in conjunction with a contract authorized by this chapter.
As added by P.L.114-1999, SEC.9. Amended by P.L.76-2000, SEC.1.
Last modified: May 27, 2006