Fourth Circuit Rules That Virginia Viatical Settlement Regulation Does Not Violate the Dormant Commerce Clause

In a case of first impression, the Fourth Circuit U.S. Court of Appeals recently ruled that the Virginia Viatical Settlements Act (Act) does not violate the dormant Commerce Clause of the U.S. Constitution. In Life Partners, Inc. v. Morrison, Nos. 06-1370 and 06-1371, 2007 WL 1240301 (4th Cir. Apr. 30, 2007), the viator was a terminally ill Virginia resident. The viator filed a complaint with the Virginia Bureau of Insurance against the Texasbased viatical settlement provider, Life Partners, Inc. (Life Partners), five months after accepting a settlement amount from Life Partners that was below the minimum permitted under the Act.

Viatical settlement regulation developed in the 1990s due to regulatory concern over potential abuses in viatical settlements, transactions in which life insurance policies held by terminally ill insureds are purchased for less than the expected death benefit. The National Association of Insurance Commissioners (NAIC)