HCS SS SCS SB 1 -- PRENEED FUNERAL CONTRACTS

This bill establishes licensing requirements for sellers, seller
agents, and providers of preneed funeral contracts and
establishes the Missouri Preneed Funeral Contract Act.

LICENSURE OF PRENEED PROVIDERS, SELLERS, AND AGENTS

The bill:

(1)  Increases the membership of the State Board of Embalmers and
Funeral Directors within the Department of Insurance, Financial
Institutions and Professional Registration from six to 10 with
not more than five members from the same political party.  The
non-public members will be appointed by the Governor with the
advice and consent of the Senate, consisting of one from each of
the state's Congressional districts.  Those appointed to the
board are required to submit an audited financial statement of
their funeral establishments by an independent auditor for the
previous five years including all of their at-need and preneed
business;

(2)  Authorizes the board to employ legal counsel if necessary;

(3)  Exempts certain endowed care cemetery operators from the
licensure requirements;

(4)  Requires applicants for a preneed provider license to make
application with the board; pay an application fee; be registered
to conduct business in this state with the Secretary of State;
identify the name and address of the custodian of records and all
sellers authorized by the provider to sell preneed contracts; and
give authorization to the board to inspect, examine, investigate,
or audit all records regarding preneed contracts sold;

(5)  Requires applicants for a preneed seller license to make
application with the board; pay an application fee; be a Missouri
resident who is 18 years of age or older or a business entity
registered to conduct business in this state with the Secretary
of State; identify the name and address of the custodian of
records and all providers which have authorized the seller to
designate the person as a provider under the contract; identify,
if applicable, the financial institution where any preneed trust
or joint accounts will be maintained; and give authorization to
the board to inspect, examine, investigate, or audit all records
regarding preneed contracts sold;

(6)  Requires applicants for a preneed agent registration to make
application with the board; pay an application fee; be 18 years
of age or older; have successfully passed the Missouri law
examination as designated by the board; and identify the name and
address of each seller for whom they are authorized to sell,
negotiate, or solicit the sale of preneed contracts for, or on
behalf of;

(7)  Authorizes the board to refuse to issue, suspend, and revoke
certificates of registration or authority, permits, or licenses;
seek an injunction, restraining order, or other order from the
Cole County circuit court; and cause complaints to be filed with
the Administrative Hearing Commission as specified in the bill;
and

(8)  Authorizes the board to adopt and enforce rules for the
transaction of its business and for the standards of service and
practice to be followed in the professions of embalming, funeral
directing, and selling preneed funeral contracts.

MISSOURI PRENEED FUNERAL CONTRACT ACT

The bill establishes the Missouri Preneed Funeral Contract Act
which will apply only to preneed contracts made on or after
August 28, 2009, and not to certain contracts sold by a cemetery
operator for which payments are to be placed in an endowed care
fund or a segregated account.  In its main provisions, the bill;

(1)  Requires the provider designated in the preneed contract to
provide final disposition, funeral or burial services and
facilities, and funeral merchandise as specified in the contract;

(2)  Requires the seller to collect and properly deposit and
disburse all payments made by a purchaser to ensure a contract is
managed in compliance with the provisions of the bill;

(3)  Requires written contractual agreements between providers
and sellers.  Providers must notify the board of the contractual
relationships;

(4)  Specifies that preneed contracts must be in writing and
include the name, address, and phone number of the purchaser and
beneficiary; include the name, address, phone number, and license
number of the provider and seller; provide details of the
disposition, funeral and burial services and facilities, and
merchandise requested; identify the funding mechanism of the
contract; include notice that the cancellation of the contract
will not affect any life insurance used for funding of the
contract; include notice that the purchaser will receive the cash
surrender value of any insurance funding the contract if canceled
after a designated time; include notice that the purchaser may
transfer the provider designation to another provider;
prominently identify whether the contract is revocable or
irrevocable; establish the terms for a cancellation; identify the
trust or joint account where the money will be deposited; include
the name, address, and phone number of any insurance company
issuing a policy to fund the contract; prominently identify
whether the contract is guaranteed or nonguaranteed; and include
any applicable consumer disclosures required by the board by rule
and on all guaranteed installment payment contracts regarding
what will be owed if the beneficiary dies before all installments
have been paid;

(5)  Allows a beneficiary who seeks to become eligible to receive
public assistance to waive his or her right to any refund or
money used to fund his or her preneed contract;

(6)  Gives all purchasers the right to cancel or rescind a
revocable contract with or without cause;

(7)  Requires sellers of trust-funded contracts to deposit 100%
of the payments into the designated trust within 60 days of the
receipt of the money.  The trustee must be a state or federally
chartered financial institution authorized to exercise trust
powers in this state.  The seller is entitled to 15% of the total
contract amount, 5% as an origination fee and 10% which may be
collected as soon as the funds have been deposited into the
trust;

(8)  Allows for the commingling of two or more contracts within
one trust under certain specified criteria;

(9)  Allows all expenses of establishing and administering a
trust to be paid from income generated by the trust;

(10)  Entitles the seller and provider to income generated by the
trust as stipulated in the contract;

(11)  Requires the provider to request payment by submitting a
certificate of performance to the seller certifying that he or
she has rendered services under the contract or as requested.
This certificate must be signed by the provider and the person
authorized to make arrangements on behalf of the beneficiary;

(12)  Requires a trustee to be held to the prudent investor
standard and to diversify the investments in the trust unless the
trustee reasonably determines that it would be better served
without diversification because of special circumstances;

(13)  Prohibits providers, sellers, and preneed agents from
collecting from the purchaser of an insurance-funded contract any
amount in excess of what is required to pay the premiums on the
insurance policy.  Sellers cannot collect any fees from the
purchaser of an insurance-funded contract, other than those fees
assessed by the insurer;

(14)  Prohibits the use of a loan against any insurance contract
to fund a preneed contract;

(15)  Allows sellers and purchasers to use joint accounts to fund
contracts under specified requirements;

(16)  Requires financial institutions to disburse funds from
canceled joint account contracts to the purchaser within 15 days
of cancellation.  In cases of a canceled trust-funded contract,
the trustee must return all of the trust property, less interest,
to the purchaser;

(17)  Gives a seller the right to cancel a trust-funded or joint-
account funded preneed contract which is in default for over 60
days.  Purchasers may remit delinquent payments if the seller
chooses not to cancel the contract.  Upon cancellation by the
seller, 85% of the contract payments will be refunded to the
purchaser;

(18)  Allows a purchaser to choose an alternate provider under
the original contract at no charge.  When this occurs, the seller
has the option of canceling the contract by paying the new
provider all of the trust property, including the principal and
interest;

(19)  Requires sellers to file annual reports with the State
Board of Embalmers and Funeral Directors within the Department of
Insurance, Financial Institutions and Professional Registration
containing the contract number of each contract sold in the last
year and whether it is funded by a trust, insurance, or joint
account; total number and total face value of contracts sold;
amount of each contract sold; name, address, and license number
of each preneed agent authorized to sell on the seller's behalf;
list of all contracts fulfilled, canceled, or transferred during
the preceding year; name and address of each provider with whom
they have contractual arrangements; name and address of each
custodial record keeper; written consent to investigate, examine,
or audit accounts and records; and certification that the report
is accurate and complete;

(20)  Authorizes the board to establish an annual reporting fee
for each preneed contract sold in the year since the date of the
last report;

(21)  Authorizes the board to conduct inspections,
investigations, and financial examinations of providers, sellers,
and agents and any trust and joint account holding assets to fund
contracts.  Subject to funding availability, the financial
examinations of sellers of contracts must be conducted at least
once every five years;

(22)  Authorizes the board to issue subpoenas to compel the
production of records and papers of any licensee, trustee, or
registrant;

(23)  Allows the board; Division of Finance; Department of
Insurance, Financial Institutions and Professional Registration;
and the Office of the Attorney General to share information
regarding any inspection, investigation, examination, or audit;

(24)  Requires a provider or seller who intends to cease doing
business in this state to notify the board at least 60 days prior
to the liquidation of all or a majority of its assets or stock;

(25)  Allows contracts to offer the purchaser the option to
acquire and maintain credit life insurance; and

(26)  Requires the board to maintain as a closed and confidential
record all personal information about any preneed purchaser or
beneficiary except in certain specified situations.

Anyone violating the provisions of the Missouri Preneed Funeral
Contract Act will be guilty of a class C felony.

Missouri House of Representatives
95th General Assembly, 1st Regular Session
Last Updated November 17, 2009 at 9:26 am