Key Points in This Section
- A viatical settlement broker owes a fiduciary duty to the viator — the highest standard of care recognized in law; a provider does not owe the same duty because it is the adverse party in the transaction
- The fiduciary duty includes four core obligations: loyalty, care, disclosure, and confidentiality
- The duty of loyalty requires the broker to place the viator’s interests above all others — including the broker’s own financial interests
- A broker who has an ownership interest or financial relationship with a settlement provider must disclose that conflict of interest to the viator before proceeding
- Brokers may not accept compensation from both the viator and the provider without full disclosure and the viator’s informed consent
- Florida law expressly provides that the viatical settlement broker “represents only the viator” — not the provider, not the investor, and not the insurer
Fiduciary Responsibility
The Fiduciary Standard
A fiduciary is a person who holds a position of trust and confidence with respect to another party and is legally obligated to act in that party’s best interest. The fiduciary standard is the highest standard of care recognized in law — higher than the ordinary duty of care that applies to most commercial relationships.
Florida law expressly provides that the viatical settlement broker “represents only the viator” in a settlement transaction (Chapter 626, Part X, F.S.). This is not merely a policy preference — it is a statutory mandate. The broker is the viator’s agent and advocate, and that relationship carries with it the full weight of fiduciary obligation.
The fiduciary duty of a viatical settlement broker encompasses four core obligations:
Broker vs. Provider — Different Duties
It is important to understand that the viatical settlement provider does not owe a fiduciary duty to the viator. The provider is the adverse party in the transaction — it is purchasing the policy from the viator and has its own financial interests to protect. The provider’s obligation is to deal fairly and honestly with the viator, not to act as the viator’s advocate.
| Obligation | Viatical Settlement Broker | Viatical Settlement Provider |
|---|---|---|
| Represents | The viator only | Its own interests (buyer) |
| Standard of care | Fiduciary — highest standard | Good faith and fair dealing |
| Disclosure obligations | All offers, all compensation, all conflicts | Purchase price, premium obligations, rescission rights |
| Compensation paid by | The provider (not the viator directly) | N/A — provider is the buyer |
| Conflict of interest concern | Provider affiliations must be disclosed | Inherent conflict — no special disclosure required |
Conflicts of Interest
The most common source of conflicts of interest for settlement brokers arises from financial relationships with providers. A broker who has an ownership interest in, or receives referral fees from, a particular settlement provider has a financial incentive to steer clients toward that provider — regardless of whether it offers the best terms for the viator.
Florida law and the NAIC Model Act address this by requiring brokers to:
- Disclose any ownership interest in a settlement provider to the viator before executing any transaction
- Disclose any contractual or financial arrangement between the broker and any provider making an offer
- Disclose all offers received — not just offers from preferred providers — so the viator can make an informed comparison
- Refrain from accepting compensation from both the viator and the provider without full disclosure and the viator’s informed consent to the dual compensation arrangement
The Agent’s Responsibility Beyond the Transaction
Life insurance agents who refer clients to the settlement market occupy a unique position. Unlike settlement brokers who are legally defined as the viator’s fiduciary, insurance agents operate under a somewhat different standard depending on the nature of the relationship and applicable state law. However, the ethical obligations are clear:
- An agent who is aware that a client’s policy may have value on the secondary market has an ethical duty to inform the client of that option — even if the agent has no financial interest in facilitating the settlement
- An agent must never discourage a settlement to protect ongoing commissions from the in-force policy
- An agent who facilitates a referral to a settlement broker or provider should ensure that the parties involved are properly licensed and in good standing
- If an agent receives a referral fee for introducing a client to a settlement company, that fee arrangement must comply with state law and must be disclosed to the client