BILL NUMBER: AB 546	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Stone

                        FEBRUARY 20, 2013

   An act to amend Section 10110.1 of the Insurance Code, relating to
insurance.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 546, as introduced, Stone. Insurance: life and disability
insurance: insurable interest.
   Existing law provides, among other things, that an insurable
interest, with reference to life and disability insurance, is an
interest based upon a reasonable expectation of pecuniary advantage
through the continued life, health, or bodily safety of another
person and consequent loss by reason of that person's death or
disability or a substantial interest engendered by love and affection
in the case of individuals closely related by blood or law.
   This bill would make technical, nonsubstantive changes to those
provisions.
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 10110.1 of the Insurance Code is amended to
read:
   10110.1.  (a) An insurable interest, with reference to life and
disability insurance, is an interest based upon a reasonable
expectation of pecuniary advantage through the continued life,
health, or bodily safety of another person and consequent loss
 by reason  of that  person's  
person by reason of  death or disability or a substantial
interest engendered by love and affection in the case of individuals
closely related by blood or law.
   (b) An individual has an unlimited insurable interest in his or
her own life, health, and bodily safety and may lawfully take out a
policy of insurance on his or her own life, health, or bodily safety
and have the policy made payable to whomsoever he or she pleases,
regardless of whether the beneficiary designated has an insurable
interest.
   (c) Except as provided in Section 10110.4, an employer has an
insurable interest, as referred to in subdivision (a), in the life or
physical or mental ability of any of its directors, officers, or
employees or the directors, officers, or employees of any of its
subsidiaries or any other person whose death or physical or mental
disability might cause financial loss to the employer; or, pursuant
to any   a  contractual arrangement with
 any   a  shareholder concerning the
reacquisition of shares owned by the shareholder at the time of his
or her death or disability, on the life or physical or mental ability
of that shareholder for the purpose of carrying out the contractual
arrangement; or, pursuant to  any   a 
contract obligating the employer as part of compensation arrangements
or pursuant to a contract obligating the employer as guarantor or
surety, on the life of the principal obligor. The trustee of an
employer or trustee of a pension, welfare benefit plan, or trust
established by an employer providing life, health, disability,
retirement, or similar benefits to employees and retired employees of
the employer or its affiliates and acting in a fiduciary capacity
with respect to those employees, retired employees, or their
dependents or beneficiaries has an insurable interest in the lives of
employees and retired employees for whom those benefits are to be
provided. The employer shall obtain the written consent of the
individual being insured.
   (d) Trusts and special purpose entities that are used to apply for
and initiate the issuance of policies of insurance for investors,
where one or more beneficiaries of those trusts or special purpose
entities do not have an insurable interest in the life of the
insured, violate the insurable interest laws and the prohibition
against wagering on life.
   (e)  Any   A  device, scheme, or
artifice designed to give the appearance of an insurable interest
where there is no legitimate insurable interest violates the
insurable interest laws.
   (f) An insurable interest shall be required to exist at the time
the contract of life or disability insurance becomes effective, but
need not exist at the time the loss occurs.
   (g)  Any   A  contract of life or
disability insurance procured or caused to be procured upon another
individual is void unless the person applying for the insurance has
an insurable interest in the individual insured at the time of the
application.
   (h) Notwithstanding subdivisions (a), (f), and (g), a charitable
organization that meets the requirements of Section 214 or 23701d of
the Revenue and Taxation Code may effectuate life or disability
insurance on an insured who consents to the issuance of that
insurance.
   (i) This section shall not be interpreted to define all instances
in which an insurable interest exists.