AB 459, as amended, Daly. Insurance: insurable interest: declaratory relief.
Existing law provides 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. 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.
Existing law, effective January 1, 2010, provides that any device, scheme, or artifice designed to give the appearance of an insurable interest when there is no insurable interest, violates the insurable interest laws.
This bill would authorize an owner of record of a life insurance policy, who believes in good faith that the insurer may challenge the policy for lack of an insurable interest, to bring an action, on or before January 1,begin delete 2017,end deletebegin insert 2018,end insert for declaratory relief seeking a court order declaring the policy to have a valid insurable interest. The bill would limit the applicability of these provisions to policies issued for delivery in California prior to January 1, 2010, that have a death benefit equal to or greater than $1,000,000,begin delete andend delete when the owner of record was the owner
of record on the effective date of these provisions. The bill would also prohibit an owner of recordbegin insert or the insurerend insert from commencing an action against the named insuredbegin insert or a relative of the insuredend insert of the policy seeking damages or any other remedy if a court enters a judgment in an action brought pursuant to these provisions declaring a life insurance policybegin delete invalidend deletebegin insert voidend insert on the basis that the policy was issued to a person who lacked an insurable interest. These provisions would remain in effect only until January 1,begin delete 2017,end deletebegin insert
2018,end insert and would then be repealed.
Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 10110.15 is added to the Insurance Code,
2to read:
(a) On or before January 1,begin delete 2017,end deletebegin insert 2018,end insert the owner
4of record of a life insurance policy, who believes in good faith that
5the insurer may challenge the policy for lack of insurable interest,
6may bring an action for declaratory relief seeking a court order
7declaring the policy to have a valid insurable interest.
8(b) The right of the owner of record of a life insurance policy
9to bring an action for declaratory relief under this section applies
10only to policies issued for delivery in California prior to January
111,
2010,begin delete andend delete that have a death benefit equal to or greater than one
12million dollars ($1,000,000). Only the owner of record of a life
13insurance policy on the effective date of this section may bring a
14declaratory judgment action under this section.
15(c) Nothing in this section shall be construed as limiting an
16insurer’s existing right to seek declaratory or other relief regarding
17the validity of a life insurance policy.
18(d) If a court enters a judgment in an action brought pursuant
19to this section that declares a life insurance policybegin delete invalidend deletebegin insert voidend insert on
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the basis that the policy was issued to a person who lacked an
2insurable interest, the owner of recordbegin insert or the insurerend insert shall not
3commence any action against the named insuredbegin insert or a relative of
4the insuredend insert of that life insurance policy seeking damages or any
5other remedy resulting from thebegin delete invalidity of the policy.end deletebegin insert policy
6being declared void.end insert
7(e) For purposes of this section, a policy is issued for delivery
8in the state of residence of the policy’s owner of record on the date
9of
issue.
10(f) For purposes of this section, “owner of record” means the
11owner of a life insurance policy as recorded on the books and
12records of the insurer that issued or assumed the policy.
13(g) This section shall remain in effect only until January 1,begin delete 2017,end delete
14begin insert 2018,end insert and as of that date is
repealed.
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