BILL NUMBER: SB 1212	AMENDED
	BILL TEXT

	AMENDED IN SENATE  MARCH 26, 2012

INTRODUCED BY   Senator Calderon

                        FEBRUARY 22, 2012

   An act to amend Section  10113   10110.1
 of the Insurance Code, relating to insurance.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1212, as amended, Calderon. Insurance. 
   Existing law provides that 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, as specified.  
   Existing law defines "stranger-originated life insurance," also
referred to as "STOLI," as an act, practice, or arrangement to
initiate the issuance of a life insurance policy in this state for
the benefit of a third-party investor who, at the time of policy
origination, has no insurable interest, under the laws of this state,
in the life of the insured.  
   This bill would exclude "stranger-originated life insurance" from
the provision authorizing an individual to 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.  
   Under existing law, every policy of life, disability, or life and
disability insurance issued or delivered within this state by any
insurer doing such business within this state is required to contain
and is deemed to constitute the entire contract between the parties
and, except as specified, nothing shall be incorporated by reference,
as specified.  
   This bill would make a technical, nonsubstantive change to that
section. 
   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 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  ,   except for a policy that qualifies as
"stranger-originated life insurance" as defined in Section 10113.1
 .
   (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 contractual arrangement with any 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 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 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 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. 
  SECTION 1.    Section 10113 of the Insurance Code
is amended to read:
   10113.  Every policy of life, disability, or life and disability
insurance issued or delivered within this State on or after the first
day of January, 1936, by any insurer doing such business within this
State shall contain and shall be deemed to constitute the entire
contract between the parties and nothing shall be incorporated
therein by reference to any constitution, by-laws, rules, application
or other writings, of either of the parties thereto or of any other
person, unless the same are indorsed upon or attached to the policy;
and all statements purporting to be made by the insured shall, in the
absence of fraud, be representations and not warranties. Any waiver
of the provisions of this section shall be void.