§ 3205 — Insurable interest in the person; consent required; exceptions

New York § 3205

• Jurisdiction: New York
• Law ISC: Insurance
• Art. 32: Insurance Contracts - Life, Accident and Health, Annuities

Text

§ 3205. Insurable interest in the person; consent required;\nexceptions. (a) In this section:\n (1) The term, "insurable interest" means:\n (A) in the case of persons closely related by blood or by law, a\nsubstantial interest engendered by love and affection;\n (B) in the case of other persons, a lawful and substantial economic\ninterest in the continued life, health or bodily safety of the person\ninsured, as distinguished from an interest which would arise only by, or\nwould be enhanced in value by, the death, disablement or injury of the\ninsured.\n (2) The term "contract of insurance upon the person" includes any\npolicy of life insurance and any policy of accident and health\ninsurance.\n (3) The term "person insured" means the natural person, or persons,\nwhose life, health or bodily safety is insured.\n (b) (1) Any person of lawful age may on his own initiative procure or\neffect a contract of insurance upon his own person for the benefit of\nany person, firm, association or corporation. Nothing herein shall be\ndeemed to prohibit the immediate transfer or assignment of a contract so\nprocured or effectuated.\n (2) No person shall procure or cause to be procured, directly or by\nassignment or otherwise any contract of insurance upon the person of\nanother unless the benefits under such contract are payable to the\nperson insured or his personal representatives, or to a person having,\nat the time when such contract is made, an insurable interest in the\nperson insured.\n (3) Notwithstanding the provisions of paragraphs one and two of this\nsubsection, a Type B charitable, educational or religious corporation\nformed pursuant to paragraph (b) of section two hundred one of the\nnot-for-profit corporation law, or its agent, may procure or cause to be\nprocured, directly or by assignment or otherwise, a contract of life\ninsurance upon the person of another and may designate itself or cause\nto have itself designated as the beneficiary of such contract.\n (4) If the beneficiary, assignee or other payee under any contract\nmade in violation of this subsection receives from the insurer any\nbenefits thereunder accruing upon the death, disablement or injury of\nthe person insured, the person insured or his executor or administrator\nmay maintain an action to recover such benefits from the person\nreceiving them.\n (c) No contract of insurance upon the person, except a policy of group\nlife insurance, group or blanket accident and health insurance, or\nfamily insurance, as defined in this chapter, shall be made or\neffectuated unless at or before the making of such contract the person\ninsured, being of lawful age or competent to contract therefor, applies\nfor or consents in writing to the making of the contract, except in the\nfollowing cases:\n (1) A wife or a husband may effectuate insurance upon the person of\nthe other.\n (2) Any person having an insurable interest in the life of a minor\nunder the age of fourteen years and six months or any person upon whom\nsuch minor is dependent for support and maintenance, may effectuate a\ncontract of insurance upon the life of such minor, in an amount which\nshall not exceed the limits specified in section three thousand two\nhundred seven of this article.\n (d) In addition to any other basis under which either an employer, or\nan irrevocable trust established by one or more employers or one or more\nemployers and one or more labor unions, have an insurable interest in\nthe lives of any of its employees or retirees or those of its\nsubsidiaries or affiliated companies, an employer or such a trust shall\nhave an insurable interest in the lives of any such employees or\nretirees who are participants or who are eligible to participate, upon\nthe satisfaction of age, service or similar eligibility criteria, in an\nemployee benefit plan, established or maintained by an employer as\ndefined by the federal Employee Retirement Income Security Act of 1974,\n29 U.S.C. § 1001 et seq., provided that:\n (1) The employer providing for insurance coverage or causing such\ncoverage to be issued under this subsection: (A) prior to or at the\ncommencement of any such coverage notifies prospective insureds in\nwriting that coverage is being obtained on their lives, requires that\nprospective insureds consent in writing to such coverage, provides each\nconsenting insured the right to have any coverage on his/her life issued\nunder the authority of this subsection discontinued at any time and\ndescribes in the notice the method the insured may use to terminate\ncoverage; (B) at the time any insured employee's employment terminates,\nnotifies the employee of the right to discontinue such coverage,\nprovided, however, that no such notification shall be required if the\ninsured employee possesses a present or prospective right to receive any\nof the benefits under an employee benefit plan being financed, in whole\nor in part, by such life insurance coverage; and (C) at any time after\nthe termination of an insured employee's employment and upon the\ntermination of an employee benefit plan being financed, in whole or in\npart, by such life insurance coverage or a reduction of the benefits\nprovided thereunder, notifies the employee of the right to discontinue\nsuch coverage.\n (2) At the time coverage is issued, the total amount of insurance\ncoverage issued to date to the employer or trust under authority of this\nsubsection shall not exceed the costs of employee and/or retiree\nbenefits already incurred in connection with such employee benefit plan\nsince the earliest date coverage on an employee or retiree was issued\nunder this subsection, plus the projected future cost of such benefits\nas established by the employer.\n (3) The amount of coverage insuring the life of each such employee or\nretiree and the selection of the employees or retirees to be insured is\nbased purely on nondiscriminatory factors such as age, premium amount or\nsome other nondiscriminatory factor, and not on conditions or terms of\nemployment other than participation in an employee benefit plan\ndescribed herein.\n (4) If subsequent to issuance of the policy or policies providing life\ninsurance coverage pursuant to this subsection, the insurer providing\nthe coverage is replaced by another insurer, the employer shall notify\neach insured employee or retiree of such replacement.\n (5) During the first five years subsequent to issuance of the policy\nor policies providing life insurance pursuant to this subsection, the\npolicyholder does not undertake a pattern of borrowing likely to require\nall or a substantial part of the cash values of the policies to be\npledged as security against repayment of such loans, unless such\nborrowing was incurred because of an unforeseen substantial loss of\nincome or unforeseen increase in financial obligations.\n (e) If, pursuant to subparagraph (A) of paragraph one of subsection\n(d) of this section, the employer receives from the employee or retiree\nwritten notice that he or she rejects the issuance of the insurance, the\nemployer shall notify the insurer of such rejection and the insurance\nshall not be issued, or if the insurance has already been issued and the\nemployee elects to have the existing coverage terminated, the employee\nshall notify the insurer of the election to terminate coverage in\nwriting, and upon receipt of such written notice from the employee, the\ninsurance shall not be continued in effect and shall terminate upon\nreceipt of such written notice from the employee. In such event, the\ninsurer shall pay any amounts which are payable to the employer or trust\npolicy owner as the result of such termination of coverage, pursuant to\nthe terms and conditions of coverage. Unless the employee or retiree\ncomplies with the requirements of this subsection, neither the employee,\nretiree nor his or her successor in interest, may contest the validity\nof the coverage.\n