§ 3212 — Exemption of proceeds and avails of certain insurance and annuity contracts

New York § 3212

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

Text

§ 3212. Exemption of proceeds and avails of certain insurance and\nannuity contracts. (a) In this section:\n (1) The term "proceeds and avails", in reference to policies of life\ninsurance, includes death benefits, accelerated payments of the death\nbenefit or accelerated payment of a special surrender value, cash\nsurrender and loan values, premiums waived, and dividends, whether used\nin reduction of premiums or in whatever manner used or applied, except\nwhere the debtor has, after issuance of the policy, elected to receive\nthe dividends in cash.\n (2) An annuity contract includes any obligation to pay certain sums at\nstated times, during life or lives, or for a specified term or terms,\nissued for a valuable consideration, regardless of whether such sums are\npayable to one or more persons, jointly or otherwise, but does not\ninclude payments under a life insurance policy at stated times during\nlife or lives, or for a specified term or terms.\n (3) The term "creditor" includes every claimant under a legal\nobligation contracted or incurred after December thirty-first, nineteen\nhundred thirty-nine.\n (4) The term "execution" includes execution by garnishee process and\nevery action, proceeding or process whereby assets of a debtor may be\nsubjected to the claims of creditors.\n (b) (1) If a policy of insurance has been or shall be effected by any\nperson on his own life in favor of a third person beneficiary, or made\npayable otherwise to a third person, such third person shall be entitled\nto the proceeds and avails of such policy as against the creditors,\npersonal representatives, trustees in bankruptcy and receivers in state\nand federal courts of the person effecting the insurance.\n (2) If a policy of insurance has been or shall be effected upon the\nlife of another person in favor of the person effecting the same or made\npayable otherwise to such person, the latter shall be entitled to the\nproceeds and avails of such policy as against the creditors, personal\nrepresentatives, trustees in bankruptcy and receivers in state and\nfederal courts of the person insured. If the person effecting such\ninsurance shall be the spouse of the insured, he or she shall be\nentitled to the proceeds and avails of such policy as against his or her\nown creditors, trustees in bankruptcy and receivers in state and federal\ncourts.\n (3) If a policy of insurance has been or shall be effected by any\nperson on the life of another person in favor of a third person\nbeneficiary, or made payable otherwise to a third person, such third\nperson shall be entitled to the proceeds and avails of such policy as\nagainst the creditors, personal representatives, trustees in bankruptcy\nand receivers in state and federal courts of the person insured and of\nthe person effecting the insurance.\n (4) (A) The person insured pursuant to paragraph one of this\nsubsection or the person effecting the insurance other than the spouse\nof the insured pursuant to paragraph two hereof, and the person\neffecting the insurance pursuant to paragraph three hereof, or the\nexecutor or administrator of any such persons, or a person entitled to\nthe proceeds or avails of such policy in trust for such persons shall\nnot be deemed a third person beneficiary, assignee or payee.\n (B) A policy shall be deemed payable to a third person beneficiary if\nand to the extent that a facility-of-payment clause or similar clause in\nthe policy permits the insurer to discharge its obligation after the\ndeath of the person insured by paying the death benefits to a third\nperson.\n (5) This section shall be applicable whether or not the right is\nreserved in any such policy to change the designated beneficiary and\nwhether or not the policy is made payable to the person whose life is\ninsured if the beneficiary, assignee or payee shall predecease such\nperson; and no person shall be compelled to exercise any rights, powers,\noptions or privileges under such policy.\n (6) If a policy of insurance has been or shall be effected by any\nperson on his own life or upon the life of another person, the\npolicyowner shall be entitled to any accelerated payments of the death\nbenefit or accelerated payment of a special surrender value permitted\nunder such policy as against the creditors, personal representatives,\ntrustees in bankruptcy and receivers in state and federal courts of the\npolicyowner.\n (c) (1) No money or other benefits payable or allowable under any\npolicy of insurance against disability arising from accidental injury or\nbodily infirmity or ailment of the person insured, shall be liable to\nexecution for the purpose of satisfying any debt or liability of the\ninsured, whether incurred before or after the commencement of the\ndisability, except as provided in subsection (e) hereof.\n (2) With respect to debts or liabilities incurred for necessaries\nfurnished the insured after the commencement of disability, the\nexemption shall not include any income payment benefits payable as a\nresult of any disability of the insured, and with respect to all other\ndebts or liabilities incurred after the commencement of disability of\nthe insured, the exemption of income payment benefits payable as a\nresult of any disability of the insured shall not at any time exceed\npayment at a rate of four hundred dollars per month for the period of\nsuch disability.\n (3) When a policy provides for lump sum payment because of a\ndismemberment or other specific loss of insured, such payment shall be\nexempt from execution of insured's creditors.\n (4) This subsection shall not affect the assignability of any benefit\notherwise assignable.\n (d) (1) The benefits, rights, privileges and options which, under any\nannuity contract are due or prospectively due the annuitant, who paid\nthe consideration for the annuity contract, shall not be subject to\nexecution.\n (2) The annuitant shall not be compelled to exercise any such rights,\npowers or options contained in the annuity contract, nor shall creditors\nbe allowed to interfere with or terminate the contract, except as\nprovided in subsection (e) hereof and except that the court may order\nthe annuitant to pay to a judgment creditor or apply on the judgment in\ninstallments, a portion of such benefits that appears just and proper to\nthe court, with due regard for the reasonable requirements of the\njudgment debtor and his family, if dependent upon him, as well as any\npayments required to be made by the annuitant to other creditors under\nprior court orders.\n (3) The benefits, rights, privileges or options accruing under such\ncontract to a beneficiary or assignee shall not be transferable nor\nsubject to commutation. If the benefits are payable periodically or at\nstated times, the same exemptions and exceptions contained herein for\nthe annuitant shall apply with respect to such beneficiary or assignee.\n (4) The benefits, rights, privileges or options accruing under an\nannuity contract funding a structured settlement which would otherwise\nbe nontransferable under this subsection may be transferred in\naccordance with title seventeen of article five of the general\nobligations law. As used in this paragraph the term "structured\nsettlement" means an arrangement for periodic payments of damages for\npersonal injuries established by settlement or judgment in resolution of\na tort claim; and the term "periodic payments" shall include scheduled\nfuture lump sum payments.\n (e) (1) Every assignment or change of beneficiary or other transfer is\nvalid, except in cases of transfer with actual intent to hinder, delay\nor defraud creditors, as defined by article ten of the debtor and\ncreditor law. In such cases creditors shall have all the remedies\nprovided by such article ten.\n (2) (A) Subject to the statute of limitations, the amount of premiums\nor other consideration paid with actual intent to defraud creditors as\nprovided in article ten of the debtor and creditor law, together with\ninterest on such amount, shall enure to the benefit of creditors from\nthe proceeds of the policy or contract; but the insurer issuing such\npolicy or contract shall be discharged of liability thereunder by making\npayments in accordance with its terms, or in accordance with any\nassignment, change of beneficiary or other transfer, unless before any\nsuch payment such insurer shall have received written notices, by or on\nbehalf of any such creditor, of a claim to recover any benefits on the\nground of a transfer or payment made with intent to defraud such\ncreditor.\n (B) The notice shall specify the amount claimed or sufficient facts to\nenable the insurer to ascertain such amount, the insurance or annuity\ncontract, the person insured or annuitant, and the transfers or payments\nsought to be avoided on the ground of fraud.\n (3) (A) Notwithstanding any inconsistent provision of this section or\nother law, any right of subrogation to benefits to which a local social\nservices district, the department of social services, or the\ncommissioner of health or his designee, shall be entitled shall be valid\nand enforceable to the extent benefits are available under any\nindividual accident and health insurance, group or blanket accident and\nhealth insurance, or noncancellable disability insurance policy, or any\nsubscriber contract made by a corporation subject to the provisions of\narticle forty-three of this chapter, except that no such right of\nsubrogation shall be enforceable if such benefits may be claimed by the\ndepartment of social services, an appropriate social services official\nor the commissioner of health or his designee, by agreement or other\nestablished procedure, directly from an insurance carrier.\n (B) The right of subrogation does not attach to insurance benefits\npaid or provided under any health insurance policy prior to the receipt\nby the carrier issuing such insurance of written notice from the\ndepartment of social services, a local social services district, or the\ncommissioner of health or his designee, of the exercise of subrogation\nrights.\n (C) No right of subrogation to insurance benefits available under any\nhealth insurance policy shall be enforceable unless written notice of\nthe exercise of such subrogation right is received by the carrier within\nthree years from the date services for which benefits are provided under\nthe policy or contract are rendered. An insurer shall not deny a claim\nmade in conformance with paragraph (b) of subdivision two of section\nthree hundred sixty-seven-a of the social services law solely on the\nbasis of the date of submission of the claim, the type or format of the\nclaim form, a failure to obtain prior authorization, or a failure to\npresent proper documentation at the point-of-sale that is the basis of\nthe claim.\n (4) No terms of any policy or contract which directly or indirectly\nprevent or prohibit the assignment of rights under any policy or\ncontract prevent a local social services district, the department of\nsocial services, or the commissioner of health or his designee, from\nclaiming benefits to which it shall be subrogated. The right of\nsubrogation attaches to any benefits paid or provided under any policy,\nplan or contract upon receipt of written notice of the exercise of such\nsubrogation rights.\n (f) This section shall likewise apply to group insurance policies or\nannuity contracts, to the certificates or contracts of fraternal benefit\nsocieties, and to the policies or contracts of cooperative life and\naccident insurance companies.\n