AB 459: 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 persons 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, 2017, 2018, 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, and 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 record or the insurer from commencing an action against the named insured or a relative of the insured 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 policy invalid void 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 These provisions would remain in effect only until January 1, 2017, 2018, and would then be repealed.