Delaware Senate Bill 220 (Prior Session Legislation)

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June 7 2012 - Reported Out of Committee (JUDICIARY) in Senate with 4 On Its Merits
Text: Latest bill text (Draft #1) [HTML]

This bill codifies the common law and protects the secondary market for life insurance in Delaware. Courts in this state have consistently held that when an insurer rescinds a life insurance policy, the insurer must return the premiums that it has collected on the policy. See, e.g., Strassburger v. Earley, 752 A.2d 557, 578 (Del.Ch.2000); Lincoln Nat’l Ins. Co. v. Snyder, 722 F. Supp. 2d 546, 565 (D. Del. 2010); Oglesby v. Penn Mut. Life Ins. Co., 877 F.Supp. 872, 890 (D.Del.1994) Some insurers, however, have ignored this well-settled rule and continue to file lawsuits that seek to rescind the life insurance policies they issued and allow them to keep the premiums paid on those policies. This bill eliminates any possible uncertainty about the state of the law by adopting the common-law rule that an insurer cannot rescind a life insurance policy issued in this State unless it refunds the premiums to the owner of the policy. The bill also advances three other goals that are important to Delaware consumers. First, it provides necessary certainty to investors who purchase life insurance policies in the secondary market. That market, in turn, benefits Delaware consumers—and particularly senior citizens—by giving them the chance to sell a life insurance policy that they no longer want or need for a substantially higher price than the cash surrender value of the policy. Second, the bill eliminates “the undesirable effect of incentivizing insurance companies to bring rescission suits as late as possible as they continue to collect premiums at no actual risk.” Snyder, 722 F. Supp. 2d at 565. Third, the bill eliminates the risk of expensive and unnecessary litigation for owners of life insurance policies issued in this state by establishing a clear and unambiguous rule that is consistent with existing case law.

An Act To Amend Title 18 Of The Delaware Code Relating To Insurance.

Rep Keeley	Rep Mulrooney	Sen DeLuca	Sen Bonini
Rep Ramone	Sen Blevins	Sen Ennis	Rep Walker

Date	Chamber	Action
2012-06-07		Reported Out of Committee (JUDICIARY) in Senate with 4 On Its Merits
2012-05-09		Assigned to Judiciary Committee in Senate

Type	Source
Summary	http://legis.delaware.gov/LIS/lis146.nsf/2bede841c6272c888025698400433a04/2f7d6173790f6f3a852579eb005c13dc?OpenDocument
Text	http://legis.delaware.gov/LIS/lis146.nsf/vwLegislation/SB+220/$file/legis.html?open