Bill Text: DE SB220 | 2011-2012 | 146th General Assembly | Draft
Bill Title: An Act To Amend Title 18 Of The Delaware Code Relating To Insurance.
Spectrum: Slight Partisan Bill (Democrat 6-2)
Status: (Introduced - Dead) 2012-06-07 - Reported Out of Committee (JUDICIARY) in Senate with 4 On Its Merits [SB220 Detail]
Download: Delaware-2011-SB220-Draft.html
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SPONSOR: |
Sen. Blevins & Rep. Mulrooney |
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Sens. DeLuca, Bonini & Ennis; Reps. Keeley, Walker & Ramone |
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DELAWARE STATE SENATE 146th GENERAL ASSEMBLY |
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SENATE BILL NO. 220 |
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AN ACT TO AMEND TITLE 18 OF THE DELAWARE CODE RELATING TO INSURANCE. |
Section 1. Amend §704, Title 18, Delaware Code, by making insertions as shown by underlining as follows:
(h) In any instance in which a life insurance contract is rescinded, voided or otherwise terminated or extinguished in accordance with law because such insurance contract was procured by an individual or a person not having an insurable interest pursuant to this section or was issued in violation of §705 or §708, the insurer shall pay to the owner of the insurance contract at the time such contract was rescinded, voided or otherwise terminated or extinguished an amount equal to the total premiums paid with interest at an interest rate no lower than that specified in the contract for calculating cash surrender values at the time such contract is rescinded, voided, or otherwise terminated or extinguished. .
(1) This subsection does not apply to the owner of an insurance contract who engaged directly in a violation of this section, or §705 or §708.
(2) This subsection applies to all insurance contracts in effect on or following the enactment of this law.
Section 2. If any provision of this Act or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the Act which can be given effect without the invalid provision or application; and, to that end, the provisions of this Act are declared to be severable.
SYNOPSIS
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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. |
Author: Sen. Blevins
