Bill Text: DE SB71 | 2015-2016 | 148th General Assembly | Draft
Bill Title: An Act To Amend Title 18 Of The Delaware Code Creating The "life Insurance Fraud Protection Act."
Spectrum: Bipartisan Bill
Status: (Engrossed - Dead) 2015-06-23 - Roll Call Rescinded in Senate [SB71 Detail]
Download: Delaware-2015-SB71-Draft.html
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SPONSOR: |
Sen. McDowell & Rep. Mulrooney & Rep. Paradee |
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Sens. Bonini, Cloutier, Ennis, Marshall; Reps. Keeley, Peterman, Ramone, Smyk |
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DELAWARE STATE SENATE 148th GENERAL ASSEMBLY |
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SENATE BILL NO. 71 |
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AN ACT TO AMEND TITLE 18 OF THE DELAWARE CODE CREATING THE "LIFE INSURANCE FRAUD PROTECTION ACT." |
Section 1.Amend §704, Title 18 of the Delaware Code, by making insertions as shown by underlining as follows:
§2704 Insurable interest; personal insurance.
(h) If a life insurance policy is rescinded or otherwise void because it was procured by an individual or a person that does not have an insurable interest pursuant to this section or was issued in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 life insurance policyan amount equal to the total premiums paid.
(1) This subsection does not apply to the owner of a life insurance policy who engaged in fraud in connection with the origination of the life insurance policy..
(2) Upon any transfer of ownership of a life insurance policy, the new owner of such insurance policy shall provide to the life insurance company that issued the policy notice of the change of ownership, including the name, address and contact information for the new owner of such contract within 120 days of the transfer of ownership.
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.
Section 3.The provisions of this Act shall apply to all insurance contracts for which premiums have been paid as of the effective date of this Act and to all policies issued or transferred thereafter issued by an insurance carrier who within five years prior to the effective date of this Act has failed to file, or filed late, a required financial report with the Securities Exchange Commission; has filed seven or more lawsuits in any court in the United States seeking to invalidate a policy for lack of insurable interest; or has received a downgrade in credit rating, or any rating agency has withdrawn rating due to lack of adequate financial information.
SYNOPSIS
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This bill only applies to life insurance carriers who meet certain criteria suggesting a history of issuing fraudulent policies or other financial misconduct.When a covered insurance carrier cancels a life insurance policy for lack of insurable interest they are required to return any premiums paid on the policy to the owner of the life insurance policy so long as the owner did not engage in any wrongdoing related to the issuance of the insurance contract. The bill also advances three 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—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 cancel policies as late as possible as they continue to collect premiums at no actual risk. 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: Senator McDowell
