17B:24-1.1. Insurable interests

1. a. For the purpose of life insurance, health insurance or annuities:

(1) An individual has an insurable interest in his own life, health and bodily safety.

(2) An individual has an insurable interest in the life, health and bodily safety of another individual if he has an expectation of pecuniary advantage through the continued life, health and bodily safety of that individual and consequent loss by reason of his death or disability.

(3) An individual has an insurable interest in the life, health and bodily safety of another individual to whom he is closely related by blood or by law and in whom he has a substantial interest engendered by love and affection. An individual liable for the support of a child or former wife or husband may procure a policy of insurance on that child or former wife or husband.

(4) A corporation has an insurable interest: (a) in the life or physical or mental ability of any of its directors, officers, or employees, or the directors, officers, or employees of any of its subsidiaries or any other person whose death or physical or mental disability might cause financial loss to the corporation; (b) pursuant to any contractual arrangement with any shareholder concerning the reacquisition of shares owned by him at the time of his death or disability, in the life or physical or mental ability of that shareholder for the purpose of carrying out that contractual arrangement; (c) pursuant to any contract obligating the corporation as part of compensation arrangements, in the life of the individual for whom compensation is to be provided; or (d) pursuant to a contract obligating the corporation as guarantor or surety, in the life of the principal obligor. The trustee of a trust established and fully funded by a corporation providing solely life, health, disability, retirement, or similar benefits to employees of the corporation or its affiliates and acting in a fiduciary capacity with respect to those employees, retired employees, or their dependents or beneficiaries, has an insurable interest in the lives of employees for whom such benefits are to be provided.

(5) A nonprofit or charitable entity qualified pursuant to section 501 (c) (3) of the Internal Revenue Code of 1986 (26 U.S.C. s.501(c)(3)), or a government entity has an insurable interest in the life or physical or mental ability of its directors, officers, employees, supporters or their designees or others to whom it may look for counsel, guidance, fundraising or assistance in the execution of its legally established purpose, who either: (a) join with the entity in signing the application for insurance, which application names the entity as the owner and irrevocable beneficiary of the policy; or (b) after having been listed as owner, subsequently transfer ownership of the insurance to the entity and name the entity as the irrevocable beneficiary of the policy. The trustee of a trust established and fully funded by a nonprofit or charitable entity qualified pursuant to section 501 (c) (3) of the Internal Revenue Code of 1986 (26 U.S.C. s.501(c)(3)), or a government entity providing solely life, health, disability, retirement, or similar benefits to employees of the entity or its affiliates and acting in a fiduciary capacity with respect to those employees, retired employees, or their dependents or beneficiaries, has an insurable interest in the lives of employees for whom such benefits are to be provided.

b. No person shall procure or cause to be procured any insurance contract upon the life, health or bodily safety of another individual unless the benefits under that contract are payable to the individual insured or his personal representative, or to a person having, at the time when that contract was made, an insurable interest in the individual insured.

c. If the beneficiary, assignee, or other payee under any contract made in violation of this section receives from the insurer any benefits thereunder accruing upon the death, disablement, or injury of the individual insured, the individual insured, or his executor or administrator, as the case may be, may maintain an action to recover those benefits from the person so receiving them.

d. An insurer shall be entitled to rely upon all statements, declarations and representations made by an applicant for insurance relating to the insurable interest of the applicant in the insured and no insurer shall incur legal liability, except as set forth in the policy, by virtue of any untrue statements, declarations or representations so relied upon in good faith by the insurer.

e. This section shall not apply to group life insurance, group health insurance, blanket insurance or group annuities.

L.1991,c.369,s.1; amended 1992,c.190.