The Office of General Counsel issued the following informal opinion on October 30, 2001, representing the position of the New York State Insurance Department.
Re: Office of General Counsel Opinions 90-1 and 91-56
Has subsequent legislation rendered Office of General Counsel Opinions 90-1 and 91-56 moot?
Yes. The Office of General Counsel Opinions 90-1 and 91-56 have been superseded by subsequent legislation.
The inquirer seeks this Departments confirmation that subsequent legislation has superceded the captioned opinions and that they no longer accurately reflect either the law or the views of this Department.
New York Insurance Law § 3205(a)(1) & (b)(2) (1986) provided:
(a)(1) In this section: (1) The term, "insurable interest" means: (A) in the case of persons closely related by blood or by law, a substantial interest engendered by love and affection; (B) in the case of other persons, a lawful and substantial economic interest in the continued life, health or bodily safety of the person insured, as distinguished from an interest which would arise only by, or would be enhanced in value by, the death, disablement or injury of the insured.
(b)(2) No person shall procure or cause to be procured, directly or by assignment or otherwise any contract of insurance upon the person of another unless the benefits under such contract are payable to the person insured or his personal representatives, or to a person having, at the time when such contract is made, an insurable interest in the person insured.
Based upon the above provisions, this Office opined in February 1990 that a corporation could not legally offer to purchase life insurance policies from individuals in exchange for an assignment of all interest in the policy, so that the assignee would be entitled to the cash value and face amount of the policy. (Opinion 90-1). In May 1991, this Office relied upon New York Insurance Law § 3205(b)(2) to opine that an individual could not legally offer to purchase a policy for less than the face amount, in exchange for an assignment of all interest in the policy. (Opinion 91-56).
Subsequently, 1996 N.Y. Laws 510 added new paragraph (3) to New York Insurance Law § 3205(b) and renumbered the old paragraph (3), to allow charities to solicit the purchase of life insurance for immediate assignment to the charity. In addition, 1996 N.Y. Laws 491 modified New York Insurance Law § 3205, by adding new subsections (d) & (e), to allow the issuance of corporate owned life insurance for the purpose of funding employee benefit plans.
Further, 1993 N.Y. Laws 638 enacted New York Insurance Law Article 78, to authorize viatical settlements. A viatical settlement is defined in New York Insurance Law § 7801(c) (McKinney 2000):
Viatical settlement means an agreement entered into between a viatical settlement company and a viator. The agreement shall establish the terms under which the viatical settlement company will pay compensation or anything of value, which compensation or value is less than the expected death benefit of the insurance policy, in return for the viator's assignment, transfer, sale, devise or bequest of the death benefit or ownership of the insurance policy to the viatical settlement company.
Based upon the cited recent legislative enactments, this Department concurs that the captioned opinions no longer reflect the state of the law and, thus, no longer have any viability.
For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.