The Office of General Counsel issued the following opinion on May 1, 2003, representing the position of the New York State Insurance Department.
Re: Application of N.Y. Ins. Law § 3205(b)(3)
May a college procure life insurance pursuant to N.Y. Ins. Law § 3205(b)(3) (McKinney Supp. 2003)?
If the college is a type B corporation pursuant to N.Y. Not-for-Profit Law §201(b) (McKinney 1997), it may procure life insurance pursuant to N.Y. Ins. Law § 3205(b)(3).
An attorney for a law firm that represents a college described it as a private college that was granted a corporate charter in New York in 1883 by the Regents of the University of the State of New York under the New York Education Law. The attorney maintains that the college is an "education corporation" as that term is used in N.Y. Educ. Law § 216-a (McKinney 2000), and that it qualifies as a "type B" corporation under N.Y. Not-for-Profit Corp. Law § 201(b) (McKinney 1997), and may therefore procure life insurance pursuant to N.Y. Ins. Law § 3205(b)(3).
N.Y. Ins. Law § 3205(b)(3) states:
Notwithstanding the provisions of paragraphs one and two of this subsection, a Type B charitable, educational or religious corporation formed pursuant to paragraph (b) of section two hundred one of the not-for-profit corporation law,1 or its agent, may procure or cause to be procured, directly or by assignment or otherwise, a contract of life insurance upon the person of another and may designate itself or cause to have itself designated as the beneficiary of such contract.
N.Y. Ins. Law § 3205(b)(3) was enacted pursuant to the Laws of 1996, chapter 510, and amended by the Laws of 2001, chapter 146. The purpose of this statute is noted in a letter dated July 1, 1996, from the Superintendent of Insurance to the Governors Counsel. "It appears that the intent of the bill is to permit donors to enter into long term gift giving arrangements which result in posthumous endowments to the religious charitable and educational organizations. In essence, the bill confers these charitable, religious and educational corporations with an insurable interest in the lives of their donors. This would expand the definition of insurable interest and presumably permit these organizations to solicit potential donors to enter into long term gift giving programs. . . . Based on the above discussion, the Department recommends approval of the bill." 1995-1996 NYS Insurance Department Legislative Diary, Volume 5, Page 103. Thus, the purpose of N.Y. Ins. Law § 3205(b)(3) was to benefit all charitable, educational and religious organizations that qualify as type B corporations.
The attorney for the college avers that the college is a type B corporation pursuant to N.Y. Educ. Law § 216-a.
N.Y. Educ. Law § 216-a(1) states, in relevant part:
The term "education corporation" as used in this section means a corporation (a) chartered or incorporated by the regents or otherwise formed under this chapter, or (b) formed by a special act of this state with its principal purpose an education purpose and which is a member of the university of the state of New York. . . .
Thus, the college, which was granted its corporate charter by the Regents of the University of the State of New York, is an "education corporation."
N.Y. Educ. Law § 216-a also provides that, with certain exceptions that the attorney states do not apply to the college, the New York Not-for-Profit Corporation Law applies to a domestic education corporation. Section 216-a further provides that "every corporation to which the not-for-profit corporation law is made applicable by this section, is a type B corporation under all applicable provisions of that law." N.Y. Educ. Law § 216-a(5). Thus, the college is a type B corporation.
The college was formed pursuant to a special act of the Legislature in 1883. N.Y. Not-for-Profit Law § 201(b) did not exist in 1883, but the college is nonetheless a type B corporation that now exists "pursuant to" § 201(b) for the purposes of applying N.Y. Ins. Law § 3205(b)(3). Section 3205(b)(3) refers to corporations "formed pursuant to N.Y. Not-for-Profit Law § 201(b) because that section is the statute pursuant to which such corporations would presently be formed. It is clear that the Legislature had not intended to exclude venerable educational institutions that were created many decades ago pursuant to a special act of the Legislature.
Thus, the college qualifies as a type B corporation that may procure insurance pursuant to N.Y. Ins. Law § 3205(b).
For further information you may contact Associate Attorney Sally Geisel at the New York City Office.
1N.Y. Not-for-Profit Law § 201(b) (McKinney 1997) states: A corporation, of a type and for a purpose or purposes as follows, may be formed under this chapter, provided consents required under any other statute of this state have been obtained: . . . Type B -- A not-for-profit corporation of this type may be formed for any one or more of the following non-business purposes: charitable, educational, religious, scientific, literary, cultural or for the prevention of cruelty to children or animals.