§ 27-4-27 - Insurable interest.
SECTION 27-4-27
§ 27-4-27 Insurable interest. – (a) Any individual of competent legal capacity may procure or effect aninsurance contract upon his or her life or body for the benefit of any person.Any life insurance company doing business within the state may issue policiesof insurance predicated upon the life or lives of any person or persons withthe consent of the insured, payable at maturity to any educational, religious,benevolent, or charitable corporation or association which can legally take andreceive testamentary legacies and which are exempt from taxation under 26U.S.C. § 501(c), irrespective of a financial interest on the part of thecorporation in the life of the person or persons insured. No person shallprocure or cause to be procured any insurance contract upon the life or body ofanother individual unless the benefits under the contract are payable to theindividual insured or his or her personal representatives, or to a personhaving, at the time when the contract was made, an insurable interest in theindividual insured.
(b) If the beneficiary, assignee, or other payee under anycontract made in violation of this section receives from the insurer anybenefits under that contract accruing upon the death, disablement, or injury ofthe individual insured, the individual insured or his or her executor oradministrator may maintain an action to recover the benefits from the person soreceiving them.
(c) "Insurable interest" as to personal insurance means thatevery individual has an insurable interest in the life, body, and health ofhimself or herself and of other persons as follows:
(1) In the case of individuals related closely by blood or bylaw, a substantial interest engendered by love and affection;
(2) In the case of other persons, a lawful and substantialeconomic interest in having the life, health, or bodily safety of theindividual insured continue, as distinguished from an interest which wouldarise only by, or would be enhanced in value by the death, disablement, orinjury of the individual insured;
(3) In the case of employees of public and privatecorporations, with respect to whom the corporate employer or anemployer-sponsored trust is the beneficiary under the insurance contract, alawful and substantial economic interest exists in:
(i) Key employees; and
(ii) Employees other than those identified in subdivision(c)(3)(i), and former employees and retirees for the purpose of funding, in theaggregate, all or part of the corporation's cost for pre-retirement andpost-retirement benefits; provided, (A) that the amount of insurance coverageon these employees will be limited to an amount commensurate withemployer-provided benefits to those employees, (B) that an insurance programused to finance these employee benefits includes former employees, retirees, ora broad class of employees selected by objective standards related to age,service, sex, or category of employment, and (C) that the proceeds created bythat insurance program used for the sole purpose of funding the corporation'spre-retirement or post-retirement benefit programs; and
(4) An individual party to a contract or option for thepurchase or sale of an interest in business, partnership, or firm or of sharesof stock of a corporation or of an interest in the shares, has an insurableinterest in the life of each individual party to the contract and for thepurposes of the contract only, in addition to any insurable interest which mayexist as to the life of that individual.
(d) Insurance effectuated under a group life insurance policypursuant to the program described in subdivision (c)(3)(ii) need not complywith the provisions of § 27-4-22 to the extent the provisions of thatsection would be inconsistent or would conflict with the purposes expressed insubdivision (c)(3)(ii).
(e) An insurer shall be entitled to rely upon all statements,declarations, and representations made by an applicant for insurance relativeto insurable interest of the applicant in the insured, and no insurer shallincur legal liability except as set forth in the policy by virtue of any untruestatements, declarations, or representations relied upon in good faith by theinsurer.