insurance contracts, Summaries of Law

Download insurance contracts and more Summaries Law in PDF only on Docsity! CHAPTER 26.1-29 INSURANCE CONTRACTS 26.1-29-01. Insurance contract defined. An insurance contract is a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from an unknown or contingent event. 26.1-29-02. Insurer and insured defined. An insurer is a person who undertakes to indemnify another by an insurance contract and the insured is the person indemnified. 26.1-29-03. Who may be parties to insurance contract. Anyone who is capable of making a contract, except as restricted by law, may be an insurer, and anyone except a public enemy may be an insured. 26.1-29-04. Insurable interest defined and classified. An insurable interest is an interest in property, or any relation thereto, or liability in respect thereof, of such a nature that a contemplated peril might damnify directly the insured, and may consist in: 1. An existing interest; 2. An inchoate interest founded on an existing interest; or 3. An expectancy coupled with an existing interest in that out of which the expectancy arises. 26.1-29-05. Insurable interest essential to insurance contract. The sole object of insurance is the indemnity of the insured, and if the insured has no insurable interest, the contract is void. 26.1-29-06. When insurable interest must exist. An insurable interest must exist when the insurance takes effect and when the loss occurs but need not exist in the meantime. 26.1-29-07. Measure of insurable interest. The measure of an insurable interest in property is the extent to which the insured might be damnified by loss or injury of the property. 26.1-29-08. Carrier or depositary has insurable interest. A carrier or depositary of any kind has an insurable interest in a thing held by the carrier or depositary as such to the extent of its value. 26.1-29-09. Insurable interest in life or health insurance. Repealed by S.L. 1987, ch. 357, § 2. 26.1-29-09.1. Insurable interest in personal insurance. 1. An individual of competent legal capacity may procure or effect an insurance contract upon that individual's own life or body for the benefit of any person. A person may not procure or cause to be procured an insurance contract upon the life or body of another individual unless the benefits under the contract are payable to the individual insured or that individual's personal representatives, or to a person having, at the time the contract was made, an insurable interest in the individual insured. 2. If the beneficiary, assignee, or other payee under a contract made in violation of this section receives from the insurer any benefits from the contract upon the death, disablement, or injury of the individual insured, the individual insured or that individual's executor or administrator may maintain an action to recover the benefits from the person receiving the benefits. Page No. 1 3. "Insurable interest", with reference to personal insurance, includes only the following interests: a. In the case of an individual related closely by blood or by law, a substantial interest engendered by love and affection. b. In the case of a person other than an individual described in subdivision a, a lawful and substantial economic interest in having the life, health, or bodily safety of the individual insured continue, as distinguished from an interest that would arise only by, or would be enhanced in value by, the death, disablement, or injury of the individual insured. c. In the case of an individual party to a contract or option for the purchase or sale of an interest in a business partnership or firm, of a membership interest in a limited liability company, or of shares of stock of a closed corporation or of an interest in the shares, an interest in the life of each individual party to the contract for the purpose of the contract only, in addition to an insurable interest that may otherwise exist as to the life of the individual. d. In the case of a religious, educational, eleemosynary, charitable, or benevolent organization, a lawful interest in the life of the individual insured if that individual executed a written consent to the insurance contract. e. In the case of an employer or the trustee of a trust providing life, health, disability, retirement, or similar benefits to employees of one or more employers, and acting in a fiduciary capacity with respect to the employees, retired employees, or the employees' dependents or beneficiaries, an employer or the trustee of a trust has an insurable interest in the lives of employees for whom the benefits are to be provided and the employer or trustee of a trust may purchase, accept, or otherwise acquire an interest in personal insurance as a beneficiary or owner. Written consent of the insured individual is required if the personal insurance purchased names the employer or the trustee of a trust as a beneficiary. f. In the case of a service recipient or the trustee of a trust providing a nonqualified deferred compensation plan, as defined by section 409A(d)(1) of the Internal Revenue Code [26 U.S.C. 409A(d)(a)], to a service provider, an insurable interest in the life of the service provider for whom the nonqualified deferred compensation plan is provided. The service recipient or the trustee of a trust may purchase, accept, or otherwise acquire an interest in personal insurance with the trust as a beneficiary or owner. Written consent of the insured individual is required. As used in this subdivision: (1) "Service provider" means an individual, other than an employee, who provides significant services to a service recipient. (2) "Service recipient" means the entity for which services are performed by a service provider. 26.1-29-10. Contingent or expectant interest not insurable. A mere contingent or expectant interest in anything, not founded on an actual right to the thing nor upon any valid contract for it, is not insurable. 26.1-29-11. What may be insured against. Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest or create a liability against the person may be insured against, subject to this title, with the exception of an insurance for or against the drawing of any lottery or for or against any chance or ticket in a lottery drawing a prize. 26.1-29-12. Effect of change in insurable interest. A change of interest in any part of a thing insured, unaccompanied by a corresponding change of interest in the insurance, suspends the insurance to an equivalent extent until the interest in the thing insured and the interest in the insurance are vested in the same person, except as follows: Page No. 2