An Act To Clarify Provisions Governing Corporate-owned Life Insurance Policies
Maine Legislature, Session 121, LD 1481
Committee: Insurance and Financial Services
Sponsors: O'NEIL, LaFOUNTAIN
Amends: 24-A MRSA §2404

Legislative Document 
No. 1481 
H.P.1086 
House of Representatives, March 31, 2003 
An Act To Clarify Provisions Governing Corporate-owned Life 
Insurance Policies 
Submitted by the Department of Professional and Financial Regulation pursuant to Joint 
Rule 204. 
Reference to the Committee on Insurance and Financial Services suggested and ordered 
printed. 
Presented by Representative O'NEIL of Saco. 
Cosponsored by Senator LaFOUNTAIN of York. 
Printed on recycled paper 
7?'/~ 1/7. /l)tc~ 
MILLICENT M. MacFARLAND 
Clerk 
Be it enacted by the People of the State oJ Maine as follows: 
Sec. 1. 24-A MRSA §2404, sub~§.3, as amended by PL 1993, c. 
320, §§1 and 2 and affected by §4, is further amended to read: 
3. 
"Insurable interest" as to such personal insurance means 
that 
every 
individual 
has 
an 
insurable 
interest 
in 
the 
individual's own life, body, and health ef-himself, and ef-e~aeF 
pe~seBs that 
a 
person 
has 
an 
insurable 
interest 
in 
other 
individuals as follows: 
A. 
In the case of individuals related closely 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 having the life, health or bodily 
safety of the individual insured continue, as distinguished 
from an interest which would arise only by, or would be 
enhanced in value by, the death, disablement or injury of 
the individual insured; 
C. 
A party to a contract 
0'::' option for the purchase or 
sale, including a redemption, of an interest in a business 
proprietorship, partnership or firm, or of shares of stock 
of a corporation or of an intsrest in these shares, has an 
insurable interest in the 
.. ;:'e, 
body and he,:llth of each 
individual party to that cont.ract or option, and for the 
purposes of that contract or option only, in addition to any 
insurable interest that may otherwise exist as 
to that 
individual; 
D. 
A corporation has an insurable interest in the lives of 
its employees, former employees and retirees for the purpose 
of 
funding, 
in 
the 
aggregate, 
all 
or 
part 
of 
the 
corporation's 
cost 
for 
preretirement 
and 
postretirement 
medical, 
death, 
disability and 
pension benefits 
to 
its 
employees, 
former 
employees, 
retirees 
or 
their 
beneficiaries, provided that an insurance program used to 
finance these employee benefits includes former employees, 
retirees or a broad class of smployees selected by objective 
standards 
related to 
age, 
service, 
sex 
or 
category of 
employment and that the proceeds created by that insurance 
program 
are 
used 
for 
the 
sole 
purpose 
of 
funding 
the 
corporations's 
preretirement 
or 
postretirement 
benefit 
programs covering at least a broad class of empl~; and 
E. 
Any revocable or irrevocable trust has an insurable 
interest, provided any settlor or any beneficiary of the 
trust has an insurable interest as provided in paragraph A, 
Page l-LR1930(1) 
B, 
e~ C~. A partnership has 
an insurable interest 
provided any partner has an insurable interest. 
SUMMARY 
This 
bill 
adds 
technical 
amendments 
to 
provisions 
governing a corporation's insurable interest in the lives of its 
employees, the Maine Revised Statutes, Title 24-A, section 2404, 
subsection 3. 
1. 
It clar;"fies that a corporation may have 
interest 
in 
individuals, . such 
as 
certain 
key 
directors. 
an insurable 
officers 
and 
2. 
It clarifies that 
the 
proceeds 
created 
by 
a 
life 
insurance funded employee benefit program must benefit at least a 
broad class of employees. 
3. 
It would expressly permit a trust to act as policyholder 
for corporate-owned life insurance plans.