Opinion ID: 2639199
Heading Depth: 2
Heading Rank: 3

Heading: distribution of insurance policy proceeds

Text: ¶ 16 Upon termination of the buy-sell agreement, the Utah Insurance Code governs distribution of the insurance policy proceeds. Section 31A-21-104(2)(a) specifically limits partners' insurable interests, required by section 31A-21-104(1)(b) for obtaining insurance generally, to those that are for purposes of insurance contracts that are an integral part of a legitimate buy-sell agreement. Utah Code Ann. § 31A-21-104(2)(a) (1999). Because the buy-sell agreement was terminated, Parduhn had no insurable interest which was for purposes of [an] insurance contract[] that [was] an integral part of a legitimate buy-sell agreement. Id. Thus, at the time of Buchi's death, Parduhn lacked an insurable interest under section 31A-21-104(1)(b), and may not knowingly procure... an interest in the proceeds of [the] insurance policy. [2] Id. § 31A-21-104(1)(b). ¶ 17 However, [a]n insurance policy is not invalid because the policyholder lacks insurable interest... but a court with appropriate jurisdiction may order the proceeds to be paid to some person [3] who is equitably entitled to them, other than the one to whom the policy is designated to be payable, or it may create a constructive trust in the proceeds or a part of them on behalf of such a person, subject to all the valid terms and conditions of the policy other than those relating to insurable interest or consent. Id. § 31A-21-104(5). Accordingly, we remand for the trial court to equitably distribute the insurance proceeds pursuant to Utah Code Ann. § 31A-21-104(5).