By Shapiro                                       S.B. No. 285

      75R3171 MCK-D                           

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to the disposition of beneficial interests in life

 1-3     insurance.

 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-5           SECTION 1.  Section 3.632, Family Code, is amended to read as

 1-6     follows:

 1-7           Sec.  3.632.  DISPOSITION OF BENEFICIAL INTERESTS IN

 1-8     INSURANCE.  (a)  In a decree of divorce or annulment the court

 1-9     shall determine all rights of both spouses in an insurance policy,

1-10     including life, casualty, liability, and health insurance.

1-11           (b)  If a decree of divorce or annulment is rendered after an

1-12     insured has designated the insured's spouse as a beneficiary under

1-13     a life insurance policy in force at the time of rendition, a

1-14     provision in the policy in favor of the insured's former spouse is

1-15     valid [not effective] unless the decree states otherwise[:]

1-16                 [(1)  the decree designates the insured's former spouse

1-17     as the beneficiary;]

1-18                 [(2)  the insured redesignates the former spouse as the

1-19     beneficiary after rendition of the decree; or]

1-20                 [(3)  the former spouse is designated to receive the

1-21     proceeds in trust for, on behalf of, or for the benefit of a child

1-22     or a dependent of either former spouse].

1-23           (c)  [If a designation is not effective under Subsection (b)

1-24     of this section, the proceeds of the policy are payable to the

 2-1     named alternative beneficiary, or, if there is not a named

 2-2     alternative beneficiary, to the estate of the insured.  An insurer

 2-3     who pays the proceeds of a life insurance policy issued by the

 2-4     insurer to the beneficiary under a designation that is not

 2-5     effective under Subsection (b) of this section is liable for

 2-6     payment for the proceeds to the person or estate provided by this

 2-7     subsection only if:]

 2-8                 [(1)  before payment of the proceeds to the designated

 2-9     beneficiary, the insurer receives written notice at the home office

2-10     of the insurer from an interested person that the designation is

2-11     not effective under Subsection (b) of this section; and]

2-12                 [(2)  the insurer has not interpleaded the proceeds

2-13     into the registry of a court of competent jurisdiction in

2-14     accordance with the Texas Rules of Civil Procedure.]

2-15           [(d)]  If a decree of divorce or annulment does not determine

2-16     all of the rights of both spouses in an insurance policy other than

2-17     life insurance in effect at the time the decree is rendered, the

2-18     policy remains in effect until it expires according to its own

2-19     terms.  The proceeds of a valid claim under the policy are payable

2-20     as follows:

2-21                 (1)  if the interest in the property insured was

2-22     awarded solely to one former spouse by the decree, to that former

2-23     spouse;

2-24                 (2)  if an interest in the property insured was awarded

2-25     to each former spouse, to those former spouses in proportion to the

2-26     interests awarded; or

2-27                 (3)  if the insurance coverage is directly related to

 3-1     the person of one of the former spouses, to that former spouse.

 3-2     The failure of either former spouse to change the endorsement on

 3-3     the policy to reflect the distribution of proceeds established by

 3-4     this section does not relieve the insurer of liability to pay the

 3-5     proceeds or any other obligation on the policy.

 3-6           (d) [(e)]  Except as provided by Subsection (c) [(d) of this

 3-7     section], this section does not affect the right of a former spouse

 3-8     to assert an ownership interest in an undivided insurance policy,

 3-9     as provided by Subchapter F [of this chapter].

3-10           SECTION 2.  This Act takes effect September 1, 1997, and

3-11     applies only to a decree of divorce or annulment rendered on or

3-12     after the effective date of this Act.  A decree of divorce or

3-13     annulment rendered before the effective date of this Act is

3-14     governed by the law as it existed immediately before the effective

3-15     date of this Act, and that law is continued in effect for that

3-16     purpose.

3-17           SECTION 3.  The importance of this legislation and the

3-18     crowded condition of the calendars in both houses create an

3-19     emergency and an imperative public necessity that the

3-20     constitutional rule requiring bills to be read on three several

3-21     days in each house be suspended, and this rule is hereby suspended.