SRC-JEC, LBB S.B. 137 78(R)   BILL ANALYSIS


Senate Research Center   S.B. 137
78R259 MXM-DBy: Ellis, Rodney
State Affairs
4/9/2003
As Filed


DIGEST AND PURPOSE 

Since 1999, corporate-owned life insurance (COLI) policies have been legal
in Texas.  A COLI, sometimes called a "dead peasant" policy, is a life
insurance policy on an employee in which the beneficiary is the employer.
There are no standards in current law for disclosure by the employer of,
and consent by the employee to, a COLI policy.  As proposed, S.B. 137
outlaws COLI policies in Texas. 

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to
a state officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 1103, Subchapter B, Insurance Code, as
effective June 1, 2003, by adding Section 1103.057, as follows: 

Sec. 1103.057.  CERTAIN LIFE INSURANCE POLICIES INSURING EMPLOYEES
PROHIBITED.  (a)  Prohibits an individual who is insured under a life
insurance policy from designating or consenting to the designation of an
individual or any type of legal entity who is the employer of the
individual as a beneficiary of the policy. 

(b)  Specifies that Subsection (a) is inapplicable if the employer is
related by blood or marriage to the individual insured under the policy or
if the designation would otherwise be permitted under Section 1103.003 or
1103.004. 

SECTION 2.  Repealer:  Section 1103.056 (Purchase of or Application for
Policy by Third Party), Insurance Code. 

SECTION 3.  Effective date:  September 1, 2003.
 Makes application of this Act prospective.