OGC Op. No. 06-03-12

The Office of General Counsel issued the following opinion on March 16, 2006, representing the position of the New York State Insurance Department.

Re: Insurable Interest of an Indian Tribe in its Members

Questions Presented:

1. Does an Indian tribe, which wishes to insure members of the tribe as described below, have an insurable interest in those members?

2. Assuming that there is no insurable interest, is the tribe exempt from the state’s insurable interest laws?


1. An Indian tribe that wishes to insure members of the tribe does not have an insurable interest in those members.

2. Before addressing that question, the inquirer’s insurer would need to submit a legal analysis of the issues. Pending such a submission, the insurer should not issue such policies.


An Indian tribe in New York wants to establish a trust that would purchase individual life insurance policies on the lives of certain tribal members. The tribe would select which members would be insured, desiring a cross-section of age and sex. All members would be fully underwritten. Most of the tribal members on whose lives the policies would be purchased do not live on the reservation. The trust would be both owner and beneficiary of the policies and would accumulate the proceeds of the policies. The trust would periodically pay out sums to tribal members who, because of "diminished bloodline", no longer share in casino profits. The situs of the trust could be either in or out of New York, depending upon whether that factor made a difference to the response. The inquirer asked whether such a transaction would violate New York’s insurable interest requirements. Assuming the insurable interest requirements would not be satisfied, the inquirer asked whether a transaction involving a tribe and tribal members would otherwise be exempt from New York Law.


N.Y. Ins. Law § 3205(b)(2) (McKinney Supp. 2006) provides:

(2) No person shall procure or cause to be procured, directly or by assignment or otherwise any contract of insurance upon the person of another unless the benefits under such contract are payable to the person insured or his personal representatives, or to a person having, at the time when such contract is made, an insurable interest in the person insured.

N.Y. Ins. Law § 3205(a)(1) provides:

The term, "insurable interest" means:

(A) in the case of persons closely related 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 the continued life, health or bodily safety of the person insured, as distinguished from an interest which would arise only by, or would be enhanced in value by, the death, disablement or injury of the insured.

As stated in New England Mutual Life Insurance Company v. Caruso, 73 N.Y.2d 74; 535 N.E.2d 270; 538 N.Y.S.2d 217; 1989 N.Y. LEXIS 193, (1989):

Insurance contracts, by their nature, create rights and duties dependent on chance. When one insures his or her own life, the wagering aspect is overridden by the recognized social utility of the contract as an investment to benefit others. When a third party insures another's life, however, the contract does not have the same manifest utility and assumes more speculative characteristics which may subject it to the same general condemnation as wagers (see generally, NY Const, art I, § 9 [1]; General Obligations Law §§ 5-401, 5-411). Under those circumstances, the law requires the person procuring the insurance to have an interest in the insured's continued life which is sufficient to negative the idea of speculation. Thus, our statute (Insurance Law § 3205 [b][2]), and judicial decisions long before it (see, e.g., Ruse v Mutual Benefit Life Ins. Co., 23 NY 516; Rawls v American Mut. Life Ins. Co., 27 NY 282; see also, Reed v Provident Sav. Life Assur. Socy., 36 App Div 250, affd after trial 112 App Div 922, mod on other grounds 190 NY 111), provide that no one shall procure a policy upon the life of another unless the benefits are payable to the person insured, a representative or one having an insurable interest in the person insured.

An insurable interest may arise by reason of blood or legal relationship or a lawful and substantial economic interest in the continued life or health of the insured (Insurance Law § 3205(a)(1)(A), (B)). It is distinguished from an interest which arises or is enhanced in value by the insured's death or disablement.

The trust does not appear to possess a legal relationship or a lawful and substantial economic interest in the lives to be insured. Unlike an employer or business partner or creditor, the trust’s only economic interest in the tribal members would be in their deaths, when the trust would receive the life insurance proceeds. That is precisely the type of "gaming" interest that public policy and Insurance Law section 3205(b)(2) prohibit. Accordingly, the trust would not have an insurable interest.

Although the transaction would violate section 3205, Indian tribes may be exempt from certain state laws, so the second question is whether a policy may be issued notwithstanding the absence of an insurable interest. Although the Department requested a legal analysis from the inquirer, none was supplied.

Before addressing this issue, the Department would need a legal analysis from the inquirer as to whether § 3205’s insurable interest requirements would apply. In this regard, the inquirer was referred to an opinion of the New York Attorney General for his analysis in determining that Indian tribes were subject to an absolute ban on the conduct of combative sport. See 1997 N.Y. Op. Atty. Gen. (Inf.) 1093, (1997).

However, until the Department receives the analysis and issues an opinion, the inquirer’s company should not issue the policies in question.

For further information please contact Principal Attorney Paul A. Zuckerman at the New York City Office.