N.Y. Insurance Law § 3212: Exemption of proceeds and avails of certain insurance and annuity contracts

§ 3212. Exemption of proceeds and avails of certain insurance and

annuity contracts. (a) In this section:

(1) The term "proceeds and avails", in reference to policies of life

insurance, includes death benefits, accelerated payments of the death

benefit or accelerated payment of a special surrender value, cash

surrender and loan values, premiums waived, and dividends, whether used

in reduction of premiums or in whatever manner used or applied, except

where the debtor has, after issuance of the policy, elected to receive

the dividends in cash.

(2) An annuity contract includes any obligation to pay certain sums at

stated times, during life or lives, or for a specified term or terms,

issued for a valuable consideration, regardless of whether such sums are

payable to one or more persons, jointly or otherwise, but does not

include payments under a life insurance policy at stated times during

life or lives, or for a specified term or terms.

(3) The term "creditor" includes every claimant under a legal

obligation contracted or incurred after December thirty-first, nineteen

hundred thirty-nine.

(4) The term "execution" includes execution by garnishee process and

every action, proceeding or process whereby assets of a debtor may be

subjected to the claims of creditors.

(b) (1) If a policy of insurance has been or shall be effected by any

person on his own life in favor of a third person beneficiary, or made

payable otherwise to a third person, such third person shall be entitled

to the proceeds and avails of such policy as against the creditors,

personal representatives, trustees in bankruptcy and receivers in state

and federal courts of the person effecting the insurance.

(2) If a policy of insurance has been or shall be effected upon the

life of another person in favor of the person effecting the same or made

payable otherwise to such person, the latter shall be entitled to the

proceeds and avails of such policy as against the creditors, personal

representatives, trustees in bankruptcy and receivers in state and

federal courts of the person insured. If the person effecting such

insurance shall be the spouse of the insured, he or she shall be

entitled to the proceeds and avails of such policy as against his or her

own creditors, trustees in bankruptcy and receivers in state and federal

courts.

(3) If a policy of insurance has been or shall be effected by any

person on the life of another person in favor of a third person

beneficiary, or made payable otherwise to a third person, such third

person shall be entitled to the proceeds and avails of such policy as

against the creditors, personal representatives, trustees in bankruptcy

and receivers in state and federal courts of the person insured and of

the person effecting the insurance.

(4) (A) The person insured pursuant to paragraph one of this

subsection or the person effecting the insurance other than the spouse

of the insured pursuant to paragraph two hereof, and the person

effecting the insurance pursuant to paragraph three hereof, or the

executor or administrator of any such persons, or a person entitled to

the proceeds or avails of such policy in trust for such persons shall

not be deemed a third person beneficiary, assignee or payee.

(B) A policy shall be deemed payable to a third person beneficiary if

and to the extent that a facility-of-payment clause or similar clause in

the policy permits the insurer to discharge its obligation after the

death of the person insured by paying the death benefits to a third

person.

(5) This section shall be applicable whether or not the right is

reserved in any such policy to change the designated beneficiary and

whether or not the policy is made payable to the person whose life is

insured if the beneficiary, assignee or payee shall predecease such

person; and no person shall be compelled to exercise any rights, powers,

options or privileges under such policy.

(6) If a policy of insurance has been or shall be effected by any

person on his own life or upon the life of another person, the

policyowner shall be entitled to any accelerated payments of the death

benefit or accelerated payment of a special surrender value permitted

under such policy as against the creditors, personal representatives,

trustees in bankruptcy and receivers in state and federal courts of the

policyowner.

(c) (1) No money or other benefits payable or allowable under any

policy of insurance against disability arising from accidental injury or

bodily infirmity or ailment of the person insured, shall be liable to

execution for the purpose of satisfying any debt or liability of the

insured, whether incurred before or after the commencement of the

disability, except as provided in subsection (e) hereof.

(2) With respect to debts or liabilities incurred for necessaries

furnished the insured after the commencement of disability, the

exemption shall not include any income payment benefits payable as a

result of any disability of the insured, and with respect to all other

debts or liabilities incurred after the commencement of disability of

the insured, the exemption of income payment benefits payable as a

result of any disability of the insured shall not at any time exceed

payment at a rate of four hundred dollars per month for the period of

such disability.

(3) When a policy provides for lump sum payment because of a

dismemberment or other specific loss of insured, such payment shall be

exempt from execution of insured's creditors.

(4) This subsection shall not affect the assignability of any benefit

otherwise assignable.

(d) (1) The benefits, rights, privileges and options which, under any

annuity contract are due or prospectively due the annuitant, who paid

the consideration for the annuity contract, shall not be subject to

execution.

(2) The annuitant shall not be compelled to exercise any such rights,

powers or options contained in the annuity contract, nor shall creditors

be allowed to interfere with or terminate the contract, except as

provided in subsection (e) hereof and except that the court may order

the annuitant to pay to a judgment creditor or apply on the judgment in

installments, a portion of such benefits that appears just and proper to

the court, with due regard for the reasonable requirements of the

judgment debtor and his family, if dependent upon him, as well as any

payments required to be made by the annuitant to other creditors under

prior court orders.

(3) The benefits, rights, privileges or options accruing under such

contract to a beneficiary or assignee shall not be transferable nor

subject to commutation. If the benefits are payable periodically or at

stated times, the same exemptions and exceptions contained herein for

the annuitant shall apply with respect to such beneficiary or assignee.

(4) The benefits, rights, privileges or options accruing under an

annuity contract funding a structured settlement which would otherwise

be nontransferable under this subsection may be transferred in

accordance with title seventeen of article five of the general

obligations law. As used in this paragraph the term "structured

settlement" means an arrangement for periodic payments of damages for

personal injuries established by settlement or judgment in resolution of

a tort claim; and the term "periodic payments" shall include scheduled

future lump sum payments.

(e) (1) Every assignment or change of beneficiary or other transfer is

valid, except in cases of transfer with actual intent to hinder, delay

or defraud creditors, as defined by article ten of the debtor and

creditor law. In such cases creditors shall have all the remedies

provided by such article ten.

(2) (A) Subject to the statute of limitations, the amount of premiums

or other consideration paid with actual intent to defraud creditors as

provided in article ten of the debtor and creditor law, together with

interest on such amount, shall enure to the benefit of creditors from

the proceeds of the policy or contract; but the insurer issuing such

policy or contract shall be discharged of liability thereunder by making

payments in accordance with its terms, or in accordance with any

assignment, change of beneficiary or other transfer, unless before any

such payment such insurer shall have received written notices, by or on

behalf of any such creditor, of a claim to recover any benefits on the

ground of a transfer or payment made with intent to defraud such

creditor.

(B) The notice shall specify the amount claimed or sufficient facts to

enable the insurer to ascertain such amount, the insurance or annuity

contract, the person insured or annuitant, and the transfers or payments

sought to be avoided on the ground of fraud.

(3) (A) Notwithstanding any inconsistent provision of this section or

other law, any right of subrogation to benefits to which a local social

services district, the department of social services, or the

commissioner of health or his designee, shall be entitled shall be valid

and enforceable to the extent benefits are available under any

individual accident and health insurance, group or blanket accident and

health insurance, or noncancellable disability insurance policy, or any

subscriber contract made by a corporation subject to the provisions of

article forty-three of this chapter, except that no such right of

subrogation shall be enforceable if such benefits may be claimed by the

department of social services, an appropriate social services official

or the commissioner of health or his designee, by agreement or other

established procedure, directly from an insurance carrier.

(B) The right of subrogation does not attach to insurance benefits

paid or provided under any health insurance policy prior to the receipt

by the carrier issuing such insurance of written notice from the

department of social services, a local social services district, or the

commissioner of health or his designee, of the exercise of subrogation

rights.

(C) No right of subrogation to insurance benefits available under any

health insurance policy shall be enforceable unless written notice of

the exercise of such subrogation right is received by the carrier within

three years from the date services for which benefits are provided under

the policy or contract are rendered. An insurer shall not deny a claim

made in conformance with paragraph (b) of subdivision two of section

three hundred sixty-seven-a of the social services law solely on the

basis of the date of submission of the claim, the type or format of the

claim form, a failure to obtain prior authorization, or a failure to

present proper documentation at the point-of-sale that is the basis of

the claim.

(4) No terms of any policy or contract which directly or indirectly

prevent or prohibit the assignment of rights under any policy or

contract prevent a local social services district, the department of

social services, or the commissioner of health or his designee, from

claiming benefits to which it shall be subrogated. The right of

subrogation attaches to any benefits paid or provided under any policy,

plan or contract upon receipt of written notice of the exercise of such

subrogation rights.

(f) This section shall likewise apply to group insurance policies or

annuity contracts, to the certificates or contracts of fraternal benefit

societies, and to the policies or contracts of cooperative life and

accident insurance companies.