HBA-TYH, BTC H.B. 457 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 457
By: McClendon
Juvenile Justice and Family Issues
4/7/1999
Introduced



BACKGROUND AND PURPOSE 

Currently, Texas law provides that following a divorce, a provision in a
life insurance policy in favor of the insured's former spouse is not
effective except in certain circumstances.  This has created problems when
a person meant to retain the former spouse as a beneficiary but was never
told by a judge, attorney, or insurance company that a redesignation of the
former spouse as beneficiary was needed.  In this instance, the former
spouse might learn that he or she was not the lawful beneficiary only when
the death benefit was claimed, which is too late for a remedy to be
effected. 

In many cases, the settlement becomes tied up in court, rather than going
to the intended beneficiary, even though an insurance contract clearly
states the beneficiary's name.  H.B. 457 gives effect to a provision in a
group insurance policy providing life insurance in favor of the insured's
former spouse unless the divorce decree states otherwise. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 9.301, Family Code, to establish that if a
divorce or annulment is rendered after an insured has designated the
insured's spouse as a beneficiary under a life insurance policy in force at
the time of rendition, a provision in the policy in favor of the insured's
former spouse is valid, rather than ineffective, unless otherwise stated in
the decree.  Deletes text stating the exceptions which make the insured's
former spouse the beneficiary.  Deletes Subsection (b) which states that if
a designation is not effective under Subsection (a), proceeds of the policy
are paid to the alternative beneficiary or to the estate of the insured.
Deletes Subsection (c) which states that an insurer who wrongfully pays
proceeds of a life insurance policy is liable for the payment of the
proceeds to the person provided by Subsection (b) only if, before the
payment of proceeds, the insurer receives written notice from an interested
person that the designation is not effective and the insurer has not
interpleaded the proceeds into the registry of a court.  Makes a
nonsubstantive change. 

SECTION 2.  Amends Section 9.302, Family Code, to provide that if a decree
of divorce or annulment is rendered after a spouse, acting in the capacity
of a participant, annuitant, or account holder, has designated the other
spouse as a beneficiary under an individual retirement account, employee
stock option plan, stock option, or other form of savings, bonus,
profit-sharing, or other employer plan or financial plan of an employee or
a participant in force at the time of rendition, the designating provision
in the plan in favor of the other former spouse is valid , rather than
ineffective, unless the decree states otherwise.  Deletes text stating the
exceptions which make the other former spouse the beneficiary.  Deletes
Subsection (b) which states that if a designation is not effective under
Subsection (a), proceeds of the policy are paid to the alternative
beneficiary or to the estate of the insured.  Deletes Subsection  (c) which
states a payer is liable for the payment of proceeds to the wrong
beneficiary only if, before the payment of the proceeds, the payer receives
written notice that the designated beneficiary or fiduciary is not
effective and the payer has not interpleaded the proceeds into the registry
of a court.  Deletes Subsection (d) which provides that this section does
not affect the right of a former spouse to assert an ownership interest in
a financial plan described  by this section.  Makes a nonsubstantive
change.   

SECTION 3.  Effective date:  September 1, 1999.  
            Makes application of this Act prospective.

SECTION 4.  Emergency clause.