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The Civil Code (Amendment) Act, 2005 (Bill No. 47)

A Bill entitled

AN ACT to amend the Civil Code, Cap 16

BE IT ENACTED by the President, by and with the advice and consent of the House of Representatives, in this present Parliament assembled and by the authority of the same, as follows>-

Short title and commencement.

Amendment of article 586 of the Code.

Addition of new

Title in the Code.

1. (1) The short title of this Act may be cited as the Civil Code (Amendment) Act, 2005 and it shall be read and construed as one with the Civil Code, hereinafter referred to as “the Code”.
(2) This Act shall come into force on such date as the Minister responsible for justice may, by notice in the Gazette appoint, and different dates may be so appointed for different provisions and different purposes thereof.
2. Sub-article (1) of Article 586 of the Code shall be amended by the insertion after the words “Saving the provisions relating to donations made in contemplation of marriage” of the words “and those relating to contracts of life insurance”.
3. In Part II of Book Second of the Code, immediately after article
1712, there shall be added a new Title XIA with the heading “Of Life Insurance Contracts” and with the following articles 1712A to 1712M as follows>

Object of a life insurance contract.

Insurable interest.

“TITLE XIA
“Of Life Insurance Contracts”

Sub-title 1 – Contractual issues

1712A. (1) A contract of life insurance may be stipulated over the life of the policyholder or that of a third party in relation to which the policyholder has an insurable interest, which is lawful, at the commencement of the contract.
(2) For the purposes of this article>
(a) A person has an insurable interest in his own life and in the life of his spouse<
(b) A parent of a person who has not attained the age of 18 years, and a guardian of such person has an insurable interest in the life of that person<
(c) A person who is likely to suffer financial loss as a result of the death of some other person has an insurable interest in the life of that other person<
(d) A body corporate has an insurable interest in the life of an officer, shareholder or employee of the body corporate and a partnership has an insurable interest in the life of a partner or employee of the partnership<
(e) An employer has an insurable interest in the life of his employee and an employee has an insurable interest in the life of his employer<
(f) A person has an insurable interest in the life of a person on whom he depends, either wholly or partly, for maintenance and support<
(g) For the purposes of this title, the term “life insurance” shall include any contract of insurance in terms of which any benefit is payable on death.
(3) Subject to the interest being lawful, the agreement by an insurer to enter into a contract of life insurance over the life of a person other than the policyholder shall be sufficient evidence of the fact that the assured has an insurable interest in the life of the life assured.
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Consent of third party whose life is insured.

Consent of persons without legal capacity.

(4) Except in the case referred to in sub- paragraph (c) of sub-article (2) of this article, where a person has an insurable interest in the life of another person it shall not be necessary for the policyholder to prove that he has suffered any loss or that the loss suffered bears any relationship to the sum insured.
1712B. (1) Where the contract of insurance refers to the life of a third party, the consent in writing of such third party, or in case of persons who lack legal capacity of their lawful representative, to the entering into of the contract and to the sum assured, shall be required on pain of nullity of the contract.
(2) In the absence of consent as above provided the nullity of the contract may only be raised by the policyholder or the person whose life is assured and in such event all premia paid to the insurer shall be returned to the person who paid them.
(3) Consent given by a third party whose life is insured shall be irrevocable unless expressly stated otherwise in writing in the policy.
(4) Where consent is revocable as established in sub-article (3) and it is withdrawn by notice in writing to the policyholder and the insurer, and barring other arrangements between the parties to the contract, the contract of insurance shall terminate.
(5) In case of persons who lack legal capacity, where the lawful representative is himself the proposed policyholder, the prior consent of the Civil Court in its voluntary jurisdiction shall be required>
Provided that where the lawful representatives are the parents of a child or any one of them, the consent of any one of the parents shall be sufficient.
Provided further that where the life assured is that of a minor it shall not be lawful for the life cover under the policy to exceed Lm20,000 or such other amount as the Minister responsible for Justice may prescribe from time to time by means of a notice in the Gazette.

Consent presumed in group policies under schemes.

Third party to consent to pledges and assignment of policy.

Contract of insurance in favour of third party beneficiaries.

Designation, of beneficiaries.

(6) Such consent shall be presumed where the third party forms part of a defined class of persons whose lives are insured in accordance with terms and conditions of an insurance arrangement covered by a group policy to which such third party has agreed or subscribed, including any arrangement forming part of a person’s conditions of employment.
(7) Notwithstanding the provisions of this Code relating to assignment and pledge of rights>
(i) the assignment or pledge of a contract of life insurance, and
(ii) any designation or substitution in the beneficiary designated in such contract, or the assignment of such benefit<
shall not be valid without the consent in writing of the third party whose life is insured, saving the provisions of any special laws in terms of which such consent may not be necessary for such transactions.
1712C. (1) The policyholder may elect that the proceeds or any benefit arising from a contract of life insurance, whether payable on a definite maturity date or on the death of the life insured, including any surrender value, be payable to one or more named beneficiaries>
Provided that in case of a spouse or children of the policyholder the designation of such persons by reference to the class of persons shall be sufficient and in such case, unless otherwise stated in the policy, they shall enjoy rights to the proceeds in equal shares and shall benefit from such designation even if they do not accept the inheritance.
Provided further that it shall also be lawful to designate a class of beneficiaries in case of insurance contracts in favour of persons who participate in a group policy as is referred to in sub-article (6) of article 1712B.
(2) (a) The designation of a beneficiary or a class of beneficiaries shall be made either in the original contract of life insurance or policy or in any subsequent amendment of the policy and such designation may refer to
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Revocability of designation.

Revocation by will or by heirs of policyholder not permitted.

Legal effects of designation.

the full proceeds or part thereof, may be subject to conditions, suspensive and resolutive.
(b) When the purpose of the designation expressly to be for the provision of maintenance of the beneficiary or as a pension, the said designation may be subject to restriction on alienation or any other legal transaction, subject to diminution or termination in the event that the beneficiary becomes bankrupt or insolvent or any of his property becoming liable to seizure for the benefit of his creditors or not liable to attachment under a garnishee order issued against the insurer>
Provided that the said immunity from garnishee shall only apply to sums reasonably required for maintenance of the beneficiary or for a pension being not more than twice the highest State pension in Malta.
(3) Subject to the provisions of sub-article 9, the policyholder may revoke or vary the terms of any designation of a beneficiary.
(4) The revocation or modification by a policyholder of a designation of a beneficiary may not be made by means of a will. The heirs of the policyholder may not revoke the designation of a beneficiary after the death of the policyholder.
1712D. (1) Subject to the right of revocation by the policyholder as provided in sub-article (5) of article 1712C and the provisions of sub-article (7) of this article relating to group policies, when made payable to one or more designated beneficiaries, the proceeds and any benefit arising from a contract of insurance, including any surrender value, are due to the beneficiary and form part of his estate, whether or not such beneficiary is aware of such designation.
(2) The beneficiary shall not enjoy any other rights in relation to the policy and the insurer shall not disclose any information about the policy without the prior written consent of the policyholder, until such time as the policyholder dies in which case the insurer, upon becoming aware of such fact, shall inform the beneficiary of his entitlement>
Provided that the insurer shall inform a beneficiary who has accepted the designation, of the reasons which may

Irrevocability of designation.

produce the lapse of the policy, and this within a reasonable time prior to such lapse taking effect.
(3) After acceptance by a beneficiary,
(a) the revocation of the designation of a beneficiary, or
(b) the modification of the sum for which the policy has been taken out, or
(c) the pledge or assignment of the policy, may only be made with the prior written consent of the beneficiary>
Provided that the above shall not apply to a group policy which shall be governed by the terms of any applicable scheme, and>
Provided further that a pledge or assignment made without such consent shall be valid but shall be subject to the prior rights of the designated beneficiary.
(4) The designation of a beneficiary in a policy of insurance cannot be revoked without the consent in writing of the designated beneficiary once the beneficiary has accepted the designation in writing and under his own hand in the presence of a witness and the acceptance is notified to the insurer. For the purposes of this article,
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and
(a) “writing” shall not include electronic means,
(b) a demand in writing to the insurer by the designated beneficiary shall be treated as acceptance in writing.
Any such acceptance shall be noted by an endorsement to the policy.
Notice of a designation of a beneficiary may be given even after the death of the policy holder or the life insured provided that any such notice is given within 7 working days of such death after which period the designation shall lapse and shall not have any legal effects.
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Special rules for group policies.

Reserved portion.

Collation between co- heirs.

(5) Subject to the express terms of the designation, all references to the beneficiary in these articles shall be construed as including the heirs, legatees, pledgees or assignees, as the case may be, of the designated beneficiary.
(6) All transactions referred to in these articles shall have legal effects only when the insurer receives notice thereof or otherwise acknowledges notice in writing and in cases where more than one such act is notified, any such acts shall take effect subject to any previously notified or acknowledged acts.
(7) The following rules shall apply in the case of group policies referred to in sub-article (6) of article 1712B>
(a) the entitlement of such beneficiary shall be in accordance with the terms of such scheme and it shall be lawful to provide for any conditions including the termination of benefit on the termination of employment>
(b) subject to the terms of the scheme not providing otherwise, the participant in a scheme shall not be entitled to assign or pledge his rights nor shall he be entitled to the surrender value of the policy on termination of benefit and the arrangement shall provide rules on the transferability of the benefits as required by applicable law.
1712E. (1) The sums payable under a contract of life insurance to a designated beneficiary shall not be subject to the rules of reduction for breach of the reserved portion of the estate. Neither shall such rules apply to the sums paid by the policyholder by way of premium or additional contributions to the policy where such sums are moderate, regard being had to the estate of the policyholder. Where the sum is not moderate, the right to reduction for breach of the reserved portion of the estate shall only be exercisable against the beneficiary of the proceeds of the policy and no rights shall lie against the insurer.
(2) Unless the policyholder exempts the proceeds of an insurance policy payable to a designated beneficiary who is a co-heir from collation in terms of this Code, the sums payable shall be regulated by the applicable provisions of this Code.

Consolidation of interests in policy in favour of co- insured.

Waiver of interest and loss of benefit by beneficiary.

Non- applicability

1712F. (a) Where a policy of life insurance is entered into by two or more policyholders, it shall be lawful to agree that on the death of one policyholder, the contract of insurance will continue in relation to the surviving policyholder and in such case all the rights and obligations under such contract of insurance at the time of death of the deceased policyholder shall accrue to the surviving policyholder and shall not form part of the estate of the deceased policyholder.
(b) Where a joint policy is stated to terminate on the death of the first life, it shall be lawful to grant the surviving policyholder an option to choose to receive the proceeds of the policy or to continue the policy until the said policyholder’s death.
1712G. (1) Upon the waiver by a beneficiary of a benefit under a contract of insurance, such beneficiary’s interest shall vest in the policyholder if there are no other designated beneficiaries. In the event that there are other designated beneficiaries such interest shall vest in the other beneficiaries pro rata to their interest. This provision shall not apply to a group policy which shall be governed by the express terms of the scheme under which it is issued.
(2) The contract of life insurance shall cease to have effect with regard to the policyholder or a designated beneficiary who has been sentenced by a court for the grevious bodily harm or wilful homicide of the policyholder or the life insured as the case may be. Furthermore, if the designated beneficiary has made an attempt on the life of the policyholder or the life insured, and in the cases referred to in article 1787 of the Code, subject always to the provisions of article 1791, the policyholder shall be entitled to revoke the designation without the consent of the beneficiary or his successors in title, even if the beneficiary has accepted in terms of article
1712D.
1712H. Where a designation of a beneficiary has been
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of the laws of made in accordance with the preceding articles, the provisions

succession.

Applicable law.

of Title III of Part II of Book Second of this Code relating to successions shall not apply to the policy or any rights or proceeds thereunder except as expressly stated in article
1712E.
1712I. (1) Subject to sub-article (3) hereof, the validity and effects of a contract of life insurance, the
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Mandatory rules.

Contracts of life insurance taken out before marriage.

obligations of the insurer, the rights of the policyholder, the person whose life is assured, any beneficiaries and those of third parties, shall be governed by the proper law expressly chosen by the parties.
(2) In the absence of an express choice, the law applicable in accordance with generally applicable principles of private international law and, in case of doubt, the contract, shall be governed by the law of the country where the insurer carries on its business, and if it carries on its business in two or more countries, by the law of the country in which its head office is situated.
(3) Notwithstanding the choice of a foreign proper law and the express terms of the policy in such case>
(i) when the person whose life is assured is habitually resident in Malta on the date of the policy, Article 1712B shall apply> and
(ii) where the policy holder is domiciled in Malta the provisions of article 1712E shall apply.

Sub-title 2 – Issues relating to Married Persons

1712J. (1) A contract of life insurance taken out by a person who subsequently contracts marriage shall not form part of the community of acquests subject, however, to the right of the other party to the marriage to be credited with a sum equal to half of the premia paid by such person during the marriage when such premia have been paid from community property.
Provided that that person may decide that such policy shall become part of the community of acquests in which case the subsequent articles shall prevail.
(2) Payments of premia during marriage shall be deemed to have been made from community property unless there is evidence to the contrary.
(3) In such cases the policyholder shall be entitled to carry out all acts in relation to such policy and to receive any proceeds thereof, whether on maturity or earlier surrender, without the consent of the other spouse, and the

Contracts of life insurance taken out by married persons.

Contract taken out jointly.

Contract taken out by one spouse.

life policy and all proceeds thereof shall be paraphernal property.
1712K. (1) Married persons may enter into contracts of life insurance in their own name or jointly.
(2) When taken out jointly, the life policy may only be surrendered, pledged, assigned or modified, including by the designation of a beneficiary thereunder, jointly by both spouses unless the policy is expressly undertaken -
(a) under a condition that either spouse may act without the consent of the other in all or some matters> or
(b) under the condition stated in article 1712F, and then only after the demise of a spouse,
in which cases either spouse can act in all matters.
(3) When any contract of life insurance is entered into in the sole name of a person who is married and whose matrimonial property is subject to the regime of community of acquests and notwithstanding any other provisions of law>
(a) the life policy may be surrendered, pledged, assigned or modified, including by the designation of a beneficiary thereunder, by such person alone and in such case, when effected
(i) for purposes unrelated to the patrimonial interests of the spouses, or
(ii) without the written consent of the other spouse, there shall arise a credit in favour of the other spouse equivalent to half the value of all premia paid by the policyholder< and
(b) the proceeds of the policy shall be deemed to be paraphernal property of that spouse subject to a credit in favour of the other spouse of a sum equal to half the value of all the premia paid by the policyholder.
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Contracts taken out for the benefit of a child’s estate.

(4) Notwithstanding the provisions of the Data Protection Act, the Professional Secrecy Act or any express clause in the contract, when a contract of life insurance is entered into by a married person jointly, both spouses shall be entitled to full information relating to all matters regarding the said contract. When entered into by one spouse, only such person and others expressly authorised in writing, shall be entitled to information about the policy.
(5) The credit referred to in sub-paragraphs (a) and (b) of sub-article (3) of this Article shall enjoy a special privilege over the proceeds of the policy in the hands of the insurer in the event that the share of the community property accruing to the policyholder at time of the dissolution of the community is not sufficient to pay the value of the credit to the other spouse.

Sub-title 3 – Issues relating to parental authority

1712L. (1) It shall be lawful for parents of a child to enter into a contract of life insurance, for the child as policyholder, in the administration of the child’s property.
(2) Any such contract may be entered into by either parent and the name of the child as policyholder shall be recorded in the policy.
(3) Payments of any proceeds under the policy, at maturity, during the term by way of withdrawals or on earlier surrender, may only be made to the parents jointly or to a bank account designated as property of the child. The provisions of article 136 shall apply to any relevant acts in relation to the life insurance policy.
(4) It shall not be lawful for the parents to designate a third party as a beneficiary of a contract of life insurance entered into for a child as policyholder.
(5) On reaching maturity the child shall be entitled to exercise all rights in relation to the policy without the need to any formality other than giving notice to the insurer and providing him with evidence of his identity and age.

Pledge of life insurance policy.

Sub-Title 4 – Pledge of Insurance Policies

1712M. (1) Rights under an insurance policy may be pledged by the policyholder in favour of any person as security for any obligation. The pledge of a policy shall be constituted by means of an instrument in writing entered into between the pledgor and the pledgee.
(2) The said pledge shall be binding on the insurer and third parties and the privilege as provided in Title XXIII shall arise only after notice of the pledge shall have been given in writing by the pledgor or the pledgee to the insurer or the insurer shall have acknowledged the pledge in writing.
(3) During the existence of a pledge, any assignment of the policy shall be subject to the pledge in favour of the pledgee. The rights of a pledgee are however subject to the rights of a designated beneficiary who has accepted the designation prior to the pledge. When a pledge is granted, the insurer shall be bound to inform the pledgee of any prior rights notwithstanding any duty of confidentiality.
(4) Subject to any prior rights, the pledgee of an insurance policy shall enjoy all the rights of the policyholder to receive notices under the policy, to receive any proceeds of the policy, when due, on maturity or earlier surrender and the right to exercise all options of the pledgor under the policy, except the designation of a beneficiary, but shall not be liable for the performance of any obligations of the policyholder towards the insurer unless otherwise expressly agreed in writing.
(5) Without prejudice to the right of the pledgee to apply for the judicial sale of the policy and notwithstanding the provisions of the Civil Code, in the event of a default under the agreement between the pledgor and the pledgee and upon giving notice by judicial act to the pledgor and the insurer, the pledgee shall be entitled to>
(i) dispose of the policy to a third party< or
(ii) appropriate and acquire the policy himself, in settlement of the debt due to him or of part thereof, or at the best achievable price being not less than the fair value.
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(6) For the purpose of the preceding sub-article, the value of the policy may be established by agreement between the pledgor and the pledgee after notice of default has been given by the pledgor to the pledgee and no prior agreement shall be valid.
Provided that, in case of disagreement, the fair value for the sale or appropriation of the policy shall be determined
(a) by a certified public accountant appointed by the Court or an arbitrator, if so agreed by the parties, on the application of the pledgee< or
(b) in such other manner as may be expressly agreed between the parties.
Provided that if the fair value cannot be obtained the pledgee can apply to the Court or the arbitrator for approval for a sale or appropriation at a price which is less than the fair value as aforesaid, subject to such conditions as the Court or arbitrator may determine.
(7) In cases where there is a surrender value of the policy, the pledgee may also give notice to the pledgor and insurer requesting the surrender of the policy and the payment of the surrender value to the pledgee. The surrender value shall be that established by the insurer in accordance with the terms of the policy and notified to the parties.
(8) For the purposes of sub-article (7) and (8) hereof, the value of the policy shall be that obtaining on the date of the proposed sale, appropriation or surrender.
(9) Any proceeds of the policy which exceed the debt due to the pledgee shall be returned to the pledgor.
(10) It shall be lawful for a policyholder to enter into more than one pledge agreement in relation to the same policy and the rules stated in this article shall apply to a second and further policy in the same way as they apply to the first policy but a subsequent pledge shall rank subject to previous pledges and other prior rights. In such case, a subsequent pledge shall be conditional on the existence of the prior pledge and no rights shall be exercisable by the subsequent pledgee until such time as the prior pledgee’s rights have been satisfied and, or terminated.
4. Article 1717A of the Code shall be amended by the insertion of the words “nor any contract of insurance” immediately after the words “for such purpose in the contract)”.
5. The provisions of article 3 of this Act shall have effect in relation to contracts of insurance entered into after the coming into force of this Act and to relevant subsequent legal transactions done under or in relation to contracts of insurance existing on such date. Nothing in the said article shall affect the validity of any contract of insurance entered into prior to such date or anything done thereunder or in relation thereto until such date.
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Amendment of article 1717A of the Code.

Transitory provision.

Objects and Reasons

The main object of this Bill is to introduce in our Civil Code the contract of life insurance thus to establish the types of insurance contracts that are allowed by law, the rights of the parties thereto, including those of the beneficiary, the necessary consent of the person whose life is assured and the right to access for information.