ACT No. XI of 2005 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>-

I assent.

E DWARD F ENECH A DAMI

(L.S.)

President

26th July, 2005

ACT No. XI of 2005

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>-

(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.

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”.

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>

“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.

(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

whose life is

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.

(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

to consent to

relating

to

assignment

and pledge of rights>

assignment of

(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

beneficiaries.

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

beneficiaries. 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

the full proceeds or part thereof, and may be subject to

conditions, suspensive or 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 and shall not be 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 subarticle (4)

Revocability

of article 1712D, the policyholder may revoke or vary the

terms of any designation of a beneficiary.

(4) The revocation or modification by a

by will or by

policyholder

of a designation of a beneficiary may not be

policyholder made by means of a will. The heirs of the policyholder may

not permitted.

not revoke the designation of a beneficiary after the death of

the policyholder.

1712D. (1) Subject to the right of revocation by the

Legal effects

policyholder as provided in subarticle (3) of article 1712C

and the provisions of subarticle (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 rights

other than as stated in subarticle (1) of this article 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

produce the lapse of the policy, and this within a reasonable

time prior to such lapse taking effect.

Irrevocability

(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) Acceptance by a beneficiary of a

and notice of

designation in terms of this provision shall be dated, signed

by the beneficiary and countersigned by a witness and shall

be notified to the insurer. For the purposes of this article,

(a)

“written” shall not include electronic means,

and

(b) a written demand claiming the proceeds under

the policy 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.

(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 a written notice 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

Special rules

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

1712F. (a) Where a policy of life insurance is entered

of interests in

into

by

two or more policyholders, it shall be lawful to agree

favour of co-

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

applicability

of the laws of made in accordance with the preceding articles, the provisions

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

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

life insurance

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

life policy and all proceeds thereof shall be paraphernal

property.

1712K. (1) Married persons may enter into contracts

life insurance

taken out by 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.

(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

taken out for

the benefit of 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.

Sub-Title 4 – Pledge of Insurance Policies

1712M. (1) Rights under an insurance policy may

Pledge of life

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.

(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.

Article 1717A of the Code shall be amended by the insertion Amendment

article 1717A of the

of the words “nor any contract of insurance” immediately after the words Code.

“for such purpose in the contract)”.

The provisions of article 3 of this Act shall have effect in Transitory

provision.

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.

Passed by the House of Representatives at Sitting No. 292 of 18th July 2005.

A NTON T ABONE

R ICHARD J. C AUCHI

Clerk to the House of Representatives

Mitbug[ fl-Istamperija tal-Gvern — Printed at the Government Printing Press