On August 29, the California Senate approved Senate Bill 1543, which had been passed by the California Assembly two days earlier. This legislation provides that trusts, special purpose entities and any related device, scheme or artifice used to apply for and initiate the issuance of life insurance policies for investors violate California's insurable interest laws and the prohibition against wagering on life. In addition to prohibiting the transfer of life insurance policies through life settlement contracts (except in limited instances) for a two-year period following the issuance of a policy, the legislation also institutes a licensing requirement for viatical settlement brokers.
Although approved by the legislature, Senate Bill 1543 has not been presented to Governor Arnold Schwarzenegger due to his announcement that he would not sign any bill until a state budget bill has been passed. Approximately 850 other bills are also subject to this impasse.
Governor Schwarzenegger's view of his rights under the California Constitution is that any bills received by him after September 29 are automatically dead. As a result, if the California Legislature fails to pass a budget bill and formally present Senate Bill 1543 for signature on or before that date, this legislation may fail to become law in California during the current legislative session. If signed, Senate Bill 1543 will take effect in July 2009.