Cat's Claw (A Pecan Springs Mystery)

employers, that is.
    Say, for instance, that you work for one of the big banks—Bank of America, for instance, or Wells Fargo—or a large corporation, like Walmart or Walgreens. You may be insured by your company under a policy known as a COLI policy: corporate-owned life insurance. In traditional life insurance, the insured owns the policy, pays the premiums, and names the beneficiaries. In a COLI policy, the corporation insures your life, pays the premium, and names itself as the sole beneficiary. When you die, your employer pockets the money. Your family doesn’t get a nickel.
    According to Professor Samuel W. Blake, who teaches at the University of Texas at Austin, corporate-owned life insurance began with companies insuring the lives of their most valuable executives, or “key men.” As time went on, Dr. Blake says, the “key man” practice was extended to lower-level employees, many of whom have no idea thatthey are covered by what has come to be called a “dead peasant” policy. The term “dead peasant” first appeared in a memo written by an insurance brokerage firm to describe the policies on janitors, cashiers, and other rank-and-file employees purchased by the grocery store chain Winn-Dixie. The term caught on when it was popularized by reporters for the
Wall Street Journal
and the Houston
Chronicle
. It also appeared in a documentary by filmmaker Michael Moore.
    In Texas, such policies were illegal until 1999, when the legislature approved COLIs, with the stipulation that the employee had to consent to the coverage. Dr. Blake points out, however, that employees might be coerced into consent. “If they don’t sign off on the life insurance, they don’t get the health package either,” he says. “Just because somebody signs, it doesn’t mean that the person freely consented.”
    Nationally, it is estimated that between five and six million Americans are covered by COLI policies. What’s more, as long as the company continues to pay the policy premiums, these policies remain in force, even after the insured person quits or is fired. The premiums are deducted as business expenses, but the company pays no tax on the death benefits, which can be substantial.
    But there’s a new twist to this story. Several corporations are being sued by the families of dead employees, who are enraged to learn that a rich corporation has profited from their loved one’s death. “Life insurance has traditionally been used to protect the family against the loss of its breadwinner,” says the attorney for one of the plaintiffs. “This is an investment scheme, pure and simple. The company is in it for the tax benefits. It’s immoral.”
    To complicate the situation further, some corporations are suing their life insurance companies, claiming that they were not warned of the inherent legal dangers in COLI policies. Walmart, for instance, hasfiled suit against AIG and Hartford, claiming losses of more than $150 million.
    Tina came back in the room, carrying a mug in each hand. “Here you go,” she said, and put a mug on the table beside Sheila. She sat down and nodded at the article, which Sheila had laid on the coffee table.
    “Guess that tells the whole story, huh? Larry didn’t even remember signing the consent form. He said he remembered signing a bunch of papers when Ms. Harmon enrolled him in the company health plan, but he had no idea what they were. I think that must happen a lot. Every personnel office has a gazillion forms for employees to fill out. People don’t look at them.”
    Sheila frowned down at the article. “But what did the company—Harmon Insurance—get out of it? Just the write-off? That doesn’t sound like much.” On the other hand, the million-dollar death benefit sounded like plenty.
    “I wondered about that, too.” Tina kicked off her flip-flops and pulled her bare feet up under her. “I looked into it and found out that it’s usually only the bigger companies that do this. The ones with lots of employees, that is, where the write-off is big enough to make a difference. And then, of course, there are the death benefits.”
    Sheila picked up her coffee mug and sipped. “Harmon Insurance—isn’t it local? It’s a small company, right?”
    Tina nodded. “Small, yes. There are just five of us in the office right now, Ms. Harmon, three agents, and me. I’m an administrative assistant, glorified secretary, really. But local, no. Actually, we’re affiliated with a larger