Today, Black Friday, one of the busiest shopping days of the year, a Wal-Mart employee was trampled to death by consumers desperate for a good deal. Will Wal-Mart profit from his death?
Right now, your company could have a life insurance policy on you that you know nothing about. When you die — perhaps years after you leave your employer — the tax-free proceeds from this policy wouldnt go to your family. The money would go to the company.
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Whats more, the company might use this policy to pay for retirement benefits and other perks not for you or your fellow workers, but for your companys top executives.
Hundreds of companies — including Dow Chemical, Procter & Gamble, Wal-Mart, Walt Disney and Winn-Dixie — have purchased this insurance on more than 6 million rank-and-file workers.
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These policies, nicknamed dead janitors or dead peasants insurance, soared in popularity after many states cleared the way for them in the 1980s.
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Jane St. John had two children and was pregnant with a third when her husband, a butcher at a Winn-Dixie store, was killed in an auto accident. When the Killeen, Texas, woman called the company to ask about insurance, she said she was told about a $17,500 policy to which she was entitled. St. John said Winn-Dixie told her nothing about the $102,000 the company collected from a corporate-owned policy on his life. She found out about it this summer, eight years after his death, from a lawyer who researched court records. The idea that the company would secretly insure lives, and then not share the benefits with the families, “is sick,” she said. “That is creepy.”Mike Rice was a 48-year-old assistant manager when he died of a massive heart attack at the Wal-Mart store in Tilton, N.H. His widow, Vicki, became the lead plaintiff in a class-action lawsuit against the company after she discovered Wal-Mart collected $300,000 from a life insurance policy it owned on him. Vicki Rice believes job-related stress contributed to the heart attack and says it is totally immoral for Wal-Mart to profit from his death.
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Anger about these practices likely will keep the heat on Congress to make some reforms. Its possible that lawmakers will restrict severely companies ability to write the policies on rank-and-file workers. At the very least, companies probably will have to get workers consent before buying any new policies and clearly disclose that the coverage may extend past the time they leave the company, the ACLIs Dolan said.But he rejected the idea that corporate-owned life insurance was immoral or a company bet against its workers.
Its an important business planning tool, Dolan said. Companies are using it for extremely valid reasons.
I would like to see just what these valid reasons are. Can anyone enlighten me?
Sounds like calls to Congress are in order. Find your Congress Critter here. Just click on your state.
TheZoo 
Thanks for posting this, MsJ.
It should be illegal for anyone to purchase life insurance on another person WITHOUT their consent. This should apply across the board. It’s incidents exactly as described in this thread that drive up the cost of life insurance.
If a business cannot stay in business without collecting on life insurance policies on its workers, then the business shouldn’t be in business.
Let’s say you are Jean Todt, the head of the Ferrari Formula One team, and you’re paying Michael Schumacher 15 million dollars a year to be your number one driver. His participation in the team, racing as well as testing, is vital to the success of the team. The loss of his services due to an injury or death would be devastating to the team’s chances for good results during the season. Hundreds of jobs depend on him, as well as fans buying memorabilia. Since a loss like this can be perceived, insurance can be purchased as a hedge against the worst case happening.
This is common of all types of sports figures, actors, and rock stars. When one of these “diva” singers ends up a cocaine addict, the reason you stop seeing them on tour after they are recovered isn’t because they can’t sing, it’s because none of these companies will insure them, to protect the tour.
That covers the high end employees, now for the WalMart employee.
A corporation the size of WalMart has many thousand employees, and you would think that the loss of a single employee would be insignificant. In their quest to protect the corporation from loss, they are large enough to statistically analyze the likely number of deaths to their entire workforce, the impact on the store for which they work, and the cost to the store to replace them. They can then negotiate a favorable rate to insure all employees, against loss of service, in the event of a death. They can probably determine how much to insure mid and upper level managers as easily. It isn’t personal, obviously, just another way the corporation limits losses on a spreadsheet.
I’m not defending the negligence of yesterday’s tragedy, but I doubt you would get much traction with lawmakers over this issue.
Cats, you have a point about the consent, but it wouldn’t surprise me if consent were required, it would just be one of the many forms you would sign as a condition of being hired, in order to get the job. We have to agree not to sue Blue Cross/ Blue Shield in Alabama, in order to get insurance at our jobs. We agree up front to “binding arbitration”, which means we have to sign away our rights to due process and a jury trial. This I disagree with and I would like to see outlawed.
I can see the point to famous people having insurance paid for by their employer, and since the law applies equally to all, I guess that makes it legal for any company to buy it.
HoR. there is a big difference between Key Man insurance, where the company has a vested interest in that particular person for business reasons, and the Dead Peasants Insurance, which is what the article is on.
When you get the former, you have a financial stake in that person remaining alive and well, as it will damage the company severely and will cost money to continue operations until, as in your example, they hire Ralf or Danica (I know, she’s not F1, but you get my gist) or someone.
What financial interest might a company have on a stock clerk, or a janitor, or warehouse person. And what financial interest do they have on employees who have left their companies? Exactly none.
It is illegal for me to take out insurance on someone I have no personal stake in. I could not, legally, take out a policy on you. Nor could you take one out on me. We have no investment in each other. Yet a corporation takes out these policies simply to get sweeping amounts of tax free money.
There is absolutely no logic in that.
HoR – Alabama needs to change the insurance law so that an employer cannot require that you sign a waiver as a condition of employment. National non-profit health insurance would remove this problem.
It is illegal for me to take out insurance on someone I have no personal stake in. I could not, legally, take out a policy on you.
Is it now, MsJ? Because apparently it wasn’t always (or it wasn’t in certain states.) I read a (true) story about some guys that secretly took out a life insurance policy on some drunk and then tried to kill him. Only it turns out they had a hard time doing it. They tried poisoning him, feeding him glass, and finally resorted to holding up his drunken body while they ran him down with a car. They got caught and went to jail, but not because they took out a life insurance policy on the guy, but because they left evidence that connected them to his death.
And that’s a good point about the difference between “Key Man” insurance (which can just be insurance to cover the loss of the person’s services for any reason, not just his death) and “Dead Peasant’s Insurance” (where a corporation collects money even upon a former employee’s death). The former is good financial planning while the latter is a cynical attempt to make a profit off a dead man.
It should be illegal for a corporation to insure a non-key worker and name themselves the sole beneficiary of the policy. And how do they get such a policy without the employee getting a physical? The worker killed on Long Island was a part-time worker who, likely, would not have had healthcare benefits paid for by his employer. If he had any, he had to pay for it himself, and on a part-time wage at Wal-Mart, I don’t know how that’s possible. So how does Wal-Mart get a life insurance policy on a worker who does not have to take a physical? And why can’t I get that for myself?
On question I didn’t see answered (unless it was in the story) is this: Did Wal-Mart actually have a policy on this particular worker?
MsJ,
It would be interesting to see how much corporations profit over the cost of the premiums on so many people, particularly those no longer employed.
If they are misusing the “key man” provision just to make money, that could be addressed in legislation.
Then there is the possibility that a corporation in trouble could hire a hit man to increase their revenue in bad times. Wait, aren’t we headed into some pretty bad times now?
I’m not surprised you know about Danica, but how do you know about Ralf?
You’re misunderstanding. This is not key man insurance. It is a whole different animal…a completely different type of policy and probably sold for pennies of what key man is sold for, which is why they can take out massive amounts of policies.
I used to follow F1. And I always felt bad for Ralf because he could never best Michael (on a regular basis). I felt he was living in his brother’s shadow. Plus, I always rooted for BMW (since I am a bimmer kinda gal – not to mention a total car freak).
p.s. I was going to say Hakkinan and Ralf…but I didn’t think anyone would get it, which was why I used Danica. 🙂
Wayne,
I think Wal-Mart had stopped doing this when light was shed on it (apparently, Wal-Mart hates negative publicity above all else), so whether they did or not will never be known unless the family of this man follows up over the next year to see if a claim was filed (which, I didn’t know, is public record – that is how they found out about this practice).
I think that the case you are speaking of had some level of involvement of the victim, with their being named beneficiary. If the person signs up for it (which only requires a signature), anyone can be the beneficiary. There is no limit on who can be beneficiary. I saw several stories on this over the years with varying scenarios, but every one of them had some cooperation (often unknowingly) by the named insured. (I used to sell insurance.)
It’s unconscionable, and it should, without question, be illegal. I see absolutely no reasonable argument toward this being right. As much as it might seem, companies do not OWN the lives and bodies of their employees. But we’ve allowed them to enslave us, so I s’pose this is just the next logical thing… The big kahuna companies are the government, and that’s the only reason such inconceivably things are allowed.
So let’s see, this is how it works? They work us to death with slave hours and piss ant wages. Make sure we’re mega stressed (no talking, no sitting, no breathing? heh), and give us the evil eye if we take breaks. We either don’t take a lunch, or feel guilty even taking 15 or 20 minutes to swallow something whole. They give us that “sick building” shit…so often no health insurance… Hmmm, and THEY profit from our death. Talk about a sure thing, easy money… And it’s necessary to ponder why this practice is, er, wrong?? ‘kay.
This pretty much says it all … “nicknamed dead janitors or dead peasants insurance”
Dove
No epic comments, please. Remember that, Christopher Wiseman.
Apologies Zooey, the Homeric response was however meant to clarify the current standing of dead peasants insurance with reference materials only, no opining.