Corporate Owned Life Insurance
Corporate-owned life insurance or “COLI” is insurance held by a company on the lives of its employees, or former employees, with the company named as the policy beneficiary. Because the company designates itself as the policy beneficiary, the insurer pays the policy benefits to the company when a covered employee dies. Employees often do not know that their lives have been insured for the company’s benefit. Regrettably, this form of insurance is also referred to as “dead peasant” or “janitor” insurance within the insurance industry.
Why is it called janitor or dead peasant insurance?
Unlike “key man” insurance which covers important executives, broad-based, corporate-owned life insurance policies generally insure the lives of vast numbers of a company’s employees. It is sometimes called “janitor” insurance because the policies cover everyone from the company’s upper management to its janitors. The phrase “dead peasant insurance” originated from an insurance brokerage firm that included a category of “dead peasants,” meaning a company’s deceased employees, on reports for companies that bought corporate-owned life insurance policies. Click here to learn how “dead peasant” insurance got its name.
How many companies have corporate-owned life insurance?
The exact number of companies that have some form of corporate-owned life insurance is unknown. A report conducted by the Unites States General Accounting Office, however, states that a substantial number of large companies, banks, and savings and loan institutions have the insurance on employees’ lives. The report cites a survey concluding that 68% of Fortune magazine’s top 1000 companies use corporate-owned life insurance. Testimony given to the United States Senate Finance Committee also states that “nearly one-third of all new life insurance policies are corporate owned.”
What experience does McClanahan • Myers • Espey with cases involving corporate-owned life insurance?
Mike Myers began representing the families of employees whose lives were covered by corporate owned life insurance in 1995. And the firm’s partners have continually represented covered employees and their families since that time. Mike Myers has been counsel in each case in the country that has successfully recovered policy benefits for the families of covered employees in cases against companies that benefited from corporate-owned life insurance. Bob Espey has also been counsel in many cases involving corporate-owned life insurance and successfully argued the landmark case Torrez v. Winn-Dixie, which held that certain broad-based, corporate-owned life insurance policies may be inherently undiscoverable by the covered employee’s family or estate.
McClanahan • Myers • Espey’s past success in corporate owned life insurance cases does not guarantee success in future litigation. Litigation is always uncertain and specific results obtained depend on the facts of each case.
Who can make a claim involving these policies?
The most common claim involving corporate-owned life insurance is made by the estate or family of an employee who passed away while covered by one of the policies. The estate or family usually argues that the employer did not have an insurable interest in the employee’s life and that the employee’s estate is therefore entitled to the policy benefits. In some instances, living people who are covered by a policy have argued that the employer improperly used their personal information, such as their name, age, date of birth, and general health information to buy the policy on their lives. The outcome of these cases depends on the applicable state law and the facts and circumstances of the case.
How does a person know whether they have a claim to the benefits of a corporate-owned life insurance policy?
It is often difficult to know whether a claim exists because employees are generally not told that their lives have been insured for a company’s benefit. The legality of the insurance policy is also usually a matter of state insurance law, which may be different from state to state. If you are an employee, former employee, or the relative of a person who has passed away and once worked for a Fortune magazine 1000 company or a large bank, you may want to investigate whether there was a policy of corporate owned life insurance. McClanahan • Myers • Espey has extensive experience representing clients in such situations. When appropriate, McClanahan • Myers • Espey will team with firms in states outside of Texas to represent the client’s interests.
Contacting Us:
If you are interested in investigating your rights, or are an attorney with clients who may have need of our firm’s experience, please contact Mike Myers.
