Case Shows How 'Janitors Insurance' Works to Boost Employers' Earnings

The Wall Street Journal ^ | Thursday, April 25, 2002 | THEO FRANCIS and ELLEN E. SCHULTZ

[TroutStalker]

How valuable is the business of managing what is known as "janitors insurance"?

One clue comes from a St. Louis court case, in which a financial-consulting firm won a $118 million jury verdict against Hartford Life Insurance Co., arguing that the insurance giant stole its method of administering these kinds of policies to smooth earnings.

[TroutStalker]

Bump.

[Irene Adler]

Wow, I'd never heard of this before. What if corporations start bumping employess off for the insurance (JOKE).

[TroutStalker]

An earlier article:

Companies Profit on Workers' Deaths Through 'Dead Peasants' Insurance

[dennisw]

btttt

[LetsRok]

I don't see a problem with this. The insurance policy does not cost the employee anything. I call it "investing in your people". Employees are owned nothing but a check for the work that they perform. Nothing else.

[mutchdutch]

Maybe I have it wrong......but I never want to collect on any insurance!!!!!!!! I don't want to collect on my house, auto, business, life, medical, nursing home, disability and I would have to think of all the other insurance I have. THE GOAL IS TO NOT COLLECT ON INSURANCE BECAUSE IF I DO, IT MEANS I HAD A SERIOUS LIFE EVENT.

Insurance is a risk management tool.........when it becomes something else and is sold as something else there are serious problems.

[proxy_user]

I still want to hear the answer to the question raised in another thread on this topic: "Does a corporation have an insurable interest in its non-executive employees? If not, are these policies legal?"

[Fifth Business]

I don't see a problem with this. The insurance policy does not cost the employee anything. I call it "investing in your people". Employees are owned nothing but a check for the work that they perform. Nothing else.

Two questions for you.

First, do you think that companies should have to disclose the the employee that they are a beneficiary to the employee's demise?

Second, do you think having these policies could create dilemmas for the beneficiary company? That is, could there be instances where an employee is worth more dead than alive and the company allows that fact to influence their decisions?

[LetsRok]

I think the companies should disclose the information, but the families are not entitled to the payout since they did not pay the premiums. The family can sue for the insurance money if it can be proven that the company was responsible for the death of the employee.

[John O]

I think the companies should disclose the information, but the families are not entitled to the payout since they did not pay the premiums. The family can sue for the insurance money if it can be proven that the company was responsible for the death of the employee.

I think I disagree. If someone profits from a picture taken of me without my permission then they are liable to be sued for stealing my image. Likewise if they profit from my death without my permission, they are essentially stealing from me whether they paid the premiums or not.

I own my own person and they are not entitled to profit on my property.

Now if they make it a condition of employment there, and it is included in the the written contract, then it is ok.

God Save America (Please)

[WI Conservative 4 Bush]

I work for a company that sets up plans like this. In ALL cases that we work on, there is either a $ benefit that goes to the insured (employee), or, in the case where the firm wants all of the insurance benefit, we have the insured sign a consent letter. We've done this business for quite a while, and have always had this 'consent letter' policy in place, even when some state laws said that such consent is not necessary.

It's always been our opinion that it is better to be safe in this area.

I can try to answer any other questions Freepers may have about these arrangements. I will say this. Most of the companies we work with use this insurance to help their bottom line AND provide some insurance to the executives being insured. For those companies that don't 'split' the insurance with the executive, they are doing this to realize the tax-free gain on the build-up of the insurance policy and the tax-free treatment of the future death benefit. This has a dual purpose from the standpoint of the company. They 'protect' themselves in the event of loss of a key employee, and they have diversified their investment portfolio. Some people may not like the fact that some types of insurance may now be used in a similar way as investments, but really, insurance products have moved in that direction for over 40 years now.

Lastly, I will say this. Our firm does not engage in the practice of having companies insure all employees, regardless of position. Our guideline is usually officers and above. Companies that don't adhere to this, while they may be legal in today's environment, may be setting themselves up for problems in the future. Because, the only constant in the legislative arena is change.

[wardaddy]

bump

[John O]

In ALL cases that we work on, there is either a $ benefit that goes to the insured (employee), or, in the case where the firm wants all of the insurance benefit, we have the insured sign a consent letter

looks like you are doing it right. Makes it legal, moral and ethical.

GSA(P)

[Moonman62]

Employees are owned...

This gets my nomination for Freudian slip of the day.