A proud day here at SSMJ! Amy is consulted by one of her longtime heroes, Randy Cohen (yes, that’s right, the New York Times’s Ethicist), in his column today. Here’s the story…
A family member, who owns a small business, and his sole employee took out life-insurance policies on each other. The employee left the business about 10 years ago, but my relative still keeps up the insurance on him, something the ex-employee does not know. I think this is unethical; my relative thinks I am “hard-nosed and narrow-minded.” You? M.T., KIRKLAND, WASH.
Illustration by Matthew Woodson
The former employee should be told about this arrangement, but if he consents to it and your relative does nothing to hasten his death — no inviting him over for nightly steak-and-fried-egg dinners washed down with a quart of heavy cream and a pack of Marlboros — I see no problem.
State insurance laws vary, according to Amy Feldman, a lawyer I consulted, but “key employee” policies like the original arrangement you describe are generally permitted — “to protect a company from the financial losses that would result from the death of a key player,” she says. Feldman adds that “there is nothing illegal about continuing to pay premiums on the policy after the employee departs.”
What the law usually forbids, Feldman says, is insuring a random passer-by, when the temptation to reach for the heavy cream might prove irresistible: “Insuring a total stranger who may or may not have any redeeming qualities for all you know tips in favor of murder when you begin to consider how much better off you’d be without said stranger walking this earth.”
Perhaps that’s why your relative’s actions feel ghoulish. He has a stake in his former employee’s hasty demise: he’s betting on it. The quicker the ex-employee keels over, the fewer monthly payments your relative must make, the more he profits. Life-insurance companies are in the converse situation: the longer a policyholder lives, the more money the company makes. It would be great if there were immortality potions or rather elixirs just shy of that: no death, no need for life insurance.
Feldman notes that the prohibition on insuring a stranger “doesn’t mean you can’t benefit from his death.” She cites viatical settlements, the purchasing of the benefits of a life-insurance policy from someone still living. This was debated, starting in the late 1980s, when some AIDS patients made such deals. They immediately gained desperately needed cash; purchasers of the policies eventually scored a big payout. Happily, improvements in AIDS treatment and greater access to health care have reduced, at least somewhat, the sad urgency of those transactions.