Dead Peasant Insurance Policies

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Dead Peasant Insurance on Texas State Retirees?* Good God! What's Next?



May 1, 2003

"Dead Peasant" Insurance on Texas State retirees? Good God! What next?

In a copyrighted article of the April 30, 2003 Houston Chronicle, by L.M. Sixel it is reported that Rep. Kenny Marchant, R-Carrollton,has introduced a bill to authorize the state to purchase GOLI (Government Owned Life Insurance) or "Dead Peasant" life insurance policies on Texas retirees. How on earth Marchant can argue that the state has an "insurable interest" in the continued lives of retirees is simply beyond comprehension. Furthermore, according to the article, the new bill introduced by Marchant would give the State the right to purchase dead peasant policies on State retirees without their permission.

Some folks have suggested that the Marchant proposal is just more pork for the insurance industry. This may be true, but I would suggest that there is probably a more sinister intent behind the proposal. By allowing the state, or any other employer or former employer, to purchase and benefit from these policies on retirees, the definition of "insurable interest" will be expanded beyond all reason and effectively end the insurable interest doctrine in Texas. This clears the way for companies like Dow and Wal-Mart to continue the practice of purchasing dead peasant policies on some of their employees, bypassing the requirement that they receive the employees' permission. Marchant's bill will make it easier for a company to claim that if the state has an insurable interest in its retirees, then a private employer also has an insurable interest in its employees, relieving them of the requirement to obtain permission from the insured employee.

What next? Will we be allowing Wal-Mart to take out life insurance on its customers? Maybe we should let doctors buy life insurance on their patients to offset the cost of medical malpractice insurance. Like that idea? In Texas, the concept of "insurable interest" is expressed in Drane v. Jefferson Standard Life Ins. Co. 139 Tex 101, 161 S.W.2d 1057, 1058 (1942). Specifically, the court states an "insurable interest":

...is determined by monetary considerations, viewed from the standpoint of the beneficiary. Would he regard himself as better of from the standpoint of money, would he enjoy more substantial economic returns should the insured continue to live; or would he have more, in the form of the proceeds of the policy, whould she die? Therefore it is said that if the situation is such that he might be led to conclude that he would profit by her death, the policy contract is void as to him since the public has a controlling concern that no person have an interest in the early death of another, an interest that may give rise to a temptation to destroy her life.

Now for the really scary stuff. Texas already has expanded the definition of "insurable interest" to the point of absurdity. In 1999, at the tail end of the session, the Bush administration successfully pushed through a bill to expand the definition of "insurable interest". The bill states that a company has an "insurable interest" in its employee if the employee mearly gives permission to the company to purchase the policy. Currently, in this "at-will-employment" state, employees can easily be "brow beaten", threatened or deceived into granting the required permission to employers. There is no job protection should anyone refuse to grant permission.

People have to understand, when anyone purchases life insurance on you, they have a financial interest in your death! And, the sooner you die, the more profit they make. Texas state retirees need to remember that the state is in a position of via the adminstration of your health benefits and prescription drug coverage to manipulate the terms of the coverage. Do you really want to give people like Marchant a greater financial interest in your death?

Now Marchant and his ilk want remove the requirement that permission be obtained. As a former state employee and the spouse of a current state employee, I'm very concerned. What is there to stop the state from expanding the program to current state employees? How about prison inmates or state mental hospital patients over whom the State literally holds the power of life and death? Quite frankly, that anyone in the legislature would even consider Marchant's bill demonstrates that this State government is simply not trustworthy enough to be entrusted with that kind of power.

Update May 3, 2003

Just Three Days and the Backpedaling Has Already Begun.

In an article by David Paztor of the Austin American-Statesman dated May 2, 2003, Representative Kenny Marchant, Chairman of the House Pension and Investments Committee, now indicates that he was "luke warm" to the idea of purchasing "dead peasant" life insurance on state retirees. He places the blame for this lame idea on Henry J. "Bud" Smith of Dallas.

According to the article, here's how this plan is supposed to work:

First, the State sells bonds to buy life insurance policies on former state employees.

Next, the State buys policies on the retirees and waits for them to die.

Finally, as the retirees die, the State collects the principles from the policies, pays off the bonds, putting any surplus in the state retirement fund.

This is the complicated plan that "Bud" says he is "...a little leery of explaining in the press"? Well Bud, I have to admit, I'd be leary too.

(Please note that on Friday only a portion of the surplus would be put in the pension fund. It was unclear where the rest would go. Now what is it Kenny, all or a portion? What does your bill say?)

Luke warm? If he was so "luke warm" to the idea, why in the heck did he even introduce it? Anyone with a brain in their head would run away from something this stupid in a heartbeat. And this guy is head of the House Pension and Investments Committee? Doesn't he know anything about actuarial tables and how life insurance works? (I'm sure "Bud" does.) What's Marchant doing heading this committee? Frightening. Simply frightening. Somebody is being played for a sucker here, and, potentially, at the taxpayers' expense.

At this point, Marchant is first in line for my first annual "Legislator's Bozo Award" for the dumbest idea of the session. Just in case there are any more like Marchant on the committee, I'm emailing my legislators about this one! For anyone that's interested, its House Bill 3613.

PS. According to the legislative web site, hearings on this turkey of a bill scheduled for May 5th have been cancelled but I'm not taking any chances. I'm still sending my emails.

Update May 6, 2003

Dead Peasant Insurance on State Employees Now a Dead Issue?

In articles by L.M. Sixel, the Houston Chronicle and the Austin Statesman American report that Legislator Kenny Marchant (R-Carollton) has dropped pursuit of House Bill 3613. If passed, the bill would have allowed the state to sell bonds to purchase "dead peasant" life insurance policies on retirees from Texas state government, without their knowledge, and use the proceeds fund state government.

Fortunately, this time reason prevailed - a rare occurrance in the Texas Legislature. Apparently, political pressure was sufficient to wake Kenny up as to the stupidity of this bill. But the real problem is that the bill got introduced in the first place. How could Kenny do something so dumb?

Kenny blamed "Bud" Smith of Dallas for this idea. Now why is Kenny, listening to "Bud"? Do you think the fact that "Bud" gave $85,000 to the Republican National Committee might have had something to do with it? You see, that's how access to government is purchased in this state. Kenny would probably have blown this whole thing off as lame if it had come from almost anyone else. But it appears "Bud" has paid for the privilage, so Kenny had to listen and act on "Bud's" request. It's called "party discipline". It's all about our corrupt system of campaign/party financing. And none dare call it bribery.

If you think that sham of a bill passed by the U.S. Congress last year is going to correct anything, think again. First, it doesn't cover state government. Second, there are so many carefully placed holes in that sucker that there is no hope of any meaningful campaign finance reform, just a change in method.

Until the voting public wakes up, our State government will continue to operate on a system of legalized bribery and Texas will continue to slip into third world status.

PS. I'm looking for this turkey to raise its head again.

This editorial is a statement of opinion by the management of TexasSportsNetwork and TexasSportfishing.com who take sole responsibility for its content. You may direct your comments to: rhmeyer@yahoo.com.

Copyright © 2003 R.H. Meyer - All rights reserved.

More:

Are you concerned about corruption and big money influences in Austin? Read this from Public Citizen.

Complete text of HB 3613 Proposal to purchase "dead peasant" insurance on Texas State retirees.

Wal-Mart shows evidence of "collective psychopathy" when it takes employee exploitation to ghoulish heights with "dead peasant" life insurance policies. Editorial by R.H. Meyer

A few months ago, only a handful of people had ever heard of "dead peasant" life insurance. But word has gotten out now that Wal-Mart and a few other companies have been sued for taking out secret life insurance policies on their employees and keeping the proceeds when the workers die... More (L.M. Sixel, Houston Chronicle)

Satire: "Who needs peasants? We'll just buy 'dead pheasant' insurance." says Texas house republican.

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