HOUSTON—Big corporations, including banks and convenience store chains in Houston, have taken out life insurance policies on their employees and received hundreds of thousands of dollars when a worker died.
The policies have become known as "dead peasant" policies, because they are taken out on low-level employees.
"It is a profit center for their business," said Scott Clearman, a Houston lawyer who has represented the families of local convenience store clerks killed on the job.
He said the stores had taken out policies that paid the company $250,000 if an employee accidently died.
Houston became somewhat of a hot-bed for such litigation with one of the latest cases making it to the big screen. Michael Moore’s latest documentary, "Capitalism: A Love Story," features Irma Johnson, who lives in The Woodlands.
Her husband had worked for Amegy Bank. In 2008, he died of brain cancer. She said she did not know about a life insurance policy the bank took out on her husband. After his death, she said the policy paid not her, but the bank, over $1.5 million.
Her Houston attorney, Mike Myers, said they reached a confidential settlement last month.
Amegy didn’t respond to a call from 11 News, but reportedly the bank had contended that Irma Johnson’s husband had given his permission for the policy and that such policies are common in the banking industry.
Actually, they’ve been common in a number of industries. In fact, so many companies have them that U.S. Rep. Gene Green, a Democrat from Houston, has been trying to pass a law making it illegal to keep the policies secret.
"If you buy an insurance policy on Gene Green, I ought to have notice," said the Congressman. He also has tried to take away the favorable tax treatment that companies get for paying the premiums.
"They even kept insurance policies on people who’d long since left the company," Rep. Green said.
As things are now, lawyers say there’s virtually no way you can make your employer reveal if it has taken a policy out on you. But if you could?
"One of the big repercussions would be attorneys like me would bring suits to collect the money for people who’ve died. And they cannot let that happen," said Clearman.
Another Houston attorney, Kerry Notestine, knows all about this controversy. A law firm he used to work for had a policy on him.
"The reason they had it on me was so if I died, they’d be able to buy back my partnership interest," said Notestine.
He had no problem with that, because in his case, the insurance money would actually help pay his survivors for his part-ownership of the firm.
In fact, he once defended a Houston software company whose founder died and whose widow sued for the company-owned life insurance payout.
"The jury ruled for the company in this instance," Notestine said.
It was an instance where the company argued it had a right to protect its financial interests because the founder was so vital. In legalese, the company had an "insurable interest."
But in the case of rank-and-file workers—the so-called "dead peasants"—Texas courts have generally ruled in their favor, ruling that companies are not entitled to make money off an employee’s death.
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