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 October, 2009


 How Corporations Benefit From Dead Peasants Insurance

Corporations Playing the Dead Peasant Game

When Michael Moore’s Capitalism: A Love Story opened on October 2nd, I was at a movie theatre to greet it.

Moore’s documentaries usually follow a similar blueprint. He finds a serious subject – one that’s worthy of social comment - then he spends two hours laying out his basic thesis by sometimes employing a serious, and at other times, a funny means.

The main point of Capitalism: A Love Story is there’s hardly anything to truly love about the state of capitalism these days.

That’s not to say Moore doesn’t see the virtues of capitalism. He just doesn’t love how greed has infected the profit motive – and inflicted pain on America’s shrinking middle class.

That said, there is, as with all of Moore’s films, lots of stuff for conservatives to dismiss as the product of a guy who secretly loves socialism.

Follow their logic close enough, and you’ll predict some rightwinger will swear Michael Moore invented the word greed.

Happily he did not. He just brings into sharp focus the fact that not all corporations – and politicians (Republicans and Democrats) are as trustworthy as they claim to be.

One segment of Capitalism: A Love Story that has generated a lot of dropped jaws and interest in the media is this fascinating profit maker known as “dead peasant” insurance.

Dead peasant (or alternately “dead janitors”) insurance is a little known instrument that hundreds of major corporations have used to help prop up their profit margins.

Some companies simply take out life insurance policies on their low-level employees, and reap windfalls when those workers die.

Here’s how they work. A store clerk, janitor or any low paid worker takes a job. The company takes out life insurance on their lives. In some cases those workers don’t even know their lives are being insured by their employers.

The company can then get a tax-free loan on the policy. If the worker dies their beneficiary (which is the company) gets paid. The family of the dearly departed doesn’t get a cent.

This practice, according to Capitalism: A Love Story has produced some mighty morbid results. When a Wal-Mart cake decorator died, her family was faced with a lot of medical bills and funeral costs. Wal-Mart, on the other hand, received an $80,000 death benefit.

At one time Wal-Mart had an estimated 350,000 dead peasant insurance policies.

And Wal-Mart surely wasn’t alone. Many American companies have realized that there’s profit to be made by insuring their low-level workers. Those companies have figured the lives of their workers are far more lucrative if they die, than if they live.

To make matters worse, if a company takes out a dead peasant insurance policy on a new employee – if they quit – the company can still cash in on the policy when they die.

According to a Wall Street Journal article that was published last May (months before Moore’s movie hit movie theatres) some major banks were using dead peasant insurance policies to pay executive bonuses during the housing bubble.

Bank of America Corp., for example, holds $17.3 million worth of life insurance policies on its employees.

There’ve been efforts to curtail these practices, but there are always ways to get around the rules.

Some states require strict measures to make sure employees are fully aware such insurance policies are being taken out on them. While other states (Pennsylvania is apparently one of them) aren’t said to be as stringent.

The IRS has, for some time, cracked down on companies that have used the insurance policies as creatively structured tax shelters.

That’s why Wal-Mart, Winn-Dixie and even Disney no longer appear to be betting against the lives of their own employees. They’ve stopped buying dead peasant insurance.

Michael Moore’s movie has, at least, sparked a public debate about the potential for abuse of employee/employer trust.

One member of Congress, U.S. Rep. Luis Gutierrez (D-Ill) has seen the movie, and he’s even gone so far as proposed a ban on dead peasant insurance unless a worker earns a million dollars from a company.

Edward A. Owens is a three time Emmy Award winner and 20 year veteran of television news. E-mail him at freedoms@bellatlantic.net