Remembering 9/11 twenty years after the attacks got me thinking about life insurance.  

 

Everyone was worried about what impact all the claims would have on the industry.  It turned out that an extra 3,000 lives and a billion dollars of accelerated payments didn’t really move the needle.  

 

I remember thinking about the “opportunity” something like 9/11 created for people.  If they worked in the Towers they could essentially walk away from their lives (never to be heard from again).  An anonymous variation of what Michael Douglas does in Falling Down.

In a situation like that—where there is no body—does an insurer have to pay?

No Body, No Payment?

This isn’t a new issue in Washington.  In fact, disputes about whether insurers have to pay when there is no body go back over 100 years.  One of the cases offers this description:

That the insured left his home in the city of Spokane on July 7, 1898, stating to his sister-in-law just before leaving that he was going to the mines to be gone for a short time, requesting her at the same time to take care of the house and water the lawn during his absence.  He failed to return and has not since that time been seen.

The jury (and court of appeals) decided that even though there was no body the insurance company had to pay.  Because all the evidence pointed to the fact that Mr. Butler loves his wife and kids, took care of his house and had plans for the future.  All of this seemed to rule out the possibility that he just pulled up stakes and left. 

Double Indemnity

Another interesting concept is “double indemnity.” It’s a provision in life insurance contracts where a multiple of the face amount of the policy is paid if there’s an accidental death. Accidental death includes murder.

Good subjects make good movies. Should you add double indemnity to your policy? Probably not. The odds of accidental death are about five percent. And people in high-risk professions are usually excluded from double indemnity coverage.

Suicide or Murder?

Suicide (made to look like accidental death) has been in the news a lot recently.  A South Carolina attorney paid his drug-dealer to shoot him in the head so that his son would receive his $10M insurance policy.  

For better or worse the plan failed.  

Even if the plan succeeded and the attorney had died it’s likely the insurer would have investigated.  There’s some interesting law when it comes to the suicide exclusion that’s written into life insurance policies.  

The law establishes a presumption against suicide.  Here’s the rationale:

The origin of the presumption against suicide is obscure. Its existence at early common law, however, has been established, as well as the policy behind its application. Suicide was a felony and considered a more heinous crime than murder. A host of worldly punishments would devolve upon the suicide’s family; all property of the suicide would escheat to the crown, and an ignoble burial by the highway, with a stake driven through the victim’s heart, forced humiliation upon the survivors. To relieve the family of these penalties, there arose a presumption that no sane man would take his own life. Slight evidence would induce a coroner’s jury to bring in a verdict of temporary insanity, thus avoiding the crime of suicide.

In cases where it’s not clear whether someone has committed suicide or been murdered, the insurance company must overcome the presumption against suicide and establish that the insured took his own life.