In 2008, the mother-in-law of a well-known business executive was found dead in her bathtub. She was fully clothed, high heels still on her feet. It was just the beginning of a mystery her family is trying to unwind -- a mystery that involves a business associate cum social companion and a $15 million life insurance policy.
The death was ruled an accidental drowning, but the family, especially the woman's daughter, remained suspicious. Their suspicions were especially piqued when they discovered that her companion had taken out a $15 million life insurance policy that named his own business as beneficiary.
The companion claimed he was entitled to the payout because the deceased was a "key man" in his business. The insurance company petitioned the court to void the policy, arguing that the companion, the insurance agent, and others obtained the policy fraudulently. With a ruling earlier this month, the family has added its own arguments to the debate, arguments against both the insurance company and the companion.
The Companion's Claim. A "key man" policy protects a business from financial harm in the event something happens to its chief executive. According to this man, the deceased had introduced him to investors and had held herself out as a board member of his company.
The Insurance Company's Argument. The fraud accusations from the insurer are based on a fundamental insurance concept and a controversial practice that insurers have fought against for years. The concept is "insurable interest." The practice is the "stranger-originated" policy.
In our next post, we will discuss these two concepts more fully.
Insurancenewsnet.com "'Convoluted' $15M Life Insurance Dispute Involving AIG May Go to Trial" 10/6/10
Wall Street Journal "Life, Death and Insurance: Indiana's $15M Mystery" 4/12/10