The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

The “janitor insurance” scam

Jun 17, 2002

In 1994, Peggy Stillwagoner was two months on the job as a temporary home care nurse when she was killed in a car accident. When her family asked her employer, Advantage Medical Services Inc., about insurance, the owner of the company tearfully informed them there was no insurance.

A few months later, her husband received a call from an insurance investigator asking him to sign a release for her medical records. He learned that the company did have a $200,000 insurance policy on her life, but that it was the company, not the family, that would receive the benefits.

Workers like Stillwagoner, whose lives are insured for the company’s benefit, don’t know that a policy exists in their name. The company that employs them gets all the benefits, which are often sizeable. A music store received $339,302 when a clerk died; a convenience store got $250,000. Companies keep track of ex-employees and retirees, looking through the Social Security records to see when they die so they can collect the money.

For years, companies could insure only “key employees.” But a loosening of state regulation in the 1980s allowed companies to insure all workers. According to The Wall Street Journal, this is called “janitors’ insurance” in the insurance industry. A large supermarket chain based in the South had another name for the workers covered by these polices: “Dead Peasants.” Companies buy these insurance policies as tax shelters. As the policy rises in value, the gain is tax-free. When the worker dies, the company collects the benefit and doesn’t have to pay taxes on it. The Wall Street Journal estimates that companies have saved billions of dollars in tax breaks in this manner over the years.

Companies justify their policies, arguing that they have an “insurable interest” in the lives of these workers.

Sure! Then why do they lay off people so often? And why do they continue to insure workers who were fired or retired?

Above all, why do they allow employees to work in such obviously dangerous conditions? (Perhaps to collect on these policies?)

Not only do companies profit from the living labor of their workers, they have found a way to make money from their deaths as well.