N001983
Friday, January 18, 2002 11:30 AM
Life insurance
In establishing the Victims Compensation Fund Congress defines the term
"collateral source" and within that definition it refers to "life
insurance." There are many different kinds of life insurance. For
instance, there is term insurance, which could be construed as some form of
disaster insurance. This type of insurance has an associated liability
stream into the future. If a victim were paid out of a term life insurance
policy then he would no longer be subject to that liability stream. It
makes sense to me that Congress meant to include term life insurance as a
collateral source. However, I think it should be carefully considered by
the Special Master as to whether Congress meant to include some other forms
of life insurance which are essentially forms of investment. For instance,
I am representing a victim who only owned whole life insurance policies.
They were very expensive policies in which he invested large sums of money
over many years until there was no future liability. There were no
additional premiums due on his policies. Being compensated by these
policies as a result of death should be construed as a return of invested
capital. This person made a choice to invest for his retirement through the
conduit of whole life insurance policies. This was not disaster insurance.
If the Special Master calls paid-up whole life insurance a collateral source
of income then he is implicitly telling this family that their husband and
father made very bad investment choices. He should have invested his money
elsewhere. When this family collects from those policies, they are not
receiving a windfall from an insurance company having made a poor bet. They
will largely be receiving a return of the capital that was invested in the
policy. It was their capital. Offsetting an award by the proceeds of this
form of policy makes no more sense than offsetting an award by the value of
someone's collection of rare paintings.
I hope the Special Master considers these different types of insurance
policies very carefully when interpreting the intent of Congress.
Respectfully submitted,
Individual Comment