Every once a while I come across a situation which indicates that someone did something just because they could and because they convinced themselves there was nothing wrong with what they were doing. Oh, one more thing. They decided it was such a good thing that they really shouldn't tell too many people about it. They probably believed that if the wrong people found out about it, they would misconstrue their intentions.  So, let me tell you about the situation I just came across.

Camelot Music purchased life insurance on all of its full-time employees, including Filipe Tillman. When he died, Camelot received approximately $340,000 in life insurance proceeds. The personal representative of Mr. Tillman's estate brought suit pursuant to the Oklahoma Insurance Code to recover the proceeds.

Camelot had purchased approximately 1,400 corporate-owned life insurance ("COLI") policies on the lives of all of its full-time employees. The purpose was to ease Camelot's tax burden, which would then help offset the cost of employee health benefits. Interestingly, Camelot actively concealed the existence of the COLI policies from the employees.

Oklahoma law requires the beneficiary of a life insurance policy to have an insurable interest in the life of the insured in order to be entitled to the policy proceeds. It is defined as "a lawful and substantial economic interest in having the life, health, or bodily safety of the individual insured continue, as distinguished from an interest which would arise only by, or would be enhanced in value by, the death, disablement or injury of the individual insured."

The Court of Appeals for the Tenth Circuit, in reversing the district court, held that Camelot had failed to establish Mr. Tillman's special importance to the company. The sole evidence presented by Camelot was that Mr.Tillman was a full-time employee with a complete benefits package. The opinion read as follows, "We conclude that the Oklahoma courts would hold, as a matter of law, that Camelot has failed to present sufficient evidence that it had a lawful and substantial economic interest in Mr. Tillman's continued life. Accordingly, Camelot did not have an insurable interest in Mr. Tillman's life." By the way, Wal-Mart filed an amicus curiae brief in the case.

I wonder what was being said about ethical considerations by corporate representatives and advisors when they implemented programs like this, or am I judging it from a different time or my own bias to even raise that concern?  Assuming there were similar policies on the other 1,399 employees, we would be talking about  $47.6 million in proceeds being paid to this one company.

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