1. What are the major ethical issues involved in this case? Is it ethical for an employer to benefit from the death of an employee if they took out and paid for the policy?
2. How does the idea that these policies fund executive compensation and/or retiree benefits affect your answer to #1?
3. Should Congress create more stringent guidelines beyond “best practices” for the administration and use of these types of COLI policies? Should states be pressured to conform to a “consent” policy? Should the proposed legislation be passed?

Caroline Murray was mourning the death of her husband, Mike, when she received a call from the employee benefits division of his company requesting a copy of the death certificate. After asking why they needed the certificate, Caroline was surprised to learn that her husband’s company had purchased a life insurance policy on her husband. Especially surprising was the fact that Caroline had no record of the policy, and apparently, neither did her husband. This particular policy listed only the company as beneficiary and allowed the company to borrow against Mike’s policy, write off the loan’s interest on its taxes, and receive a tax-free payout upon Mike’s death. Mike’s position at the company was not an executive one; he was the security guard at a local manufacturing company, and his company received $80,000, tax free, upon his death. His family received nothing. How did this happen? Through the company’s purchase of a life insurance policy nicknamed “dead peasant” life insurance.