She can't die fast enough

January 22, 2006 7:06 PM

Company bets on woman to die quickly. Woman lives, company sues. "It's ghoulish, but all insurance is a bit ghoulish," says Goldfein, who oversaw "tons" of deals like Smith's in the early 1990s. "AIDS was a sure thing."
posted by NorthernSky (56 comments total)

Stung by the costly miscalculation, the publicly traded company (www.lphi.net) is balking at paying Smith's combined health- and life-insurance premiums.

A stranger claiming to represent angry investors has twice called Smith at home to ask her how she was feeling.

All of it has her lawyers wondering whether Life Partners is trying to hasten Smith's death with all the stress about whether she's going to lose her health insurance.
posted by NorthernSky at 7:07 PM on January 22, 2006

I like this snark at the end:

"I wish I could get somebody to make my house payment for me, but that's not going to happen."

Well, it could happen. If, say, a company hoping to make some money agreed to do it in a contract.
posted by qwip at 7:24 PM on January 22, 2006

Sigh. At least we'll get a legal precedent out of this.
posted by deadfather at 7:24 PM on January 22, 2006

I don't really get it; how does the company make money when she dies?
posted by Citizen Premier at 7:48 PM on January 22, 2006

They're taking a portfolio view on the profitability of this group and then want to get rid of the outliers who aren't profitable. Classic case of having your cake and eating it too.
posted by missbossy at 7:49 PM on January 22, 2006

How did the "stranger claiming to represent angry investors" get her phone number?
posted by swell at 7:50 PM on January 22, 2006

I don't really get it; how does the company make money when she dies?

The cost of the policy would outweight what the insurance company would have to shell out for her medical care... assuming she dies within their projected time frame. I assume, anyway.
posted by Meredith at 7:51 PM on January 22, 2006

I don't really get it; how does the company make money when she dies?

They get to cash out on her life insurance when she dies. In return they give her a fraction of that so that she can have money now.

The problem of course is if she doesnt die. They have agreed to take over the insurance payments until she dies - which they had planned to be soon. So, they lose.
posted by vacapinta at 7:54 PM on January 22, 2006

I don't really get it; how does the company make money when she dies?

From the FA:

"And so, in 1994, Smith sold her $150,000 life insurance policy to Life Partners Inc. of Waco, Texas, for $90,000. "

jeez
posted by Aknaton at 7:54 PM on January 22, 2006

Ouch, a double jinx!
posted by Aknaton at 7:55 PM on January 22, 2006

I don't really get it; how does the company make money when she dies?

TFA: "Single, self-employed and with little savings, Smith was intrigued by an ad offering to buy her life insurance.

The terminally ill person gets money to live comfortably until the end - and then, the company makes a killing."

So she receives a stipend in return for nominating these toerags as her beneficiary. Ideally (from the POV of said toerags) she pops her clogs ASAP, as the longer she lives, the smaller the return.
posted by pompomtom at 7:57 PM on January 22, 2006

Next....
posted by pompomtom at 7:58 PM on January 22, 2006

"They're not a charity. These people win by having her die fast. They were not counting on a revolution in the treatment of AIDS," notes Cohn, of the Cozen O'Connor firm, who took Smith's case for free.

Betting against modern medicine is not a very good idea.
posted by delmoi at 8:01 PM on January 22, 2006

How long can someone expect to live with AIDS these days anyway? I wonder how much longer she'll live.
posted by thebbxx at 8:12 PM on January 22, 2006

The service these death companies provide is actually really useful in specific situations, espcially in the absence of socialized health care, but these assholes don't seem to understand the concept of risk.
posted by Falconetti at 8:17 PM on January 22, 2006

While this case seems absurd, I would point out that the actual service they provide (specifics notwithstanding) is quite valuable. If I were in the same situation as this woman, I'd do the same thing, as I have no beneficiaries that I would sign my free company life insurance over to.
posted by loquax at 8:18 PM on January 22, 2006

I wonder how much longer she'll live.

Hopefully longer than it will take to sue this insurance company for consumer fraud.
posted by Rothko at 8:21 PM on January 22, 2006

I don't see how this is any worse (from a go-underdog perspective) than losing to "the house" when you're in a casino. In a casino, the odds are always stacked against you; in insurance, the odds are always stacked in your favor, if you're the insurance company. It's nice to see "the man" have to pay out from time to time.
posted by Clamwacker at 8:46 PM on January 22, 2006

If her life insurance premium and health insurance premium were linked from the outset, what is the insurance company's complaint? Surely they must've realized that this was the case. I hope they're not just suing her to create stress.
posted by mullacc at 8:59 PM on January 22, 2006

these guys are complete amateurs. they obviously don't understand the role of an actuary, and the role of an underwriter.
posted by randomstriker at 9:08 PM on January 22, 2006

Two things I don't get:

1) Why was Life Partners paying her health insurance premiums in addition to her life insurance premiums? That's what really broke them, but its not like she sold them her health insurance, just her life insurance.

2) This is done all the time with structured settlements, lotto wins, and other long-term payments. A company will buy the winnings from you at some fraction of their total worth in exchange for giving you all the money up front immediately. How is this really all that different? Some of the details are slightly varied, but it seems to me there must be plenty of precedent already set. On what is Life Partners basing their claim?
posted by ChasFile at 9:10 PM on January 22, 2006

I hope we'll start to hear about bookies complaining about having to payout to people when they win bets with them as cutting into their profit margin.

Not much sympathy for the insurance company.
posted by fenriq at 9:12 PM on January 22, 2006

$90k isn't that much. I hope she gets to counter-sue, and wins a nice settlement. I'm so sick of 'insurance' companies that only want to take the easy risks, or drop people (or raise premiums beyond reason) the moment their status changes.

Back when I had American health insurance, they kept raising premiums or offering to raise deductibles until it was no longer useful to keep the insurance. When I made a claim, the local hospital charged "more than normal for your area"--In spite of the fact there was one hospital in my area (within 40 miles, this was quite rural). In South Africa, everyone pays the same premium according to their policy.
posted by Goofyy at 9:12 PM on January 22, 2006

Ah, I see why I was confused, somehow I got the impression that the company stood to make a large deal of money if she died today.

Anyways these guys just sound like my friend trying to get out of a bet he lost.
posted by Citizen Premier at 9:14 PM on January 22, 2006

nobody likes a welcher.
posted by BrotherCaine at 9:29 PM on January 22, 2006

I don't think Life Partners has thought this thing through. Whether they win or lose their case, it has already made headlines and their reputation has suffered for it. Who's going to buy from them now?
posted by ironisokratic at 10:02 PM on January 22, 2006

Wow, that's pretty sleazy; in a just world, they should not only lose, but face hefty punative damages for even trying to weasel out of it.

I guess this was a form of viatical insurance, which can be fairly morbid but also useful (and makes the basis for an oft-underappreciated Tom Hanks film), and it was a smart deal for her: she gets a lump sum up front to presumably do a "Last Holiday" fling, while the company gets to keep $60k of that life insurance payout.

I'm surprised the company wasn't smart enough to have some kind of clause that said "if you don't die within X years...". But they didn't, so fuck 'em: live by the sword, die by the sword. That this wasn't some small company but a company with regular double-digit profits makes it all the more egregious.
posted by hincandenza at 10:09 PM on January 22, 2006

People might still buy from LPHI if they're convinced they'll die soon. (Assuming LPHI has no competition with a better reputation.)
posted by hattifattener at 10:13 PM on January 22, 2006

Why was Life Partners paying her health insurance premiums in addition to her life insurance premiums?From the article:

As part of the contract, Life Partners set aside $5,510.64 to pay the premiums for Smith's health- and life-insurance policies, which were linked and could not be separated.

posted by moonbiter at 10:18 PM on January 22, 2006

What is the Tom Hank's film that deals with viatical insurance?

Surprisingly, IMDB doesn't return anything when I search for "Tom Hanks" + viatical.
posted by Falconetti at 10:22 PM on January 22, 2006

Joe vs. the Volcano (I presume), although it wasn't exactly about viatical insurance. He was offered an all-expenses paid trip to go and jump into a volcano after he was diagnosed as being terminally ill. I guess that's a mini-spoiler, but it only describes the first few minutes of the movie.
posted by loquax at 10:29 PM on January 22, 2006

Well gosh when I bet all that money on red I didn't expect to lose!

Jesus Christ. Scumbags and amateurs. I'd rather represent a serial killer than a company like that. How do you do it, lawyers?
posted by Optimus Chyme at 11:08 PM on January 22, 2006

I think you guys are jumping to conclusions based on an article that doesn't fully flesh out the facts. Here is my (highly speculative) theory about what is happening:

1. Evil Insurance Company (EIC) buys her life insurance policy which is, oddly, linked to her health insurance policy.
2. As is typical with viatical insurance, the sale is structured such that they must continue to pay the premium in order to retain the rights to the policy. HOWEVER, they are still free to stop paying the premium at will. If they stop paying, they no longer get the jackpot from the policy, and there is no obligation on the part of the original seller, the Poor Woman (PW), to resume payments when the EIC stops.
4. So, the EIC keeps thinking she is about to croak, and thus pays the premium (which covers her health insurance as well).
5. Now that it's become clear she might live for awhile longer yet and investors are getting annoyed, the EIC decides to cut its losses. They stop paying the premium and forfeit the policy.
6. PW freaks out because she thinks they are contractually obligated to keep paying the premium when, in fact, they are only obligated to keep paying it if they still want the life insurance jackpot.
7. She finds a Young, Budding Lawyer (YBL) who thinks he can win a verdict from a jury highly sympathetic to the cause of a PW standing up to an EIC.
8. They sue to get her health insurance back without any particular legal standing.
9. Journalists write light on facts, highly slanted articles about case, leading casual readers to assume EIC is being its typical evil self.
10. YBL and PW win their case because of aforementioned sympathetic jury.

I can't say for sure that this is what's happening. I don't have the facts of her particular case. But I do know that it's very much the norm for viatical insurance providers to have the option to give up on a policy in the way this one appears to have done. So perhaps get all the facts before you condemn the EIC involved.
posted by TunnelArmr at 11:16 PM on January 22, 2006

2. As is typical with viatical insurance, the sale is structured such that they must continue to pay the premium in order to retain the rights to the policy. HOWEVER, they are still free to stop paying the premium at will. If they stop paying, they no longer get the jackpot from the policy, and there is no obligation on the part of the original seller, the Poor Woman (PW), to resume payments when the EIC stops.

If this is true then a) that's some bad reporting and b) the EIC's company should have repeated that over and over again to the reporter and said nothing else. All that shit about "I'd like someone to make my house payments" was ridiculous grasping for straws, which makes me think they may have fucked up on the point outlined above.
posted by Optimus Chyme at 11:34 PM on January 22, 2006

This:

company sues

doesn't square with this:

Life Partners wants the case dismissed.

The article could be clearer, but it's the woman suing, not the company, and we don't have the particulars of the contracts involved, so we can't tell if TunnelArmr's take is on-target or not. The company is stupid as hell, though. $26K a year versus a public relations nightmare no smart business would want? Talk about a no-brainer. Lots of folks have mixed feelings about "life settlement" arrangements; sucking up the (apparently very few) cases where your calculations didn't pan out should just be a cost of doing business. The last place you want to be is in front of a jury.
posted by mediareport at 11:38 PM on January 22, 2006

The whole thing is fucked... seriously the insurance is 26K a year? There are things the market system truly sucks at and providing health care is one of them.
TunnelArmr, I could see how such situations may occur as you describe, but it seems that in such cases it would be pretty clear cut. A clause in the contract would be invoked and it would seem null and void.
Unless there was a clause that countered the bit cited in the article...
"Purchaser, ... agrees to make any necessary contributions to the escrow fund to pay future premiums in the event that escrowed funds are exhausted and Seller shall have no further liability for payment of premiums on the policy." one would assume that the EIC is indeed an EIC. If nothing else they are just a mite disingenuous...


Life Partners' president and General Counsel, Scott Peden ... said he believes is the first of its kind (lawsuit) in the company's 15-year history of helping "thousands of terminally ill patients."

Profit is the motive, helping is a by-product unless it interferes with profit.

I think we can agree the article needs more specfic detail.
posted by edgeways at 11:41 PM on January 22, 2006

edgeways: The key point of the clause in the article is that the seller has no responsibility to resume paying the premium in the event that the EIC forfeits. I know it seems otherwise, but in the bizarro world of contract phraseology, that clause is just meant to convey that the EIC, rather than the woman, is responsible for the premiums, not that they are on the hook for them at any cost. The EIC fronted her a lump sum in escrow, and the point of this clause is to clarify that, if she lives long enough to where that escrow runs out, she doesn't have to start picking up the tab. The company still has to do it (if they still want the jackpot). The escape clause that I presume exists would supercede any ambuigity about the "agrees to make any necessary contributions" wording.

All that shit about "I'd like someone to make my house payments" was ridiculous grasping for straws, which makes me think they may have fucked up on the point outlined above.

Agreed. And it's a distinct possibility. Based on their ghetto website, I don't think they're a particularly well-run institution. It may be a contract gaffe on their part, but that sort of escape clause is pretty normal and for them not to include it would be a HUGE* oversight by a company whose business is just crunching numbers and writing airtight contracts. I think more likely than such a big contract screw-up would be that mismanagement led to a spokesperson botching the interview (leading to the bad quote).

I know people think EIC companies are evil (otherwise they'd just be IC's), and they may well be, but they're not stupid.

If they're contractually obligated to pay the premium, to stop paying would be an obviously stupid decision. If that woman got wrongfully stripped of health insurance and then succumbed to her illness, her family could sue for liability and get a HUGE* payout that makes the $26k a year (the cost of the premium) look like pocket change.

I have to believe that any viatical insurance company takes notice of a goofy policy like her joint life+health deal and makes sure they've got their bases covered. But who knows, you can never underestimate human stupidity.

* The screw-up and payment in question would be so large that both bold and italics were required to convey their hypothetical enormity.
posted by TunnelArmr at 11:55 PM on January 22, 2006

TunnelArmr - This could simply be a case of ferociously bad reporting, but I have certainly seen contracts, from businesses that should know better, with exactly the kind of HUGE oversights you mention. So, frankly, without seeing the wording of the contract as a whole, I don't think we can make any assumptions.
posted by kyrademon at 1:03 AM on January 23, 2006

What's astonishing is that this is, from what I can tell, a profitable company otherwise. This is simply an investment that didn't pay off for them. Were they wise, they'd continue paying her insurance bill with a smile - it makes for great PR and suggests that they actually care about the people they do business with. The positive publicity might bring in more customers and offset the loss.

Were I a shareholder, the mismanagement of all this would concern me a whole lot more than the minor loss. And if it's not just a minor loss, then the company has far bigger problems to deal with.

All that aside, I hope the PW continues to do well, that the EIC squirms a bit and that the BYL wins a nice settlement.
posted by aladfar at 1:08 AM on January 23, 2006

In France, you can speculate on old people by buying their property through a kind of monthly wage paid until they kick the bucket - once they die the property transfers.

It was demonstrated to work both ways, when Jeanne Calment lived to 121 years old (outliving her investor by one year).
posted by strawberryviagra at 1:49 AM on January 23, 2006

Based on their ghetto website, I don't think they're a particularly well-run institution.

TunnelArmr, I'm curious: Why do you characterize their site -- I assume you're referring to this one -- as a "ghetto website"? Would you elaborate, please? I find your choice of description especially interesting in that you are remarking on how appearances shape perceptions.

A stranger claiming to represent angry investors has twice called Smith at home to ask her how she was feeling.
----
Though Life Partners has wowed investors with regular dividends and an average 16 percent return, the Smith case has been all pain, no gain.

I'm not sure what to make of this. Could this one instance have affected their bottom line enough to concern investors? It seems more likely to me that $26k/yr would be an would be an irritant to the management team than a noticeable hit to the bottom line.
posted by alumshubby at 4:54 AM on January 23, 2006

alumshubby, that looks like the "Site Builder" type package that most hosts provide you - 10 pages for $99! - plus it's done in FrontPage, which most of the digital elite turn their noses up at.

This whole business makes me mad, like if you are watching the military channel and some guy comes on, all grandfatherly, and promises to make a structured settlement for a veteran's benefits in exchange for some quick cash. Schadenfraude, indeed.

It will be interesting today to see how they're stock fares (LPHI), as they're traded on NASDAQ. The markets have tricky-to-no morality aside from generating profits to their shareholders - witness Google losing 8.5% of value after standing up to the Federales.
posted by rzklkng at 5:14 AM on January 23, 2006

TunnelArmr, I'm curious: Why do you characterize their site -- I assume you're referring to this one -- as a "ghetto website"? Would you elaborate, please? I find your choice of description especially interesting in that you are remarking on how appearances shape perceptions.

a) meta name="GENERATOR" content="Microsoft FrontPage 5.0"
b) shitty, overcompressed logo with Photoshop default bevels
c) stock photo of hands shaking superimposed over a globe
d) bad formatting in most browsers
e) same links in three different places
f) just looks like shit
posted by Optimus Chyme at 8:19 AM on January 23, 2006

What Optimus Chyme said.

I'm by no means a web design snob, but when it comes to a corporate webpage, I expect a certain level of polish, and if it's not there, it says something to me about the company. The same would be true if I went to their office and it was a pigsty or if they handed me a business card written in pencil on an unevenly cut slip of printer paper.

Their site looks like something I could have thrown together in a few hours, and my web design chops are pretty mediocre. Grainy graphics, poorly measured margins, just generally very amateur, which is fine for some guy's blog, but not some insurance company that wants to seem reputable.
posted by TunnelArmr at 8:51 AM on January 23, 2006

Without hearing it from the horse's mouth, so to speak, then, I can assume "ghetto" == "looks like crap to the web-design cognoscenti." Interesting choice of descriptor.
posted by alumshubby at 9:04 AM on January 23, 2006

"ghetto" == "looks like crap to the web-design cognoscenti"

As a member of the web-design working class, I'd phrase it more like this: "ghetto" == "someone with no skills whatsoever elected to purchase an application to generate their website from one of that application's pre-existing templates".

If it were a slide presentation, it would be one that used one of the templates included with PowerPoint. If it were a color brochure, it would be one that was generated from a Quark XPress sample template. If it were a song, it would be one that used the sample music included with ProTools.

In short, someone decided that it was enough to HAVE a website/slide presentation/brochure/song, but not to hire a professional (or develop the skills themselves) to make it unique and compelling.
posted by davejay at 11:13 AM on January 23, 2006

Well said, davejay. The PowerPoint thing is another good example. PowerPoint is useful, but it's also a big crutch. People often give a presentation that is wholly reliant on their powerpoint slides just because they can, and their slides suck, because they don't go beyond just having them to thinking carefully about what's on them.

There are so many companies that think they have to have a web presence but don't concern themselves with the nature of it. Same with blogs. Lots of small businesses decide "Hey, everyone's doing this blogging thing, we'd better get on board!" but they make no effort to study the medium and the blog they end up with is totally worthless. Bandwagon goods that people have for the sake of having them are usually a waste of money if they don't put in the extra step to make proper use of them. Except diamonds. Those just sit there and look sparkly.

'ghetto' is a slang term from my Northern California upbringing, it just refers to anything of poor or degraded quality, like a generic brand DVD player that breaks in 3 months or a website that looks like it was made with KidPix and a Your Child's First Website software suite. It can also refer to processes, in which case it usually means that something is a stopgap solution instead of a well thought out, good way to do something.
posted by TunnelArmr at 11:49 AM on January 23, 2006

Without hearing it from the horse's mouth, so to speak, then, I can assume "ghetto" == "looks like crap to the web-design cognoscenti." Interesting choice of descriptor.

Are you bothered by the potential ethnic overtones of the word? I wouldn't sweat it; "ghetto" has become typical slang for cheap and run down. Kids these days.
posted by mr_roboto at 11:52 AM on January 23, 2006

Ghetto, Nigger, Wigger...all effective derailers all the time.
posted by elpapacito at 12:12 PM on January 23, 2006

Without hearing it from the horse's mouth, so to speak, then, I can assume "ghetto" == "looks like crap to the web-design cognoscenti." Interesting choice of descriptor.
posted by alumshubby at 9:04 AM PST on January 23

All right, all right: you keep harping on this point and it's driving me nuts, with your "interestings" and your "would you elaborate"s and this false bullshit transparent curiousity about it. Why not just say "I, alumshubby, think that's a racist term" and fucking get it over with. Christ on crutches.
posted by Optimus Chyme at 12:23 PM on January 23, 2006

For what it's worth, "ghetto" isn't inherently racist; a ghetto is a place where housing is provided, but there is no concern over the quality or safety of that housing.

Housing of this (lack of) quality is only considered liveable by those who cannot afford anything better, aka "poor people"; race only enters into it if the majority of poor people in a given region are also of a common race.

Which is, historically, a significant portion of the time. Nevertheless, it is a descriptor of the housing, not of the people who live there; referring to a specific race as "ghetto-dwellers", now THAT would be racist.

Or, of course, referring to a neighborhood populated significantly by a specific race as a "ghetto" because the people of that race live there, not because the housing is substandard.

However
posted by davejay at 2:20 PM on January 23, 2006

argh, darn that extra "however"
posted by davejay at 2:21 PM on January 23, 2006

Are you bothered by the potential ethnic overtones of the word? I wouldn't sweat it; "ghetto" has become typical slang for cheap and run down. Kids these days.


Having been called a "clueless white boy" around here for not lovin' all over rap music, I guess I'm just behind the curve; when I hear or read "ghetto" I'm pretty much just thinking of this. Nothing like MeFi for expanding my horizons....
posted by alumshubby at 2:52 PM on January 23, 2006

I guess I can understand why it could be seem like it has racist overtones, but I never really thought anything of it. My high school was quite ethnically diverse (minority white, pretty even split of hispanics, blacks, and pacific islanders), and everyone seemed to the use the term equally regardless of race. I think, if anything, it's a classist term, because it's used in reference to lots of different cities and races around the world, but it's always used to refer to poor people. I certainly didn't mean to be classist in my use of it ("your website looks like something a poor person would make!"), but I can see why it would seem that way. It's interesting that you focused on it in that way, because it's pretty common parlance where I grew up.
posted by TunnelArmr at 3:30 PM on January 23, 2006

From Merriam-Webster:

ghetto
1: a quarter of a city in which Jews were formerly required to live
2: a quarter of a city in which members of a minority group live especially because of social, legal, or economic pressure
3a: an isolated group <a geriatric ghetto> b: a situation that resembles a ghetto especially in conferring inferior status or limiting opportunity <stuck in daytime tv's ghetto>

More at wikipedia: Ghetto, Redlining.

Since present usage of ghetto as a pejorative does not refer to a specific minority group, it seems less offensive than similar usage of, say, gay.

(This isn't intended to be a callout. Just a bit of history.)
posted by ryanrs at 7:44 PM on January 23, 2006

One thing Tunnel Armor, Her lawyer is not YBL his is an veteran.
In fact he has: more than seventeen years' experience in all aspects of trial and appellate practice in both state and federal courts
posted by Megafly at 5:30 PM on January 24, 2006