Will Chase And Wells Fargo Benefit From The Deaths Of WaMu And Wachovia's Former Employees?
Washington Mutual and Wachovia have two things in common. First, they were spectacular business failures. Second, they were two of the nation’s largest holders of “bank owned life insurance” or “BOLI” policies. The combination of these two facts creates interesting issues concerning the legality of the BOLI policies and who may benefit from the deaths of the banks’ former employees.
Bank owned life insurance generally refers to policies that a bank purchases on the lives of its employees. But unlike traditional forms of life insurance, the bank designates itself as the policy beneficiary—meaning that the bank is entitled to the policy benefits when the insured employee dies. BOLI policies also remain in force even if the insured person no longer works for the bank. The policies are therefore similar to those often referred to as “dead peasant” or “janitor” insurance.
Washington Mutual and Wachovia had enormous appetites for BOLI policies. As of June 30, 2008, Washington Mutual reported to the Office of Thrift Supervision that it maintained $5.072 billion in BOLI holdings. Wachovia likewise reported a staggering $14.575 billion of BOLI holdings. Notably, those amounts are reported in cash surrender value, meaning that the policies’ benefit amounts are likely substantially higher.
Washington Mutual’s assets were acquired by JP Morgan Chase in September and Wachovia was acquired by Wells Fargo earlier this month. These transactions create interesting questions concerning the validity of the policies on the lives of the former employees and who may profit from their deaths.
Assuming that the Washington Mutual and Wachovia employees consented to the BOLI policies on their lives (a big assumption indeed), Washington Mutual and Wachovia may have had the insurable interest necessary to support the BOLI policies. But what about JP Morgan Chase and Wells Fargo? WaMu and Wachovia employees, especially former employees who left long before the collapse, probably never imagined that Chase and Wells Fargo might one day benefit from their deaths. Thus, two issues surface. First, who will receive the BOLI policy benefits when WaMu and Wachovia’s former employees die? Second, if Chase and Wells Fargo are the expected beneficiaries of those policies, do they have the insurable interest necessary to ensure the policies’ validity?
For more information on this topic, please contact any of the firm's partners at mmellp.com.
The question of insurable interest is only applicable at the time of application for life insurance. Subsequent transfer of these policies is not predicated on the existence of an insurable interest at the time of transfer. Since these BOLI insurance policies are also legal contracts that were structured upon an offer, an acceptance, consideration, and has a legal business purpose, JPMorgan-Chase and Wells Fargo should be the beneficiaries of these BOLI death proceeds. As with most contracts, the new owner, successor or assigns, steps in and takes the place of the original contract owner. Just as we would expect JPMorgan-Chase and Wells Fargo to honor all of the contracts that Wachovia and WaMu entered into with respect to mortgages, certificate of deposit rates and employee contracts, it should be no different regarding their new ownership in BOLI policies acquired through the business failures of Wachovia and WaMu.
ALL I KNOW IS THAT CHASE AND WAMU SCAMMED CUSTOMERS AND DID NOT TRY ALL OPTIONS TO FORECLOSURES IN ALL OF THE CASES I HAVE INVESTIGATED. I FOUND SNEAKY PRE-DATED PAPERWORK, HORRIBLE CUSTOMER SERVICE, AND NOBODY KNEW WHAT WAS GOING ON WHILE THE COMPANY WAS FLOUNDERING.
IT DISGUSTS ME THAT THE BANKS RECEIVED MONEY FROM THE GOVERNMENT ONLY TO SCREW THE VERY PEOPLE THAT PUT MONEY INTO THE BANK. IT STATES ALL OVER THE WEB THAT BANKS DON'T WANT HOUSES BUT THAT IS A CROCK! HOW MANY TIMES DO WE PAY FOR THE SAME HOUSES OVER AND OVER AGAIN? I PREDICT MANY CLASS ACTION LAW SUITS REGARDING PREDATORY LENDING. IF YOU HAVE ASSETS THEN YOU HAVE MONEY, OR A MEANS TO GET IT. THE BANKS WOULD RATHER HAVE EQUITY THAN NOTHING. AFTER ALL, KICK SOMEONE OUT AND GET A WHOLE NEW DOWN PAYMENT, GREATER TO THE AMOUNT DELINQUENT ON THE MORTGAGE FROM PREVIOUS OWNER, AND START THE WHOLE THING OVER AGAIN. MY SON COULD NOT EVEN GET THE SAME AMOUNT OWED TWICE FROM OVER 8 REPRESENTATIVES ALL ON THE SAME DAY, YET EACH INSISTED THEY WERE CORRECT.
AMERICAN BUSINESSES NEED TO START TREATING THE AMERICAN PUBLIC BETTER-THEY ARE NOTHING WITHOUT US!