Life insurance may not seem like a good topic for a movie. But it’s the subject of one of the most acclaimed films of all time, “Double Indemnity.”
The film is about a woman named Phyllis Dietrichson, who together with an insurance salesman devises a plan to kill her husband and make it look like an accident to collect on a life insurance policy. The hero is a claims adjustor (how often do you hear that?) who sniffs out the dastardly plot.
What happens if your beneficiary murders you?
Though it makes for an interesting story, it is very difficult for a life insurance beneficiary to receive a payout if they kill the policyholder, although stories of life insurance murders still crop up in the news from time to time. The law has long frowned on people profiting off murder.
For example: Riggs v. Palmer, an 1889 case out of New York, in which Elmer E. Palmer, the 16-year-old grandson of Francis B. Palmer, poisoned his forefather to collect his inheritance. While under the letter of the law Elmer was entitled to his inheritance, the majority ruling from the New York Court of Appeals laid out what has become known as the slayer rule: A killer shouldn’t be able to profit from killing.
Of Elmer, the court wrote: “He made himself an heir by the murder, and he seeks to take property as the fruit of his crime. … He cannot vest himself of title by crime.”
Even if a beneficiary is tried for murder and is found not guilty, if there is enough evidence linking them to the death, an insurer could take the beneficiary to court to argue they don’t deserve the money, said Dennis Jay, executive director of the Coalition Against Insurance Fraud. In civil court, the burden of proof is lower than the reasonable doubt standard in criminal court (that’s how O.J. Simpson could be found not guilty of murder in criminal court, but liable for wrongful death in civil court).
However, it would still take a strong case for a court to agree that an insurer shouldn’t pay out benefits, Jay said.
Who gets the money if there’s a murder?
It depends on state laws and the type of case. If there are contingent beneficiaries, that makes it easy: They get the money.
If there are no other beneficiaries, it may fall to a court decide and the money may go to the murdered person’s estate. In any case, the murderer won’t get anything.
Preventing insurance murder
A standard feature of life insurance policies is the two-year contestability period. This gives insurers a window in which they can investigate whether there’s anything fraudulent or suspicious about the policy. Being murdered during this period would qualify.
Insurance is regulated by states in the U.S., so there can be different laws in different places, but basically every jurisdiction in the world has some kind of slayer statute, said Peter Kochenburger, deputy director of the Insurance Law Center at the University of Connecticut School of Law. The law everywhere generally agrees insurance should not encourage murder, he said.
While state laws are mostly uniform on insurance murder, the Coalition Against Insurance Fraud's Jay said, the one blind spot in the law may be juvenile insurance.
Only a few states have tough laws requiring parents or guardians to have a good reason for taking out a large life insurance policy on their children, he said. There are only rare cases when such policies are justified, Jay said, like when a child is a high-earning actor. Still, at least one recent case supports the notion that state laws in this area need to be strengthened.
The case of Prince McLeod Rams
It should have raised red flags when Joaquin Rams bought a $500,000 life insurance policy on his 15-month-old son, Jay wrote this year in a letter to the Washington Post. Rams applied for the policy in September 2011.
On Oct. 20, 2012, emergency responders arrived at the home where Prince and Rams were living Virginia and found the child in cardiac arrest. Doctors pronounced him dead the next morning.
In a verdict reached in April, a judge ruled that Rams lied multiple times in the life insurance application, particularly about his income — he was broke — and that he killed his son, either by drowning or suffocation.
“We need a high standard of scrutiny for insuring the precious lives of infants and other youths,” Jay wrote. “That responsibility extends from life insurers to insurance agents to state laws that permit such sales.”
How often does life insurance murder happen?
There aren’t hard statistics kept on this, Jay said. His organization, the Coalition Against Insurance Fraud, has tried to encourage states to keep better records, but it’s difficult because prosecutors don’t always file additional insurance fraud charges in murder cases.
Anecdotally, life insurance murders seem to come in waves, he said. There were a rash of killings after the financial crisis, for example.
It’s surprising there are any at all given how difficult it is to get away with it, Jay said. It may be a sign current laws aren’t enough of a deterrent, he said.
Gambling on lives
Lawmakers in Britain first became concerned about insurance murder in the 18th century. Back then, writes Timothy Alborn in the Connecticut Insurance Journal, only aristocrats had life insurance.
This became a concern when people started taking out life insurance policies on strangers, hoping they would die early. Some people would do more than hope, employing poison to collect on policies. According to one historian, gambling on lives was more popular than betting on horses.
Parliament passed the Gambling Act in 1774, which said anyone taking out a life insurance policy on another person must have a financial interest in that person’s life. This is the basis for the “insurable interest” requirement most policies have today that prevents you or me from taking out life insurance policies on a president or senator or anyone else unless we actually depend on them financially, Kochenburger said.
“You want insurance to protect people, not provide an incentive for bad behavior, murder being the worst,” he said.
The case of Kenneth McDavid
Still, life insurance murders are not necessarily family affairs. With enough guile and ruthlessness, it's still possible to take out a life insurance policy on a stranger.
In one widely reported case, two septuagenarians, Helga Golay and Olga Rutterschmidt, befriended Kenneth McDavid, a homeless, schizophrenic man who had lost touch with his family, in 2003. They found him an apartment and paid his bills and only asked he not allow anyone else to stay there, according to court records.
While he lived there, Golay and Rutterschmidt took out several life insurance policies on McDavid worth more than $1 million altogether, claiming Golay was his fiancee and Rutterschmidt his relative.
He was found dead in an alley two years later — just after the contestability period ended — the victim of an apparent hit-and-run. But in addition to the injuries from the car, a toxicology report showed he had ingested a cocktail of drugs that would put someone to sleep.
Golay and Rutterschmidt ran into trouble when they tried to file the claims. Insurers found several irregularities, including the multiple policies and the discovery that McDavid's signature seemed to have been stamped on many of the forms. They also doubted any insurable interest existed. A private investigator working for the insurers called the police after taking a closer look at McDavid's death.
Police arrested Golay and Rutterschmidt in 2006. The Los Angeles Police Department put them in an interrogation room together and secretly recorded them trying to get their stories straight.
A homicide detective overheard them and realized the details of McDavid's death matched those of Paul Vados, another homeless man killed by a car with several valuable life insurance policies taken out on him. The beneficiaries were Golay and Rutterschmidt.
The net closed quickly after that. Both women were sentenced to life in prison in 2008 for the murders of McDavid and Vados.
Why people do it
Despite rules like insurable interest and the slayer statute, life insurance murder persists. People get desperate. People lie. A life insurance policy automatically creates an incentive for someone to collect on that policy, whether or not they act on it, Robert Peterson, professor emeritus at Santa Clara University School of Law.
It's not a very good idea, he said. Insurers tend to get tight-fisted when there's anything suspicious about a life insurance payout. A big life insurance policy in connection with a murder is a big obvious motive that insurers, as well as the police, will investigate.
It's a crummy way to make money, on top of being a crummy way to be a human. Despite that, there's probably no perfect deterrent against life insurance murders.
"A person who plots to murder someone else doesn't expect to get caught," Peterson said. "They expect to collect the money."