Insuring Key Signal-Callers
Why is it good to have a runner on second base? Two reasons: first, he’s in “scoring position” where a well-placed single will drive him home; and second, he can see the signals the catcher is giving the pitcher and pass them on to the batter. In this subtle game of refined skills, anticipating the correct pitch turns even a mediocre hitter into Ty Cobb on the next throw to the plate.
The savvy fan is aware of the importance of the ongoing flurry of signals that continually circulate the field as players communicate information, strategies and intentions. He or she is also aware that most originate somewhere in the dugout from one of several players or coaches, all making gestures to confuse and mislead the opponent as to their source.
And so it is, sometimes, with businesses whose success is often, in part, because of influence and input from people on the sidelines not involved in the day-to-day activity of the business. Let’s call them key directors.
Consider this:
Sometimes a position on the Board of a company is an honorary thing, much like sitting in the celebrity box for the Macy’s Thanksgiving Day Parade. More often it entails involvement in decisions and policies whose resolution and implementation require a level of street-smarts and industry background.
But, sometimes a director’s input is so impactful that the untimely loss of his or her services could have an adverse economic impact on the business. A little company-owned coverage on such a director might seem wise and in order.
The problem is that carriers don’t traditionally recognize the importance of these off-field signal-callers for purposes of financially justifying any coverage applied for by the business.
But, as always, there is a crack in the door that affords an opportunity if a good case is made.
Even if convinced of a director’s unusually disproportionate importance, two things works against a carrier’s standard criteria for granting key person coverage: 1) the director is not an employee and 2) the director has little or no compensation on which to apply the “ten-times annual compensation formula”, employment status notwithstanding.
In a recent case we experienced success in getting a carrier to consider modest amounts of coverage ($250,000) on directors where their contributions to the economic well-being of the company was adequately demonstrated, and where they were paid a respectable modicum of compensation ($2,000 a year and $1,000 per meeting), and the company was taking steps to insure its traditionally-defined key people using the standard coverage guidelines. The success on this small matter has allowed the agent to begin personal planning for two of the key people.
Back to baseball. So potentially beneficial is the knowledge of a rival’s signals that teams have been known to put a mole in the centerfield bleachers with binoculars to monitor the opposing catcher’s instructions to the pitcher. Recently the FBI has shown interest in investigating allegations of hacking the data bases of opposing teams for information. Oh my! What happened to the good old days when a strategy of success was as simple as Honus Wagner’s remark, “I just hit ‘um where they ain’t?”
Contact us with questions or for information on all your key person opportunities, especially those outside the common case parameters – at 706-614-3796 or tom@cpsadvancedmarkets.com.