Company that banks on your death, suing woman defying odds

[Eldred]

Monica Yant Kinney | She beat odds; dealer won't payBy Monica Yant M. Smith was diagnosed with cancer and AIDS in the early 1990s, she was given two years to live.
That she is still very much alive today is good news - to everyone but the people who bet big on her dying.
Had Smith perished on schedule, Life Partners Inc. would have made $60,000 on a $90,000 wager - a 66 percent return on the investment.
Instead, the company that expected to make a profit on Smith's life insurance policy wound up spending $100,000 more keeping her alive.
Now, Life Partners' attempt to wriggle out of the relationship has led to one of the most morbid contract disputes ever filed in New Jersey Superior Court.
Stung by the costly miscalculation, the publicly traded company (http://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.
"They were in a risky business, hoping for a massive windfall," notes Ronda Goldfein, executive director of the AIDS Law Project in Philadelphia.
"And when they don't get it, they slowly torture her and eat away at her peace of mind," she said.
Dying for dollars
Smith felt like a normal, healthy thirtysomething when she got her dual death sentence in 1992.
"I went to the gym the day I saw the doctor," the former New Jersey resident recalled in an interview Thursday. (She requested anonymity because of the stigma of her disease.)
She began treatment, but wasn't optimistic. Back then, it seemed as if everyone who had AIDS died quickly.
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.
"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."
And so, in 1994, Smith sold her $150,000 life insurance policy to Life Partners Inc. of Waco, Texas, for $90,000. 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.
By investing in her fate, Life Partners assumed responsibility for the premiums as long as she lived.
"Purchaser," the contract read, "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."
Medical miracles
Smith defied the odds. She recently turned 50 - and thanks to daily medicine, says she generally feels fine.
Though Life Partners has wowed investors with regular dividends and an average 16 percent return, the Smith case has been all pain, no gain.
The cost of insuring her has jumped from $3,000 a year to $26,000 - more than she earns in a year.
Her lawyer, Jacob Cohn, feels no sympathy for a company that normally profits handsomely from death.
"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.
Life Partners' president and General Counsel, Scott Peden, declined comment about the lawsuit - which he said he believes is the first of its kind in the company's 15-year history of helping "thousands of terminally ill patients."
Life Partners wants the case dismissed. In e-mails between the lawyers, Peden said Life Partners paid Smith's bills as an act of goodwill, not obligation.
"We didn't buy her health insurance. There's no value there, it doesn't benefit us," Peden told me in a brief phone interview Friday.
"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.