Key person
Cover protecting an organization against the financial loss caused by the unavailability of a person on whom a significant part of its value depends.
On March 4, 2021, in Roc Nation v. HCC, a New York federal judge ordered payment of most of a $12.5 million key person policy on Jordan Feldstein, who died in 2017. Everything turned on how the policy defined the loss. Key person insurance covers the financial burden that the person's unavailability places on whoever depends on them, and not the person as such. It protects the investment of a business, a sports club or a producer against the failure of an individual whose absence disorganizes the activity or destroys a balance-sheet asset. Underwriting requires the person to be named and, for large sums, a medical selection that excludes known conditions. The insured value is a bet on a trajectory, and the quality of the contract is judged by the definition of unavailability far more than by the headline capital.
Textbook case: a club that paid a transfer fee insures the player as a key person, to protect the net book value and the residual wages. The player, for their part, insures their own future income.
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