Your reasoning is very short sighted. Yes the "in case of bus" envelope is important, but if you've ever actually been a sysadmin, you know you're the blame guy. There are always idiots up the corporate chain that will blame you for anything technical even if the problem stems directly from them not following your instructions, or otherwise doing something stupid.
That aside, this isn't about you. I know it's hard to imagine, but try to bear with me. It goes like this:
Maybe he's a dick, but that doesn't matter. What matters is that WHAT HE DID WAS CORRECT! You do NOT give the "bus envelope", password or whatever, to some guy, the janitor, the mail boy or whoever, you give it to one of a small number of people only. It may be handled by a secretary or other assistant, but opening said envelope would be grounds for immediate dismissal, as would revealing that same password info to any of the afore mentioned individuals without appropriate "clearance" or what have you.
So here's the situation, your boss, who may or may not have the right to know the password, with some people in the room who DEFINITELY aren't on the access list demands the password.
Situation #1:
You refuse to divulge sensitive info in front of inappropriate individuals because 1) it's actually your job, and 2) if you do so, you can be held liable for any damage done as a result. You are arrested immediately. Happy fun.
Situation #2:
You give up the password immediately, someone brings the system to a crashing halt by incompetence, and you are arrested immediately because it's obviously something you did. Happy fun.
Sure, an envelope is a good idea, but there wasn't one, and that's not his fault, that's a management oversight. Even if this guy's difficult, or abrasive or whatever, he didn't break anything, and was willing to go forward with relinquishing the password, just on very specific terms. If that's a reason to spend over a year in jail, then we better start handing out life sentences for J walking, because unlike not giving up a password, J walking could actually harm someone.