Skip to comments.Attorney: Wal-Mart Collected On Deaths [Life Insurance Policies on People Without Telling Them]
Posted on 07/03/2007 8:28:15 AM PDT by Excuse_My_Bellicosity
TAMPA - When Karen Armatrout died in 1997, her employer, Wal-Mart, collected thousands of dollars on a life insurance policy the retail giant had taken out without telling her, according to a lawsuit filed in U.S. District Court.
Armatrout was one of about 350,000 employees Wal-Mart secretly insured nationwide, said Texas attorney Michael D. Myers, who estimated the company collected on 75 to 100 policies involving Florida employees who died.
Myers is seeking to make the Armatrout lawsuit a class-action case on behalf of the estates of all the Florida employees who died while unwittingly insured by Wal-Mart.
"Creepy's a good word for it," Myers said. "If you ask the executives that decided to buy these policies and the insurance companies that sold them, they would say this was designed to create tax benefits for the company, which would use the benefits for benevolent purposes such as buying employee medical benefits.
"If you asked me, I would say they did it to make more money."
Wal-Mart spokesman John Simley said he could not comment because the company has not been served with the lawsuit.
The company settled two lawsuits with employees represented by Myers in Texas and Oklahoma, one for about $10 million and one for about $5 million. He said Karen Armatrout came to his attention when Wal-Mart mistakenly gave her husband's phone number to an Oklahoman who called the retailer inquiring about the settlement.
Myers said he also has filed a lawsuit against Wal-Mart in Louisiana.
Payouts Up To $80,000
Richard Armatrout, who is retired, does not want to speak publicly about his case, Myers said. Armatrout did not respond to a message left by the Tribune.
Karen Armatrout was 50 when she died of cancer, said Myers, who said she had worked several years in the pharmacy of the store on West Waters Avenue.
Myers said the policy payouts ranged from $50,000 to $80,000, depending on the person's age and gender. They were taken out on all full-time Wal-Mart employees who, in December 1993, were between ages 18 and 70 and participated in the medical benefits plan.
He said the company stopped taking out the policies in 1995 but continued to receive payouts on employees who died, even those who had left Wal-Mart.
Wal-Mart, which said it canceled its policies in early 2000 because it was losing money on the arrangement, says the program was intended to reduce its income taxes to help pay rising employee health care costs. Workers were notified and given the opportunity to opt out, the company said.
The Armatrout lawsuit says the policies were all written in Georgia, where the laws allowed such policies to be obtained.
The lawsuit says Wal-Mart used confidential information it received from employees for use in their employment, such as Social Security numbers and dates of birth, to obtain the life insurance policies.
Myers said this corporate practice is not uncommon. He estimates that up to 25 percent of Fortune 500 companies have taken out such policies on employees. The vast majority of the time, the employees didn't know, Myers said.
The practice evolved over time, Myers said. Corporations started by taking out large life insurance policies on key executives, getting tax breaks when they paid the premiums and collecting the payouts.
IRS Not Pleased, Attorney Says
The amounts of those policies grew to the point that Congress limited how much a company could insure an individual for, Myers said. Insurance companies then suggested buying lots of small policies on companies' work forces, the attorney said. He said the Internal Revenue Service has labeled the practice a sham and has successfully litigated the issue against several corporations.
Myers said his law firm has sued corporations for the practice, including Winn-Dixie and Fina Oil and Chemical. The latest case is its first in Florida.
The practice spread beyond top executives in the 1980s when the industry successfully lobbied states to allow employers to claim an "insurable interest" in the lives of rank-and-file workers.
Many employers seized on the practice because they could borrow against the policies, and the interest paid was tax-deductible. Congress closed that loophole in 1996, but COLI - corporate owned life insurance - remained a popular investment strategy.
The chief appeal was that interest accrues over time on the money in such policies. When a worker dies, the employer collects without paying taxes on the gain.
In 2001, premiums on such policies swelled to $2.8 billion from $1.5 billion the year before, according to a report by CAST Management Consultants of Los Angeles.
Information from The Associated Press was used in this report. Reporter Elaine Silvestrini can be reached at (813) 259-7837 or email@example.com.
Key employee insurance for employers is nothing new - can’t they find something else to complain about?? I know...it’s Walmart!
Where do they get these immature crybabies who write this drivel?
KEY-MAN insurance has been around for decades. It is a good way to protect your business (oh and the thousands of other employess)
If you ask me that is a disgusting practice and Wallmart should be ashamed of itself, honestly, trying to get a tax break of the death of others? I’m beginning to see why everybody hates them.
it would be irresponsible for a corporation NOT to have key man insurance.
I fail to see what the problem is.
When a company loses a valuable employee to death, the expense of recruiting and training a new one to take his place can be quite high. I would be surprised if more companies didn't do the same thing.
So? IF they paid the premiums and didn’t kill the individual in question, it’s none of anyone’s bidness.
Is this going to become another one of those annual stories the media publishes to fill space. Many employers take out term life insurance policies on their employees, about the only part about it that’s bad is that the insurance company frequently puts on travel restrictions (like no more than 5 employees on the same plane) that can be kind of annoying if you’re trying to get a large number of employees someplace other than the office. By and large if your company offers some kind of life insurance benefit you can bet they’ve probably taken out a policy on you. And this is like the 3rd or 4th time somebody has whined about WalMart doing that, people just need to get over it.
And this negatively impacted the employees how, exactly?
They intended to use the money from the policies to offset rising health care costs, a BENEFIT to all of the employees receiving the coverage.
What a bunch nonsensical drivel! It is a standard and prudent practice of companies to have insurance on key personnel.
WHAT an ignorant “journalist.” And, what a scummy attorney.
What's a disgusting practice is this lawyer bilking WalMart (and thus their customers) out of $15 million. THAT'S a disgusting practice.
But if 'Key man' coverage was common, then how could a 'key man' not know?
I am insured with key employee insurance here at my work, but since it is a family business the money will go directly to my wife when I die. The cost of the insurance is dirt cheap and it is a nice bonus coverage on top of my regular policy, I fail to see why people are getting upset over this, companies have been doing this for decades.
Key employee insurance is one thing because loosing the replacing the president of the company or even a store manager is expensive, but insuring everyone as a tax dodge? No wonder so many people hate the IRS.
Not to worry, it's all about the low prices on low-quality garbage...........from china!
Oops, I mean “That’s my opinion folks, and you’re going to have to live with it, that is, unless you’re a walmart employee, then you might wind up dead?”
Other then not telling the employees who were insured what is creepy about this? Companies do this all the time! If you lose an employee there is a financial cost to the company and why would you ensure your assets but not youre most important resource, your employees..
What in the world am I doing behind the keyboard?
key man insurance.
this is just hurt walmart image to force settlement insurance.
I got some bad news for you, you’re going to wind up dead n matter who does or doesn’t have an insurance policy on you.
I know that must be shocking, and I’m sorry to have to break it to you. But alas, that’s one of the problems with being human.
Unless the policy is in effect after the employee leaves like a regular term life would be, then that is kind of creepy.
We have been doing it here for years, whether the employee wants us to do it or not he can’t stop us from doing it, it’s our businesses expense to replace him if he dies and the policy is dirt cheap.
I think that doing it in secret is the only problem. However, the company claims that employees were notified. If they were, then this is a non issue.
Contemplating the death of your company leaders is pretty dismal subject matter. But think of the consequences - businesses have bitten the dust due to the death of just one employee. Key man life insurance is an affordable way to prevent your business from sinking after a critical employee passes away.
Key man life insurance works like individual life insurance - when the insured dies the policy pays out a benefit. Instead of an individual insuring himself or a family member, however, the business owns the policy and pays the premium. If the insured dies, the business is the beneficiary and will receive the policy payout...
How are we defining "key"??
If by 'key' you mean manager, department head, etc. yes, but the typical WalMart greeter? Are they key?
It should be against the law for anyone to take out insurance on you without your knowledge - pure and simple.
Who’s paying the premium? A good business venture, IMHO.
A great thing - if done in the sunshine, with all participants knowing and approving. What makes WalMart's position weak is that is was done in secrecy.
You quite obviously don’t understand this subject at all.
>>>I fail to see what the big deal is.
Ho ‘bout the fact it was done without people’s knowledge? Would you want your employer taking out a policy on you without telling you about it?
The difference is that your company is probably small enough where losing an employee will affect the company. Wal-Mart is big enough that they are just playing statistical games. Let's say they figure 0.1% of the employees would die in a year. Insurance will then be 0.11% (or so) of the total insured value. If an average number of Wal-Mart employees die, Wal-Mart falls behind because of the insurance overhead - except that it looks like the insurance payout is tax-free. So the payout of 0.1% times the total insured value (tax free) is more than the premiums of 0.11% times the total value minus tax deductions because the insurance is a "legitimate" business expense.
And of course, Wal-Mart is the ONLY store that sells crap from China. /s
From management perspective I would think notifying an employee of this would be good:
"You are so valuable to us that we have ...."
Everyone likes to feel important and to occasionally be reminded of this.
Why? How does it hurt the employee?
WalMart Hit Piece Ping..............
My employer has insurance policies on every single employee in the engineering department, most of the high end people in the rest of the company, and everybody that’s manager or above. The only reason I found out about it was when we did a gathering of all of engineering and I asked the person that was arranging the travel of the people in my office why we were spread across so many flights. It’s no big deal, doesn’t bother me in the least.
Myers said this corporate practice is not uncommon. He estimates that up to 25 percent of Fortune 500 companies have taken out such policies on employees.
It’s the principle of the thing. I simply believe that one is entitled to know when a second party takes out insurance on them that benefits said second party...and if you think that’s odd, well, I don’t care.
What an idiotic statement. Do you suggest the investigation into the deaths of every employee who works for a company with these policies, or is your veiled accusation only aimed at WalMart?
According to the article WalMart employees were notified and offeredd the opportunity to say no.
This is not key man insurance. This is what the industry calls Janitor Insurance.
How would it make you feel to know that the company that controls the quality of your health care coverage and workplace safety also has a financial interest in your premature death?
>>My employer has insurance policies on every single employee in the engineering department, most of the high end people in the rest of the company, and everybody thats manager or above.<<
More power to ‘em.
But you should have been notified up front about it.
I can see where it could be abused by a company that also controls the medical care insurance for the employees.
I got some news for ya. Companies do a lot of things in secret you don't know about. Generally for their benefit, not yours.
I know, I'm shocking you. ;-)
Don't let facts get in the way of a good WalMart-bashing thread.
Why? What does it matter? It’s their money, so long as they aren’t using that policy to limit my off the clock behavior there’s no logical reason for me to give a damn.
I know that must be shocking, and Im sorry to have to break it to you. But alas, thats one of the problems with being human.
But Wal-Mart sells cheap stuff! /knee jerk