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 firstname.lastname@example.org.
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
well, i am able to get Sara Lee Whole Wheat Bread at Wal-Mart for 1.88... it's 3.27 at SaveMart... and even more at SafeWay... i like Wal-Mart...
If an employer wants to take out a policy on me, I think I should be notified first. And if you don’t give a damn - well good for you.
But why? What is the LOGICAL reason for you to be notified first? Forget feelings, give logic. Your employer does all kinds of stuff that might or might not have an effect on you that you will never find out about.
If my employer has an insurance policy out on me, then bully for them.
As long as they’re not tainting the coffee it doesn’t bother me. :o)
Im beginning to see why everybody hates them.
Thanks for letting people know that you've chosen to discredit yourself. If you thought for a half a second you'd realize that of the 180 million Wal-Mart customers most of them don't hate Wal-Mart.
At least one poster on this thread made such an insinuation about WM.
I agree. However, I think these people probably signed something in their hiring process that agreed to this. Who really reads the fine print anyway!