Wal-Mart Settles Insurance Policies Suit
By DAVID KOENIG, AP Business Writer
DALLAS - Wal-Mart Stores Inc. has settled a lawsuit over its practice of taking out life insurance on employees and making itself the beneficiary.
The settlement with families of employees who died was reached hours before a federal appeals court ruled against the giant retailer. Terms of the deal, reached earlier this week, were not disclosed.
Wal-Mart officials said the settlement could benefit relatives of 150 to 500 employees although only about six families were part of the lawsuit.
The families who sued alleged that Wal-Mart never told workers about the life insurance policies ? Wal-Mart disputes that claim ? and said they were enraged that the company profited but they received nothing from the proceeds.
"A large percentage of the population doesn't approve of the morality or the ethics of this type of conduct," Mike Myers, a Houston attorney for the families, said Friday. "My clients' reaction, when they found out, was stunned and disbelief, turning to frustration and anger."
The families sued in 2001 in Houston. A federal court judge ruled in their favor, finding in effect that Texas law limited such insurance policies to key employees.
Wal-Mart appealed to the 5th U.S. Circuit Court of Appeals (news - web sites) in New Orleans. But lawyers for the company and the relatives reached a settlement hours before the court issued its ruling Monday, upholding the victory by relatives and saying that Wal-Mart "unlawfully took funds that, under Texas law, rightfully belonged" to a dead worker's estate.
Mona Williams, a spokeswoman for Bentonville, Ark.-based Wal-Mart, said the company was pleased to end the litigation and expected the district court to approve the settlement. Wal-Mart says it lost $100 million on the policies and unwound them in 2000 after court decisions took away tax advantages.
Wal-Mart is suing AIG and Hartford Life, which sold the policies, to force them to pay Wal-Mart's losses and additional expenses ? potentially including the cost of Monday's settlement.
Hartford Life, the original defendant in the families' lawsuit, was not involved in the settlement.
Wal-Mart is one of many large U.S. companies in recent years that have taken out policies on the lives of employees, ranging from executives to workers on the bottom rungs of the pay ladder, with the goal of collecting benefits when the employees die. Companies term the policies corporate-owned life insurance, or COLIs. Critics call them dead-peasant policies.
Wal-Mart set up a trust in 1993 and named itself as beneficiary on policies for 355,000 employees.
:thefinger
By DAVID KOENIG, AP Business Writer
DALLAS - Wal-Mart Stores Inc. has settled a lawsuit over its practice of taking out life insurance on employees and making itself the beneficiary.
The settlement with families of employees who died was reached hours before a federal appeals court ruled against the giant retailer. Terms of the deal, reached earlier this week, were not disclosed.
Wal-Mart officials said the settlement could benefit relatives of 150 to 500 employees although only about six families were part of the lawsuit.
The families who sued alleged that Wal-Mart never told workers about the life insurance policies ? Wal-Mart disputes that claim ? and said they were enraged that the company profited but they received nothing from the proceeds.
"A large percentage of the population doesn't approve of the morality or the ethics of this type of conduct," Mike Myers, a Houston attorney for the families, said Friday. "My clients' reaction, when they found out, was stunned and disbelief, turning to frustration and anger."
The families sued in 2001 in Houston. A federal court judge ruled in their favor, finding in effect that Texas law limited such insurance policies to key employees.
Wal-Mart appealed to the 5th U.S. Circuit Court of Appeals (news - web sites) in New Orleans. But lawyers for the company and the relatives reached a settlement hours before the court issued its ruling Monday, upholding the victory by relatives and saying that Wal-Mart "unlawfully took funds that, under Texas law, rightfully belonged" to a dead worker's estate.
Mona Williams, a spokeswoman for Bentonville, Ark.-based Wal-Mart, said the company was pleased to end the litigation and expected the district court to approve the settlement. Wal-Mart says it lost $100 million on the policies and unwound them in 2000 after court decisions took away tax advantages.
Wal-Mart is suing AIG and Hartford Life, which sold the policies, to force them to pay Wal-Mart's losses and additional expenses ? potentially including the cost of Monday's settlement.
Hartford Life, the original defendant in the families' lawsuit, was not involved in the settlement.
Wal-Mart is one of many large U.S. companies in recent years that have taken out policies on the lives of employees, ranging from executives to workers on the bottom rungs of the pay ladder, with the goal of collecting benefits when the employees die. Companies term the policies corporate-owned life insurance, or COLIs. Critics call them dead-peasant policies.
Wal-Mart set up a trust in 1993 and named itself as beneficiary on policies for 355,000 employees.
:thefinger
