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Wal-Mart pays $2 million to settle life insurance lawsuit
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Published: August 12, 2011
Updated: 08/12/2011 10:06 pm
TAMPA - Wal-Mart has agreed to pay more than $2 million to settle a class-action lawsuit that alleges the retail giant secretly took out life insurance policies on some of its Florida workers in the 1990s.
After attorneys fees and other costs, the settlement will result in an estimated payout of $5,800 each to the estates of more than 200 deceased former employees, according to court filings in U.S. District Court. The two lead plaintiffs, Richard Armatrout of Tampa and Wayne Atkinson of Pasco County, are each to receive $10,000.
The plaintiffs' wives, Rita Atkinson and Karen Armatrout, were former Wal-Mart employees who died in 1996 and 1997 respectively.
When contacted for comment, plaintiffs' attorney Michael Myers released a joint statement from his clients and Wal-Mart: "The settlement is the result of significant arms length negotiations and is fair and reasonable. Wal-Mart has not bought company-owned life insurance (COLI) in 15 years and it just makes sense to settle this matter."
The plaintiffs' lawyers – McClanahan Myers Espey in Houston, Texas, and Aballi, Milne, Kalil & Escagedo of Miami - are expected to receive $673,000 in legal fees under the settlement.
U.S. District Judge James Moody on Thursday gave preliminary approval to the settlement and scheduled a hearing Oct. 17, when the beneficiaries of the class action can object if they wish.
The class includes the executors and administrators of the estates of people whose lives were insured under Corporate Owned Life Insurance Polices purchased by Wal-Mart while they worked as associates in Florida and whose deaths occurred no later than Jan. 31, 2000, and resulted in the payment of insurance policy payments to Wal-Mart.
The company received $55,000 to $90,000 on each policy payout, according to court filings.
The settlement ends a string of litigation that began more than four years ago.
Wal-Mart has maintained all along that it did nothing wrong and that it informed employees that it was taking out the policies in their names. The company said employees were allowed to opt out of the program.
The lawsuit, however, alleges the company told employees that Wal-Mart would not collect policy benefits.
The company has said in court filings that it received more than $9 million in payouts from the policies, which were taken out on all full-time Wal-Mart employees who, in December 1993, were ages 18 to 70 and participated in the medical benefits plan. The company stopped taking out the policies in 1995 but continued to receive payouts on employees who died, even after they 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 and help pay rising employee health care costs.
Wal-Mart has settled three other lawsuits on the same issue in Texas, Louisiana and Oklahoma.
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