They call them ‘dead peasant’ policies — life insurance policies that a company takes out on its employees, naming the company — not the family’s survivors — as the insurance beneficiary. A 5th. U.S. Circuit Court of Appeals in New Orleans, Louisiana ruled this week in support of a lower court ruling against Wal-Mart in a lawsuit originally filed in Houston, Texas. The Appeals Court agreed that the company “unlawfully took funds, that, under Texas law, rightfully belonged” to the relatives of the dead Wal-Mart workers. In Texas, a corporation is not allowed to name itself as the beneficiary of a life insurance policy on its own workers — except for a few very key employees. The half dozen families that brought suit against Wal-Mart in 2001 charged that Wal-Mart never told their workers about the life insurance. According to the Associated Press, Houston Attorney Mike Myers, who represented the plaintiffs, said, “A large percentage of the population doesn’t approve of the morality or the ethics of this type of conduct,. My client’s reaction, when they found out, was stunned and disbelief, turning to frustration and anger. ” Wal-Mart, apparently anticipating that the federal court was going to rule against them, decided to settle the Houston case hours before the January 5th court ruling. The financial terms of the deal were not disclosed, but the company said it would affect relatives of as many as 500 dead Wal-Mart workers in Texas alone. A Wal-Mart spokesman told the AP that the company was happy the case was now over, and said the retailer lost $100 million on these policies, and stopped making them three years ago, after court decisions stripped the policies of any tax benefits. Wal-Mart is suing the two insurance companies that wrote these policies, AIG and Hartford Life, trying to force the insurance companies to pay Wal-Mart for their losses on the policies, and this most recent court settlement. Ten years ago, Wal-Mart created a trust which named itself the beneficiary on policies written on 350,000 employees. One of the widows of the Texas Wal-Mart workers, Jane Sims, was quoted as saying, “They used my husband. It’s wrong. Morally wrong.”
Wal-Mart still faces more lawsuits over its company-owned life insurance policies (COLI). The company warned its stockholders in its 2003 Annual Report that “the company is a defendant in three putative class action lawsuits in Texas, one in New Hampshire, and one in Oklahoma. In each of the lawsuits, the plaintiffs seek a declaratory judgement that Wal-Mart and other defendants who purchased COLI policies lack an insurable interest in the lives of the class-members, who were the insureds under the policies, and seek to recover the proceeds of the policies under theories of unjust enrichment and constructive trust. ” The note goes on to say that some plaintiffs wants claims for violation of their privacy rights, and seek punitive damages. The actions of the company in this case sum up the entire Walton empire: Unjust enrichment.
