DALLAS - Wal-Mart 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 were not disclosed. The families said 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. “My clients’ reaction, when they found out, was stunned and disbelief, turning to frustration and anger.”
The relatives sued in 2001 in Houston, and the U. S. District Court sided with the families, ruling in effect that Texas law limited such policies to key employees. Wal-Mart appealed to but lawyers for the company and the relatives reached a settlement hours before the court issued its ruling, 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.
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.