Walmart Took Secret Life Insurance Policies Out On Employees, Collected After Their Death

According to CourtTV and the Tampa Tribune, Walmart has been secretly taking out life insurance policies on its employees and cashing them in when said employees pass away. That’s what happened to Karen Armatrout and her family, according to a lawsuit filed in U.S. District Court. From the Tampa Tribune:

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.”

According to the lawsuit, the policies were for $50,000 – $80,0000 and were taken out on any employee from 18-70 who participated in Walmart’s health plan. Walmart stopped taking out the policies in 1995, but continued collecting the money on employees and ex-employees who passed away. Walmart canceled the policies altogether in 2000. Creepy is right. According to CourtTV, only six states, Delaware, Georgia, New Jersey, North Carolina, Pennsylvania, Vermont, allow companies to take out life insurance policies on their employees without notifying them.

Attorney: Wal-Mart Collected On Deaths [Tampa Tribune]
Husband files ‘dead peasant’ suit against Wal-Mart for collecting insurance in spouse’s death [CourtTV]

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  1. mopar_man says:

    Wow. When I thought Wal-Mart couldn’t get any lower, they prove me wrong.

  2. SkyeBlue says:

    It amazes me that it is legal to take a life insurance policy out on ANYONE without their consent. It could be so easily abused, especailly say by a corporation whose employess are in high risk professions.

  3. sleze69 says:

    Someone please explain to me how this affects the family. Although it is creepy, it doesn’t seem to DO anything to the deceased’s family.

  4. homerjay says:

    Next up: WalMart found to be directly involved in Chinese poison train.

  5. Major-General says:

    Old news. I saw this almost two years ago.

  6. winnabago says:

    It’s not like they had them “taken care of” or anything. They’re hedging against the loss of an employee, or at least that’s what it sounds like to me.

    It’s like betting on a soccer game, but more grim!

  7. mopar_man says:

    @homerjay:

    You know, if this hadn’t stopped so long ago, I would’ve almost thought that Wal-Mart was doing this to get the money from their poisoned employees. How’s that for a conspiracy theory?

  8. jeffj-nj says:

    .
    .
    So, wait. It’s legal to take out insurance polices on people without, ya know, being those actual people? Can I just get insurance policies on homeless people? What about gangsters? Drug dealers? Damn, this an un-tapped gold mine.

  9. eckre says:

    You can NOT take a life insurance policy out on “just anyone” (mumbles under breath – idiots) You have to have an “insurable interest” in them, of which employers HAVE an arguable relationship with employees. Because when you loose an employee, you have to heir and TRAIN another one, thus costing you money, etc.

  10. hallik says:

    Hmm, they definitely must have had consent, maybe there was some fine print in the health benefit package that employers signed? All in all, this is pretty bad not because of it being creepy, but because of the whole “why the freak would you even do that” scenario.

  11. Can I just get insurance policies on homeless people?

    @jeffj-nj: There was a story on CNN months ago about a couple of women who did that (married them first).


    (mumbles under breath – idiots)
    @eckre: (speaking clearly – asshole)

  12. Skiffer says:

    @SkyeBlue: Thank you! Jesus…

    @eckre: And companies with employees in “high risk” work DO typically take out life insurance policies on their employees for SkyeBlue’s very reason, even on some “non-high risk but important” CEOs, etc., too…

    The case will most likely be won based on arguing whether Wal-mart actually had an “insurable interest” in someone who could have just been a door greeter…

    I’d love to hear wal-mart’s version on this…

  13. sleze69 says:

    Why do the families give a crap? It’s the insurance companies who could technically have a beef.

  14. bluegus32 says:

    To anyone who thinks this is ok — wouldn’t you consider it a violation if someone, without your knowledge, gambled on whether you were going to die? And if they gambled and won (meaning you died), wouldn’t it creep you out to know that someone is profiting from your death without your consent? If you died, and an insurance policy paid out on your death, wouldn’t you rather see the money go to your family rather than to the largest corporation on the planet?

    This is a violation. If Pete Rose is not permitted to gamble on baseball, then nobody is allowed to place odds on whether I love or die.

  15. Kos says:

    Companies started doing this years ago and it makes sense for executives and highly specialized employees since it protects the business from short term disrupture when that person shakes the mortal coil. Of course, like everything else where there is money to be had, companies started buying policies for any employee. The problem is that it (a) seems rather heartless to make money on a employee’s family loss, and (b) leads to conspiracy theories about why a company would do it in the first place because of the potential conflict of interest (insurance = 100K payou vs. new janior = 50K for salary and training…hmmm)

  16. artki says:

    > “If you asked me, I would say they did it to make more money.”
    If that was the plan then those insurance companies are morons. You can no more make a profit on life insurance than you can on roulette. (I’m not saying that life insurance isn’t a good idea, just that on the average it’s the life insurance companies that make money off them. Otherwise they wouldn’t be in the life insurance business)

    I’d still like to hear WalMart’s explanation. I don’t see where the families have anything to complain about but it still sounds creepy.

  17. elf6c says:

    Step One: Hire the elderly, sick and frail

    Step Two: Take out secret life insurance policy on them.

    Step Three: Have the stand by the door for 4-6 hours straight, push carts around in hot parking lots, use deadly recalled but still on shelf products ect. Watch Darwin’s cruel hand thin the herd accordingly.

    Step Four: Profits!

    Step Five: Repeat, if caught claim that random cart-pushing types as valuable to company as a CFO. Try not to snicker until after the press conference. If pressed, accuse reporter of hating freedom.

  18. There’s an enormous difference between “Key Person” life insurance (that’s what you take out on your CEO or highly-trained specialist) and “Dead Peasant” life insurance, which is what you take out on random interchangeable employees. (I went to law school in North Carolina, one of the six states, so we got to learn all KINDS of interesting things about dead peasant policies!)

    Dead peasant policies are illegal in most states for very good reason. Historically they were abused and encouraged employers to skimp on safety in high-risk occupations because many employees were worth far more dead than alive, particularly if they were unskilled and easily-replaceable labor.

    These days dead peasant policies are basically a tax shelter (although that may change if the IRS starts taxing the payouts).

    Aside from the fact that they set up perverse incentives and allow unintended tax sheltering, I do find them creepy and distasteful. Certainly I think companies should have to disclose when they take out a policy on you at the very least, or, better, get your permission.

  19. mike1731 says:

    There was an article about this practice several years ago in the Wall Street Journal on this practice. Idea was that the insurance on higher compensated employees was a good investment and could be used to offset cost of retiree benefits. The official rationale was that the insurance covered key employees replacement cost (training and recruitment of replacement) but in fact money didn’t go that way. It’s been a while since I read this, but recall a number of major companies did this.

  20. Trick says:

    Why are more people not cheering this on? The Consumerist hates everything about Wal*Mart. From the suits to the idiots they hire.

    All of a sudden people are for the idiot Wal*Mart workers?

    If you are stupid enough to work at Wal*Mart…

  21. rmz says:

    Wasn’t this the subject of a Dilbert cartoon?

  22. ConRoo says:

    I once was insured by an employer as a “key person” meaning should I die OR quit the company would incur substantial losses. The losses would come from loss of sales based on the trust I had earned from my customers. Thusly, it would cost the company to advertise and hire a reputable replacement. If you are wondering as to the type of employment I was in, I was the meat department manager at a trendy, high-end fresh market. No PETA comments, please.

  23. tvh2k says:

    Am I the only one who doesn’t a problem with this? I mean, they’re simply placing a bet that the person will die before the $$ they contribute in premiums is > than the total payout of the policy. It’s just like the stock market (except you’re betting on the life expectancy of a person, not a company). I think anyone should be able to take out a policy on anyone else. Remember, they don’t get paid if they were involved in the insured person’s death.

    Now I can’t understand why Walmart would have considered this to be a wise financial investment…

  24. swalve says:

    i don’t see a problem either. if it’s legal and the insurance company sells the policy freely, so what? it causes no harm to anyone.

  25. 5h17h34d says:

    @swalve: It also gives the company incentive to ignore safety rules and laws, after all, if the person dies they profit from it.

    That’s why it is illegal.

  26. frogpelt says:

    Insurance policies on employees is good business. It may sound freaky but the only thing they did wrong was not tell people that their lives were insured.

    It’s amazing the lengths to which people will go to make Wal-Mart look evil even though 95% of us shop there.

  27. 5h17h34d says:

    frogpelt said: “the only thing they did wrong was not tell people that their lives were insured.”

    Amazes me how people are such sheep.
    Read Eyebrow McGee’s answer above so I don’t have to retype it here..

  28. hemaphore says:

    this gives a whole new twist to the deadpool concept

  29. CumaeanSibyl says:

    LOL at all the people saying “If it’s legal, what’s the problem?”

    It says right there that it’s NOT legal in Florida. THAT’S the problem. Say what you like about the morality or creepiness of the practice — not the point. It’s illegal and Wal-Mart appears to have broken the law.

    It bugs me when companies do stuff like this, not because I’m a stand-up gal myself, but because I really would like my giant multinational corporations to be smart enough to know when breaking the law is worthwhile and when it isn’t. Smart evil is at least marginally better than dumb evil.

  30. tedyc03 says:

    The life insurance certainly provides a disincentive to offfer quality health care…

  31. TinaT says:

    In the UK, this kind of policy would not be legal, except in the case of ‘key person’ policies. An employer has insurable interest in an employee only to the extent of the notice they are required to give. If they have a contract saying they must give six week’s notice, then they can take out a policy for the amount of that person’s salary for six weeks. The reason is that you should not be able to gain from someone’s death for more than their death will cost you financially.

    (The law is actually taken too far… you can take out unlimited life insurance on yourself or your spouse, but none at all on your children. There is a law on the books allowing you to insure your parents for funeral expenses, but it limited it to something ridiculous like £30 (which was sufficient at the time of the law being passed in the 1920′s) The foregoing useless trivia is brought to you by your friendly neighborhood insurance student…)

  32. Shadowman615 says:

    “According to the lawsuit, the policies were for $50,000 – $80,0000…”

    Is that supposed to be $80,000 or $800,000?

  33. royal72 says:

    “the greeter rebate program”

    employing old people to greet the customer is great for local communities. the cost of employment for these employees will be offset by a life insurance policy which will be collected upon death.

  34. @swalve: “if it’s legal and the insurance company sells the policy freely, so what? it causes no harm to anyone.”

    It is NOT legal in 44 states, and past and historical experience with dead peasant policies tells us they DO harm employees. That is why they are illegal in 44 states: they hurt people.

  35. etinterrapax says:

    @Eyebrows McGee: “Perverse Incentives” would be a great name for a band.

    I’ve heard of this practice. I don’t think that the company could justify the amount of the insurance by its hiring and training practices, so that excuse is bogus. And I doubt Wal-Mart is the only company that’s done it. But I’m not opposed to anything that adds another public layer of reprehensibility to this reprehensible organization.

  36. andrewsmash says:

    @RMZ AT 11:38 AM
    “Wasn’t this the subject of a Dilbert cartoon?”

    I remember that one.

    To me, it just reflects the fact that corporations like Wal*Mart are no longer in the business of doing anything but making money. If retail stopped being profitable (but was still sustainable) they would just move to distribution or manufacturing. It’s even more telling that, by offering to give the families a token amount (20% or something) it could have made for some good press, but of course, that could have cut into their profits.

  37. Youthier says:

    @Trick: I hate Wal-Mart as a corporation but I have no beef with people working there. I can’t dislike people who are actually trying to make an honest living off of minimum wage just because life may have handed them circumstances or they may have made stupid choices that led to Wal-Mart being their only employment option.

  38. TechnoDestructo says:

    Why am I not surprised to see Delaware on that list?
    Delaware is first on my list of non-Southern states that should be ejected from the union.

  39. Optimistic Prime says:

    This explains why our local Wal-Mart has a different greeter at the door every other week.

  40. ohnothimagain says:

    @sleze69: Well, despite the company’s show of grief at the loss of a valued employee, the family knows that some of the executives and all of the shareholders not only are delighted that the deceased “earned” an extra 80 grand for the company, but were probably rooting for him or her to die before the end of the current fiscal year.

  41. fredmertz says:

    It doesnt make sense that this is a money-making scheme — the more insurance policies you take out, the less likely you are to profit on them. That’s how insurance companies make money — on average, over a big enough sample, they pay out less than they take in (the interest carry on the premiums just makes it a better business for the insurers). There has to be more to the story. As far as these policies allowing Wal-Mart to skimp on safety, that’s silly. How many workplace deaths have there been in the 40+ year history of the company? Not many, I’d argue.

  42. fredmertz says:

    An interesting article on this topic — this is all about tax planning:

    [fsnews.findlaw.com]

  43. JohnMc says:

    I agree with some others here. It is not uncommon for companies to file insurance policies on employees. Generally its not the rank and file but it is common practice from a continuity perspective.

  44. nyobserver says:

    sleze69: interesting name. you sure you don’t work for walmart ;)?

    how it affects the families: they exploit and actually profit from the death of your family member. quite sickening actually. it’s not as if they give the family some portion of the money.

  45. JeffK. says:

    It also gives the company incentive to ignore safety rules and laws, after all, if the person dies they profit from it.

    That wins the award for least-thought out thing I’ve seen this week. If they ignore safety rules and laws, they open themselves up to liability lawsuits. Which will cost them quite a bit more than what they make off life insurance policies.

  46. synergy says:

    This is OLD news.