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Should death benefit a boss?
Wal-Mart had a $73,200 policy on an employee. Her widower is suing.
By KEVIN GRAHAM, Times Staff Writer
Published December 7, 2007
TAMPA - After Karen Armatrout died of cancer in 1997, a life insurance claim for $73,200 went to a trust named for her employer, Wal-Mart.
Her husband, Richard, says the couple never knew the life insurance policy existed, and he didn't received a dime of that payout following his wife's death.
His attorney says Karen Armatrout, 50, was one of about 350,000 rank-and-file employees that Wal-Mart secretly insured nationwide for two years beginning in 1993.
Richard Armatrout sued the retail giant in July in federal court in Tampa and wants judge to grant his case class-action status for similar estate claims in Florida.
But Wal-Mart attorneys say Armatrout's case doesn't belong in federal court.
On Thursday, they urged U.S. District Judge James S. Moody Jr. to toss the civil complaint on technical legal grounds. Among them, the lawsuit doesn't reach the $75,000 limit for a civil complaint to go before a federal judge, said Edward A. Moss, a Miami attorney for Wal-Mart.
Michael D. Myers, a Texas lawyer representing Armatrout, said he believes Wal-Mart's profits from the claim exceed $75,000. He's reviewing documents to find out whether the policy had investment returns tied to it.
Moody agreed to give him more time to check before ruling whether the case should stay in his court. He has given Myers 90 days to respond.
Myers has won previous settlements against Wal-Mart in Texas and Oklahoma. In the Oklahoma case, a judge approved a $5.1-million class-action settlement in a case brought by the estate of deceased Wal-Mart employees. A $10-million settlement was reached in the Texas case.
Those states have laws that say if a named beneficiary has no insurable interest, then the estate of the deceased has a claim for all benefits under a life insurance policy.
Florida doesn't have such a specific statute. Moody asked Myers whether Karen Armatrout's life insurance policy would therefore be void or if her husband had a right to sue for it.
Myers said he does.
Wal-Mart wasn't alone in its insurance practices.
Winn-Dixie Stores Inc. took out corporate-owned life insurance policies on its employees from about 1993 through 1997. Such policies are often referred to as "dead janitors" or "dead peasants" insurance.
Because the premium payments were a tax-deductible business expense, Winn-Dixie anticipated tax savings of more than $2-billion over 60 years. In 2001, the 11th Circuit Court of Appeals in Atlanta upheld a tax court ruling that the policies were nothing more than a scam to avoid taxes.
Winn-Dixie settled the issue with the IRS in 2003 by paying $52-million in taxes and interest.
Wal-Mart officials have said they dropped all of their 350,000 policies by the start of 2000. The company claimed to have lost millions of dollars on the program and sued AIG and Hartford Life, the insurance companies that sold the policies.
Richard Armatrout said his wife worked for several years at a Wal-Mart pharmacy on Waters Avenue in Tampa. She took a leave of absence from the job when she found out she had cancer.
Times researchers John Martin and Caryn Baird contributed to this story. Kevin Graham can be reached at email@example.com or 813 226-3433.