As an insurance broker, the issuing company would have reprimanded me (at least) for even writing an application on a non-key employee.
It is the obligation of the writing agent to point out to the policy owner (in this case Wal-Mart) that there must be an insurable interest before a policy will be issued. If the writing agent doesn't catch it, the underwriting department is the next level where those kinds of mistakes are stopped.
I don't write on large companies like Wal-Mart, but it looks to me that Wal-Mart got a raw deal here.
One: It was the life insurance companies responsibility to decline to write and issue the policies, not Wal-Mart’s.
Two: Once written, Wal-Mart was the owner and premium payer, not the employees or the families.
Three: Dollars to donuts Wal-Mart had to pay gift taxes (about a 50% tax rate) on the death benefit that Wal-Mart was wrongfully forced to give to the employees families. A $100,000 death benefit to the family (remember that $100,000 was legally and morally Wal-Mart’s) also cost Wal-Mart an additional $50,000 in taxes.
One winner though, Wal-Mart bashers, like youself and those over at the DUmmie site.
I'll stay on the morally correct side.
Yeah, well Wal-Mart is trying to protray itself as the victim in its lawsuits against two insurace companies, so we'll see if that flies.
How many lawyers and corporate big dogs with multiple degrees thought up this great scheme to begin with? None of them can look up the state laws regarding life insurance before starting the program?
They took out policies on 355,000 employees .... Why?