Lake Worth woman sues Walmart, citing secret insurance policy on her husband

When Linda Gaub’s 51-year-old husband died of a heart attack in 1994 she said his employer, Walmart, couldn’t have been more supportive.

They took up a collection. They brought Christmas presents for the couple’s three young children. They donated plants for a garden at Liberty Park Elementary School, a project that had been her husband’s passion — a way of using his skills as a farmer to help out one of his kid’s school.

Then, last year, the Lake Worth woman got a letter, alerting her that Walmart benefited richly from her husband’s death. Like hundreds of thousands of its other employees, the Arkansas-based discount giant had secretly taken out a life insurance policy on her husband when he worked as a department head in the garden center of its store on Forest Hill Boulevard, her attorneys said. Ronald Gaub’s death, they said, put between $75,000 and $150,000 in its pockets.

“I was floored,” she said of the news. “Myself and my children were extremely upset that they had profited from his death. It’s deplorable.”

As if that wasn’t enough, she learned she couldn’t share in the $2 million the company last year agreed to pay to settle claims filed by other Florida residents who were equally shocked to learn that the death of loved ones had lined Walmart’s pockets.

According to the settlement reached in a lawsuit filed in federal court in Tampa, only court-appointed administrators of estates could share in the settlement. Because her husband, a healthy jogger, had no reason to believe death was imminent, he died without a will.

In a lawsuit filed on Gaub’s behalf this week in U.S. District Court in West Palm Beach, her attorneys claim the restriction was no accident. Based on its experiences in similar lawsuits in other states, Walmart knew a large percentage of its employees died without wills so there were no court-appointed administrators to collect money from the settlement, said Scott Clearman, a Houston, Tx. attorney who is representing Gaud in the lawsuit he hopes will benefit others in similar straits.

While the families of 223 Walmart employees who died in Florida were supposed to get money from the $2 million settlement, he estimates only about half of them qualified. According to the agreement, after paying about $675,000 to plaintiffs’ attorneys, Walmart was allowed to keep any money that wasn’t handed out. Clearman estimates that Walmart paid out about $660,000 to families of dead employees and got to keep roughly the same amount.

“Walmart used slight-of-hand to conceal the lack of a settlement with Gaub and the people in her category,” he said in the lawsuit. Estimating more than 100 people were also denied their rightful shares, he is asking U.S. District Judge Kenneth Ryskamp to certify the case as a class-action lawsuit.

Randy Hargrove, a Walmart spokesman, said the company will investigate Gaub’s claims. “We acted in good faith through the settlement and believed we settled with all of the estates of individuals whose lives were insured,” he said.

A brief investigation on Wednesday revealed that it had paid out at least one claim to the spouse of an employee who had died without a will, he said. The spouse received a court appointment to share in the settlement, he said.

After taking out life insurance policies on an estimated 350,000 employees, Walmart stopped doing so in 2000 when the tax implications outweighed the benefits, Clearman said. But, he said, Walmart isn’t alone. Other companies secretly take out life insurance policies on employees. He is convinced it violates state laws, including those in Florida, which require people to have an insurable interest in the life of someone before they can take out a life insurance policy in that person’s name.

Walmart didn’t admit wrongdoing when it settled the lawsuit in Tampa or similar ones in Texas, Louisiana and Oklahoma. Hargrove said employees were aware of the practice the company initiated in the 1990s to defray rising health care costs.