Discount retailing giant Wal-Mart cannot sue its insurers just because it gambled and lost $1.3 billion on getting a tax break from thousands of insurance policies it took out on employees, according to a brief filed by the insurers in the Delaware Supreme Court.
Press reports have dubbed the "corporate-owned life insurance" policies at issue in this litigation "dead-peasant insurance" because most of the policies were purchased by companies that employ large numbers of workers at the lower end of the wage scale and most of the policy benefits went to the companies rather than to families of deceased employees.
Wal-Mart is contending in an appeal that it was entitled to rely on its expert insurance brokers to warn the company of the inherent dangers of buying COLI policies. Wal-Mart has asked the high court to revive its bad-faith and breach-of-duty claims against its insurers, which the Delaware Chancery Court had dismissed.In opposition, AIG Life Insurance Co. and a host of other carriers and brokers say they had no duty to advise Wal-Mart about the risks of assuming it could get — and keep — a tax break on the policies. Moreover, the carriers said, they could not have legally rendered that advice even if they wanted to.
Wal-Mart's suit could be a test case and has been closely watched by other companies that had invested heavily in COLI plans. Such policies lost their attraction for corporations long ago but disputes over liability for the tax consequences continue for companies in a position similar to Wal-Mart's.
Details here from Andrews Publications via FindLaw.com.