November 20, 2007

A Turkey for Walmart

My favorite retailer is in the news again. (The source is an article in the Wall Street Journal by Vanessa Fuhrmans, so you need a paid subscription to read it, at least until Rupert Murdoch decides otherwise.) The story concerns Deborah Shank, a 52 year old woman who stocked shelves in the Cape Girardieu, Missouri store. She worked the night shift, so she could be home during the day with her three sons. Seven years ago, she was perusing yard sales with a friend when a tractor trailer plowed into her van. She was left with permanent brain damage. Walmart paid about $470,000 in medical expenses. The Shanks sued the trucking company and collected about $1 million, the limit of liability under the company's policy.

Jim Shank, Deborah's husband, used his portion of the settlement to buy an accessible home for his disabled wife. After paying legal fees, his wife was left with $417,000 to help supplement her care. End of sad story? Not quite.

When she signed onto the Walmart health plan, Deborah agreed that her employer would be first in line for payment out of any subrogation. [This type of language in employer health insurance policies is becoming increasingly popular.] Walmart sued Deborah for $470,000 plus legal expenses - in other words, they are suing for more than the balance of her settlement funds. They rejected the Shank's offer to settle for a portion of their costs. And of course, Walmart being Walmart, they have won the suit.

Life Isn't Fair
Our many readers in the insurance industry certainly understand the logic of Walmart's position. Administrators of the company plan have a "fiduciary obligation" to be impartial. In the interests of the group itself, they must pursue every available dollar, regardless of the consequences for one isolated (and devastated) family. The courts may feel some sympathy for Deborah Shank and her long-suffering husband, but the language of the policy is clear and unambiguous. The settlement dollars - and then some - belong to Walmart.

Less than a week after the Shanks lost their appeal, their son Jeremy was killed in Iraq. At that point, Jim Shank wanted to give up, but his lawyer wants to continue with the appeal (which heads for the Supreme Court, if the Court deigns to accept the case. I have no idea why the Shank's lawyer expects a different result at that level.)

In the meantime, Jim Shank has, on the advice of consultants, divorced his wife, to make her eligible for public aid as a single and totally disabled person. Deborah has not been informed of the divorce, but even if she were, she might not understand what it means. After attending her son's funeral, she still could not figure out why he was missing from the family circle.

There is, of course, nothing wrong with this story. The language of an insurance policy has been enforced. The fiduciary obligation of Walmart's health plan administrator has been fulfilled. One family is ruined, but that's just bad luck on their part. Surely they do not expect Walmart to show any compassion!

I hope Jim Shank can put together a nice turkey dinner on Thursday for his two remaining sons. Despite his many losses, he has much to be thankful for. It might just take a few extra moments to put those thoughts into words. When he does finally bow his head to say grace, there is at least one word that will not cross his lips: Walmart.



I have had some doubts about your objectivity in the past but today's posting has pushed me over the edge. You are being blocked.

Walmart is not doing anything that is not allowed by law. We place undue emphasis in this article on Walmart as being the "bad guy", when in fact we should be lobbying our legislators to make this type unreasonable action illegal. You need to be more unbiased in your writings.

I have a suggestion. Perhaps Wal-Mart's health insurance plan would like to organize a special "compassion collection" for Deborah Shank among the participants in their health coverage plan. It's not appropriate for a corporation or a health insurance fund to be compassionate with someone else's money (i.e., the money of the stockholders or the money of the other participants in the health plan), but individual persons could certainly be compassionate with their own money, if they so choose.

One may also note that the family's attorneys received over 40% of the settlement. This, in a case where there was no substantial question about the liability, and apparently settled without a trial.
Wonder what their fee of over $300K worked out to on an hourly basis?
Just bad luck, surely no compassion would be expected from there, either!

This is sad and tragic. Walmart's duty was to ensure that their employees understood what they were signing. If that burden was met, then informed consent exists and albeit horrible, the Shanks are responsible for the decision.

The real underlying question is who is responsible for healthcare. Employer sponsored programs are a BENEFIT. This benefit has morphed into what some folks believe is a right. We as a nation need to determine how to allocate resources to provide healthcare. Is healthcare a right? If so should medicine then be socialized - why does it lie with the private sector? These are the questions that need to be answered by the nation.

Mikk - I agree that Walmart should start a trust fund financed by employee and customer donations. This is a sad and tragic story.

It really seems to me that we think corporations should have no responsibility to their employees. I can understand why employees no longer have loyalaty to their corporation. Whenever the bottom line is the only thing that matters, God help us because at that time we certainly won't be able to help ourselves.

What I want to know is if the suit against the trucking company took into account these healthcare costs, or if they were considered irrelevant because Wal-mart had already paid the medical bills. Would it have been possible for the Shanks to collect more in the suit had these costs been taken into account?

This is a complicated issue. I don't believe anyone would argue with Walmart having a right to reimbursement. The question is how is this accomplished? The Shanks sue, pay a significant percentage for the expense of litigation, and then Walmart gets full reimbursement. Why not discount the reimbursement to Walmart proportionate to the expense the Shanks paid to obtain the reimbursement? In addition, employees seldom recognize the fact that they signed these subrogation releases. They hear from Walmart after the case is resolved. Wouldn't it make more sense to require Walmart to enter the litigation as a party, so the court/jury/adjustor is aware that the net recovery to the Shanks will be diminished by the Walmart claim? Let the reimbursement occur, but make the timing so that the employee is not blind-sided.

The focus on Wal-Mart appears to skip the part that the tortfeasor who caused permanent brain damage was an apparently underinsured trucking company. Wal-Mart simply wants their medical bills paid when a recovery occurs.

How did the trucking company survive such a claim by simply paying policy limits? Why didn't her attorney go after the company for $50 million and take over the company if they didn't pay?

I am appalled by the general consensus of the comments so far. If this is acceptable behavior by ANY company, what has happened to our society? It would seem that the people who commented are rather privileged and don't have to take what insurance is offered to them. And apparently they have never fallen victim to an unscrupulous attorney at a vulnerable time. With all of Wal-Marts ill-gotten gains, they wouldn't have even noticed $400,000. I guess this falls right in line with that same company collecting life insurance on former employees, instead of the family getting it. It may be "legal", but is it right?


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This page contains a single entry by Jon Coppelman published on November 20, 2007 10:29 AM.

Your Government at Work - Worker injury research you can actually use was the previous entry in this blog.

News Roundup: Cavalcade of Risk; Terrorism bill; new OSHA PPE rule is the next entry in this blog.

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