Sears retirees fight life insurance termination

FILE - In this Oct. 15, 2018 file photo, a Sears department is seen in Hackensack, N.J. After its jo
Lawyers for retired Sears workers say the bankrupt retailer has wrongly terminated the life insurance policies for tens of thousands of former employees.
(Seth Wenig / Associated Press)

A group of retired Sears Holdings Corp. workers has asked for the creation of a committee to protect their interests, claiming the spouses of some retirees who recently died were deprived of life insurance payments earned from years of work at the iconic department store.

Lawyers for the retired workers say the bankrupt retailer has wrongly terminated the life insurance policies for tens of thousands of former employees. In one instance, the life insurance policy of a Sears retiree who died May 6 won’t be paid because his death was 21 days after the Sears estate terminated his benefits, according to the Tuesday court filing.

“Sears has stated its clear intention to ignore its obligations to the retirees,” states the motion to form a committee. “The retirees request that the court direct the appointment of a committee to advocate for the thousands of retirees unjustly and illegally losing their benefits.”

Sears filed for bankruptcy last year and sold its assets in January. The shell of the business that is now winding down with a plan to pay creditors said in an April court filing that it had stopped making premium payments and had terminated the retiree plan.


The U.S. Department of Labor objected this month to the estate plan to end the life insurance without court approval, but the estate responded that it has the right to “unilaterally amend or terminate the plan at any time.”

“It came as really a shock that they would do that, because that was the last benefit we had,” said Ronald Olbrysh, one of the Sears retirees asking for the committee. Olbrysh said that many Sears retirees dropped their existing life insurance policies in favor of a company policy. “That was a mistake, but they relied on Sears.”

The fight over life insurance comes amid a number of other conflicts in the bankruptcy. Eddie Lampert, ex-Sears chief executive and founder of the investment firm that bought the company’s assets, sued the estate Saturday for failing to deliver “hundreds of millions of dollars of assets” in accordance with the sales agreement.

Lampert says that the estate’s failure to deliver assets means he shouldn’t have to pay $43 million in severance payments to workers who lost their jobs. Representatives of his firm, ESL Investments, didn’t immediately respond to a request for comment on the severance issue. Lampert’s lawsuit followed one filed against him by the Sears estate that accused him of wrongly transferring $2 billion of company assets beyond the reach of creditors in the years before bankruptcy.


Olbrysh is also the chairman of the National Assn. of Retired Sears Employees, which notified its membership this year when the life insurance policies were terminated. “As a result of the life insurance cancellation, Olbrysh received an average of twenty phone calls per day from retirees,” according to a court filing.

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