Jun. 26--The judge overseeing Sears Holdings' bankruptcy is giving 29,000 retired employees a chance to fight for the life insurance benefits they lost when the retailer canceled their coverage earlier this year.
This week, U.S. Bankruptcy Court Judge Robert Drain directed the U.S. Trustee overseeing the case to appoint a committee representing retirees.
Sears ended the retirees' life insurance benefits in March, shortly after selling most of its remaining assets to Transform Holdco, an entity controlled by Sears former CEO and largest shareholder, Edward Lampert, and his hedge fund.
As of March 15, about 29,000 retirees had coverage with death benefits worth between $5,000 and $14,500 that cost Sears $1.3 million in monthly premiums, Sears said.
"The Debtors determined that, given the financial circumstances of their estates, they could no longer justify paying the significant premiums for the policies," an attorney representing Sears Holdings said in a court filing.
Attorneys representing two retirees who pushed for the committee's creation have argued that the company gave up the right to end the life insurance benefits as part of a settlement agreement reached in 2001, after the company made cuts to life insurance coverage.
But Sears said the changes agreed to in the settlement were never made official and that it had the right to end the benefits, according to court filings.
A committee representing Sears' unsecured creditors also objected to the retirees' request, citing Sears' limited remaining funds. In a court filing, Sears said unsecured creditors are expected to receive 2.3 to 2.7% of what they claim they're owed.
Retired employees who purchased replacement life insurance after Sears canceled coverage may have a claim, as might beneficiaries of retirees who died after the life insurance benefits ended in March, said Michael Mulder, an attorney representing the retirees.
"We know there are people out there's that's happened to," he said.
A dozen former senior executives still have life insurance benefits worth between $356,080 and $2.7 million. Allstate, which covered the former executives but not the larger group of workers, agreed to extend the policy's grace period at no cost to Sears while the companies worked to give the retirees a way to maintain coverage at their own cost, Sears said in the filing.
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