A customer enters a Sears Holdings Corp. store in San Bruno, California, U.S., on Friday, Dec. 28, 2018. Sears Holdings Corp. got another chance at survival after Chairman Eddie Lampert put together a last-minute, last-ditch bid to buy the retailer out of bankruptcy. Lampert persuaded three lenders to finance the $4.4 billion offer, according to a statement from ESL Investments. The plan includes keeping 425 stores open and a $1.3 billion financing commitment, the statement said. Bank of America Corp. is leading the financing effort, people with knowledge of the plan have said. Photographer: David Paul Morris/Bloomberg (Photo: David Paul Morris/Bloomberg)

A group of retired Sears Holdings Corp. workers have asked for the creation of a committee to protect their interests as a retiree died shortly after his life insurance was canceled.

Lawyers for the retired workers say the bankrupt retailer has wrongly terminated the life insurance policies for tens of thousands of former employees. They believe the spouses of some Sears retirees who recently died have been deprived of the life insurance payment earned from years of work at the iconic department store, according to a court filing. 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.”

(Related: The Retirement Bills Should Be Good for Retail Advisors: Phil Waldeck)

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 earlier 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 officer and founder of the investment firm that bought the company’s assets, sued the estate on 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. ESL representatives 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 Association of Retired Sears Employees, which notified its membership earlier 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.

The case is Sears Holdings Corp., 18-23538, U.S. Bankruptcy Court Southern District of New York (White Plains).

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