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US: Wal-Mart Takes Image Hit From Shank Case


by Kimberly MorrisonThe Morning News
December 7th, 2007

Wal-Mart won a lawsuit against a former employee, injured in an accident that left her brain damaged, divorced and penniless, for reimbursement from her medical care.

But public relations experts say the cost to the company's image may outweigh the $470,000 it received for repayment from Debbie Shank's care.

It's a tragic tale of an insurance loophole called "subrogation" increasingly common in employee health insurance plans that allows a company to recoup expenses incurred for the injured party's medical care should that person receive damages from a lawsuit with a third party.

Shank, a 52-year-old former stocker for Wal-Mart in Cape Girardieu, Mo., signed such a contract with her then-employer before a traffic accident with a semi-trailer truck. After receiving a settlement from the trucking company, Wal-Mart did what experts say any corporation would -- demand repayment. In this case, it happened to be slightly more than the settlement amount left after lawyer's fees and expenses about $417,000 placed in a trust for her future care.

Many health care officials have gone to bat for Wal-Mart, and any company's right to repayment under the terms of subrogation clauses, but public relations officials said there's no getting around this as a messy public relations issue.

"From a public relations point of view, it's an absolute nightmare for the company," said Alan Caruba, a public relations counselor and expert on corporate and public issues for the Caruba Organization in South Orange, N.J.

Wal-Mart, having previously provided an e-mailed statement about the case, declined to comment for this story.

Caruba said the company would do itself a favor by electing to let Shank keep the funding extended to her in the interest of the company's image, but that the interests of shareholders and the Wal-Mart insured shouldn't be overlooked.

"I'm sure the company pays out millions in health benefits in any given year, and those who receive the benefits are not the source of front-page news or editorial stories, but in this case, which is obviously quite tragic, the company has an obligation to protect its interests," Caruba said.

Companies today face a greater expectation from the public to be socially responsible beyond the bottom line interests, despite the fact that few companies would not have acted differently from Wal-Mart in this case, and that subrogation clauses are increasingly common in health care contracts.

"Today, companies have a much greater devotion to image in what we call 'the court of public opinion,'" said Sam Waltz, a counselor to businesses facing sensitive reputational issues at Sam Waltz & Associates in Wilmington, Del.

"The real question is, (is) Wal-Mart's predisposition in how it handles these claims the right course or the wrong course? My impression is that Wal-Mart did what every other employer would do, which is to say, 'Excuse me, but that award is double payment, and that belongs to us,'" Waltz said. "But new social policy is set every day and this becomes a case to examine how Wal-Mart and the industry feels about such cases."

Waltz said companies will often incur losses to further a reputation as a "sensitive employer," and Wal-Mart might in this case consider taking a noncrisis handle on the issue by forming an internal task force and empower the company to redress the case.

"Either way, they will sustain a reputational black eye because their predisposition has already been exposed," Waltz said.

The public's outcry over the case has echoed across the country.

The Wall Street Journal published a half dozen letters to the editor in response to its article. The Los Angeles Times wrote an editorial that the case was "legal, but wrong." Television news shows broadcast the story as a tragic insurance nightmare. Union-funded Wal-Mart Watch on Tuesday sent out a letter to e-mail subscribers soliciting donations to the family, and has not only raised nearly $5,000, which the organization will match, it has been overwhelmed with e-mail responses to the case.

Shank is left severely impaired both physically and mentally, living wheelchair-bound in an assisted care facility. Her husband, a maintenance worker, divorced her under advisement from a health care administrator because she would qualify for more public assistance as a single woman. And a week after losing their last appeal, the Shank's 18-year-old son, Jeremy, was killed while serving in Iraq.

Blogs have taken the story and ran with it, inciting discussions from the Wall Street Journal's law blog to the popular Daily Kos sounding off on the issue. Some say the law should be upheld, while others argue that the case illustrates Wal-Mart's unscrupulousness.

It's undoubtedly a tragic story, but experts said the case won't resonate with the public.

"It will not, in my opinion, create a lasting blemish on Wal-Mart's reputation. It is really the cumulative effect of these types of things, and speaks back to the issue of how Wal-Mart stewards its public," Waltz said. "In the big picture, Wal-Mart has taken so much reputational damage, that this is just one more shot across the bow."

Caruba warned that people's emotional reaction to the story ought not overrule their sensibilities.

"People don't understand that everything in society is bound together by contract, and when you start dismissing the fundamental rule of law, the whole of society is threatened," Caruba said.

"It is one of those situations where nobody's a winner, and, in a sense, everyone is a loser, including Wal-Mart," Caruba added, "but it's a huge company with thousands of employees, and there has to be a system of rules in place for everyone."



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