America's second biggest retailer, Sears, has agreed to settle a lawsuit with retired employees of the company.

Angry retired staff filed a lawsuit after Sears said it was reducing the 10-year period of the life-insurance coverage to $5,000 from a maximum of $100,000.

The former staff said Sears had promised that the benefits were permanent.

Around 80,000 former staff will be affected by the settlement which, if approved by the court, is understood to allow retirees to apply for partial relief from the planned benefit cuts.

A group formed to fight for the insurance benefits, the National Association of Retired Sears Employees, says relations improved after a new head of the company.

Alan Lacy was chosen as chairman and chief executive of Sears in September last year.