ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Saturday, February 4, 2017

Providing "Retirement Benefits" Isn't the Same as Providing Health Insurance Coverage

A recent case out of New York, Wilson v. New York State Thruway Authority, 931-16, deals with the collective bargaining agreement between the New York State Thruway Authority and its retirees over whether the Thruway Authority was contractually bound to provide health insurance coverage to the retirees at no cost. The retirees had enjoyed free health insurance until April 1, 2016, when the Thruway Authority required them to start paying six percent of their premiums. The retirees wanted to introduce evidence that the parties understood that the Thruway Authority was going to pay all of their health insurance premiums, pursuant to the collective bargaining agreement. 

The problem was that the contract between the parties contained no such obligation and the court found that the contract was unambiguous on its face. All that the contract stated was that the Thruway Authority should provide "retirement benefits" made available by New York statutes the contract went on to enumerate. None of those statutes contained provisions requiring the Thruway Authority to provide health insurance coverage. In fact, health care benefits were governed by different New York statutes, not the ones enumerated, and New York state courts had long pointed out that "retirement benefits" and "health care benefits" were two different things governed by two different statutes under New York law. Given that, the court concluded that "retirement benefits" was an unambiguous term of art that the parties knew the definition of, given their particular citation of New York statutes to define it. The court refused to allow extrinsic evidence in the face of this lack of ambiguity. If the retirees had wished the Thruway Authority to pay for their health insurance premiums, they should have included an express provision saying that in the collective bargaining agreement, as many other collective bargaining agreements construed under New York law had done. 

This decision is fairly straightforward as a matter of the law: finding that the term was unambiguous (and indeed basically defined within the document through the statutory citations) and so therefore extrinsic evidence was unnecessary to decide the breach of contract action (the court here concluded that, with no obligation to pay the health insurance premiums, the Thruway Authority had not breached the contract). However, it is a legal dispute that we might see more and more of, as deals with retirees are reevaluated and altered in an age of shrinking budgets. 

https://lawprofessors.typepad.com/contractsprof_blog/2017/02/providing-retirement-benefits-isnt-the-same-as-providing-health-insurance-coverage.html

Commentary, Government Contracting, Labor Contracts, Legislation, Recent Cases, True Contracts | Permalink

Comments

Post a comment

If you do not complete your comment within 15 minutes, it will be lost. For longer comments, you may want to draft them in Word or another program and then copy them into this comment box.