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December 01, 2009

City to pay 100% of the cost of health insurance for retired firefighters

City to pay 100% of the cost of health insurance for retired firefighters
Matter of Gooshaw v City of Ogdensburg, 2009 NY Slip Op 08738, decided on November 25, 2009, Appellate Division, Third Department

Thomas W. Gooshaw, a retired City of Ogdensburg firefighter, was the lead plaintiff in an action that alleged that the City had violated the terms of the collective bargaining agreement [CAB] in place at the time they retired. That agreement provided that the City would pay "100 percent of the cost" of their health insurance plus the employee contribution for health insurance for their dependents.

The City had been paying these premiums for health insurance for all retired firefighters and, in addition, had reimbursed them for any cost incurred in obtaining health coverage under Medicare Part B.

In 2005, petitioners filed a complaint claiming that the City had breached the CBA by refusing to cover the cost of these Medicare Part B premiums and sought a declaratory judgment to the effect that the City, under the CBA, was required to reimburse them for these payments.

Supreme Court, converted the action into a CPLR article 78 proceeding, applied a four-month statute of limitations and dismissed the petition as untimely. Gooshaw appealed.

The Appellate Division said that the principal claim made by Gooshaw was that the City breached the CBA by failing to honor their contractual obligation "to pay for one hundred percent (100%) of the cost of retirees' health insurance, including Medicare Part B premiums."

"[W]here the focus of the controversy is on an agency's breach of an express contractual right,” said the court, a contract action is the recommended remedy. Accordingly, said the court, "The proper vehicle for seeking damages arising from an alleged breach of contract by a public official or governmental body is an action for breach of contract, not a proceeding pursuant to CPLR article 78," citing Kerlikowske v City of Buffalo, 305 AD2d 997. Thus the six-year statute of limitations applies here (see CPLR 213). Therefore, the court erred in granting Ogdensburg’s motion for summary judgment and dismissing the petition as untimely.

In support of their motion, Gooshaw claims that because an arbitrator in an earlier similar grievance found that the CBA required the City to make these payments. In view this earlier determination, Gooshaw contended that the City should be estopped here from denying the existence of this contractual obligation.

The City, on the other hand, argued that “the doctrine of collateral estoppel” did not apply in this instance because the CBA has undergone extensive revisions as a result of ongoing negotiations between the City and the firefighters' union and that the contract that was before the arbitrator was not identical to the CBAs that were in effect when all of the Gooshaw petitioners retired.

The Appellate Division noted that the City was correct: the firefighters had not all retired at the same time and that the provisions of the CBAs in place on the date of their respective retirements were not, in each instance, entirely the same.

However, said the court, while the CBA as renegotiated limited the choice that retired firefighters had regarding their health plan, it did not alter or modify the City's obligation to provide them with a fully funded health insurance program. Further, the arbitrator concluded that the "City payment of Medicare reimbursement did not change with the changed language and for many years, through several contracts, so that the meaning of the contract remained the same after the language change."

Lastly, the arbitrator took specific note of the fact that while these CBAs had been the subject of extensive renegotiation during the 15-year period immediately preceding the arbitration, the City continued its practice of reimbursing retired firefighters for the payment of these premiums, and at no time was a provision included in the CBA to the effect that the City was not obligated to make these payments.

Accordingly, the Appellate Division ruled that the arbitrator's decision and her finding that the City is obligated to reimburse retired firefighters for these payments under the CBA “is dispositive of the claims raised here and the City is estopped from claiming otherwise in this litigation.” The court that Ogdensburg was required to reimburse retired firefighters for Medicare Part B premiums.

NYPPL Comments: A similar issue was considered by the Appellate Division in Myers v. City of Schenectady, 244 A.D.2d 845.

Decided over a decade ago, the decision explains the rational underlying Civil Service Law Section 167-a which provides, in pertinent part for the reimbursement for Medicare premium charges, as follows:

“Upon exclusion from the coverage of the health insurance plan of supplementary medical insurance benefits for which an active or retired employee or a dependent covered by the health insurance plan is or would be eligible under the federal old-age, survivors and disability insurance program, an amount equal to the premium charge for such supplementary medical insurance benefits for such active or retired employee and his dependents, if any, shall be paid monthly or at other intervals to such active or retired employee from the health insurance fund.”

In effect, this transfers to charges associated with providing medical and hospital benefits from the employer’s health insurance carrier to Medicare, which results in a reduction in the cost of providing health insurance directly through the employer’s health insurance plan.”

As the Myers’ court observed:

“Participation in part A of the Medicare program is mandatory at no cost to the retiree. However, participation in part B of the Medicare program is optional and if a retiree opts to participate therein, he or she must pay a premium. The City encouraged plaintiffs' class to enroll in Medicare part B because Medicare then became the retirees' primary insurance and the employer-provided health insurance became secondary, with a resultant reduction in premium cost to the City. If a retiree did not elect to participate in Medicare part B, the City continued to provide the retiree with the same fully paid health insurance coverage as it provided to its eligible employees. On the other hand, if a retiree opted for the Medicare part B coverage, the premium was automatically deducted from his or her social security benefits and the retiree was reimbursed by the City.

”In March 1994, the City unilaterally determined that it only would reimburse its retirees 50% of the cost of Medicare part B coverage and, in June 1994, the City ceased making reimbursements altogether. As a consequence, plaintiffs commenced this action seeking, inter alia, full reimbursement retroactively as a vested contract benefit.”

The court's conclusion:

“In this regard, we agree that the City's own 19-year practice of continuing to provide fully paid health insurance coverage to plaintiffs' class, even after the expiration of the various collective bargaining agreements pursuant to which they obtained such benefits, constitutes very substantial evidence that the provisions in question were intended to provide benefits to retirees for the entire period of their retirement. Clearly, one of the more important aids in the interpretation of a contract is the construction placed upon the agreement by the contracting parties (see, Atwater & Co. v Panama R. R. Co., 255 NY 496, 501; Matter of Mencher [Geller & Sons], 276 App Div 556, 565). As has been observed, " '[t]here is no surer way to find out what parties meant, than to see what they have done' " (Town of Pelham v City of Mount Vernon, 304 NY 15, 23, quoting Insurance Co. v Dutcher, 95 US 269, 273).”

N.B. Although the Gooshaw and other court decisions noted above refer to "renegotiated collective bargaining agreements," the employee organization and the employer could only agree upon the health insurance benefits available to active employees upon their retirement in the context of renegotiated or successor collective bargaining agreement or a "memorandum of understanding." Such discussions could not serve to diminish or impair the health insurance benefits available to those individuals already retired based on earlier collective bargaining agreement or "past practice" as such individuals are not employees for the purposes of the Taylor Law and thus the employee organizations may not represent those already retired in its collective bargaining with the employer.

Public Employment Law Press

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