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December 21, 2017

Continuation of health insurance benefits upon retirement

Continuation of health insurance benefits upon retirement
Adamo v City of Albany, 2017 NY Slip Op 08583, Appellate Division, Third Department

Plaintiffs [Adamo] are former police officers and the spouses of former police officers who retired from their employment with defendant at various times who allege the City of Albany [City] breached the collective bargaining agreements [CBAs] that were in existence at the time of the police officers' retirements by refusing to reimburse plaintiffs for the cost of their Medicare Part B premiums.

Significantly, prior to 1985, City participated in the New York State Employee Health Insurance Plan [NYSHIP], which provided health insurance coverage for both active and retired police officers, as well as their spouses and which provided that once a retiree reached the age of 65 and enrolled in the Federal Medicare program, NYSHIP would provide secondary health insurance coverage and defendant would reimburse the retiree for his or her cost of Medicare Part B premiums.

In 1985 the City became self-insured for health insurance purposes and discontinued its participation in NYSHIP. At that point, the unions representing the active police officers negotiated new health insurance coverage and included a "health care provision" [HCP] in each subsequent CBA providing that "[a]ll employees in the bargaining unit shall be eligible for hospitalization and medical insurance for themselves and all of their eligible dependents pursuant to [certain] plan options . . . which provide benefits at the same or higher level as were provided under [NYSHIP]."

Pursuant to the HCP the City continued to reimburse retirees and their spouses for the cost of Medicare Part B premiums for the next 25 years. Effective January 1, 2010 the City said that it would not make such reimbursement payments to individuals "not yet enrolled in Medicare Part B."Adamo commence an action for breach of contract. 

However, Supreme Court, finding that the language of the HCP in the CBAs "unambiguously did not apply to retirees," dismissed the action and Adamo appealed. The Appellate Division held that Adamo's reliance on the language of the HCP was misplaced. and the City's practice of reimbursements from 1985 to 2009, maintain that they stated a cause of action for breach of contract.*

Citing Agor v Board of Educ., Northeastern Clinton Cent. Sch. Dist., 115 AD3d 1047, the court explained that "In determining the obligations of parties to a contract, the threshold determination as to whether an ambiguity exists is a question of law to be resolved by the court."** As relevant with respect to the CBAs here, "[o]nly when a contract is ambiguous can the interpretation placed upon it by the parties, as shown by their conduct, be considered in determining their intent, and even then, the parties' practices are 'merely an interpretive tool and cannot be used to create a contractual right independent of some express source in the underlying agreement.'"

The Appellate Division found that the HCP:

[1] Unambiguously failed to grant retirees the right to reimbursement for the cost of Medicare Part B premiums" by limiting its provisions to "employees in the bargaining unit";

[2] Made no reference to retirees or to health care benefits to be paid in retirement; and

 [3] Retirees are no longer part of the bargaining unit upon their retirement and, therefore, "employees in the bargaining unit" cannot be read to encompass retirees.

The bottom line: Although NYSHIP obligated City to reimburse retirees for the cost of Medicare Part B premiums and the HCP provided for the "same or higher level" of benefits, the Appellate Division concluded that the plain language of the HCP is susceptible to only one reasonable interpretation — namely, that it does not provide for any reimbursement to retirees for the cost of Medicare Part B premiums" and thus the City's past practice in this regard may not be considered.

* The Appellate Division noted that "Recently, in a proceeding commenced by active employees of defendant to annul a determination of the Public Employee Relations Board, this Court found that defendant's actions in providing reimbursements to retirees for 25 years constituted a past practice that could not be unilaterally discontinued pursuant to the Taylor Law (seeMatter of Albany Police Officers Union, Local 2841, Law Enforcement Officers Union Dist. Council 82, AFSCME, AFL-CIO v New York Pub. Empl. Relations Bd., 149 AD3d 1236" and then pointed out that "a different standard applies when considering past practices in the Taylor Law context," citing Matter of Aeneas McDonald Police Benevolent Assn. v City of Geneva, 92 NY2d at 332-333) and, thus, its holding in that case has no bearing on whether Adamo stated a cause of action for breach of contract in this action.

** In the words of the Appellate Division, an "[a]mbiguity exists if the language used lacks a definite and precise meaning, and there is a reasonable basis for a difference of opinion."

The decision is posted on the Internet at:

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