Pension & Benefits News Questions regarding vesting of right to health insurance coverage for retirees certified to New York high court
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Wednesday, December 2, 2020

Questions regarding vesting of right to health insurance coverage for retirees certified to New York high court

By Pension and Benefits Editorial Staff

In a case arising from the State of New York’s 2011 reduction of its rate of contribution to certain retired former employees’ health insurance premiums, the Second Circuit U.S. Court of Appeals certified two questions to the New York Court of Appeals for resolution. The plaintiffs contended that the reduced contribution rates contravened the state’s contractual obligation, under a union’s collective bargaining agreements with the state, to pay a fixed percentage of retirees’ health insurance premiums throughout their retirements. They brought claims for breach of contract under New York law and for impairing the obligations of contract in violation of the Contract Clause of the U.S. Constitution.

Background. A union representing a bargaining unit of New York state employees brought action on behalf of themselves and retired former members of that bargaining unit, contending that the state’s reduction of its contribution rate contravenes its contractual obligations to the union under past collective bargaining agreements to pay a fixed percentage of retirees’ health insurance premiums throughout their retirements. In order to prevail on either claim, the plaintiffs must establish that the relevant CBAs provide for a vested right to health-insurance coverage at fixed contribution rates for the life of the retiree.

Finding that both of these issues depended on aspects of New York law on which the state’s courts have not conclusively ruled and that meet the Second Circuit’s other criteria for certification, the appeals court reserved decision and certified two questions to the New York Court of Appeals.

Certified questions. Question one asks whether under New York state law a collective bargaining agreement, (1) created a vested right in retired employees to have the state’s rates of contribution to health-insurance premiums remain unchanged during their lifetimes, notwithstanding the duration of the CBA, or (2) if they do not, create sufficient ambiguity on that issue to permit the consideration of extrinsic evidence as to whether they create such a vested right?

Question two asks if the CBA, on its face, or as interpreted at trial upon consideration of extrinsic evidence, creates a vested right in retired employees to have the state’s rates of contribution to health-insurance premiums remain unchanged during their lives, notwithstanding the duration of the CBA, does New York’s statutory and regulatory reduction of its contribution rates for retirees’ premiums negate such a vested right so as to preclude a remedy under state law for breach of contract?

SOURCE: Donohue v. Cuomo (CA-2), No. 18-3193-cv, November 6, 2020.

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