Class Action for Termination of Post-Retirement Insurance Benefits

In UAW, Local No. 1697 v. Skinner Engine Co., 188 F.3d 130 (3d Cir. 1999), retired employees brought a class action suit alleging that the employer's termination of their postretirement insurance benefits breached their collective bargaining agreements; violated the Employee Retirement Income Security Act of 1974, 29 U.S.C. 1001-1461 (ERISA); and was barred under the doctrine of equitable estoppel. At issue was a provision that appeared in the 1989 collective bargaining agreement under which the employees retired. The provision stated that the "Company will continue to provide Blue Cross-Blue Shield hospitalization and surgical coverage, all costs being borne by the Company." Skinner, 188 F.3d at 135. When the 1993 collective bargaining agreement was negotiated, employees who had retired prior to 1993 had their medical benefits changed. These retired employees filed suit. According to the retirees, the 1989 collective bargaining agreement provided them with lifetime health insurance on exactly the same terms. Accordingly, changes effected in 1993 breached the 1989 collective bargaining agreement as well as the employer's fiduciary duty under ERISA. The district court dismissed the suit on summary judgment, and the Third Circuit affirmed. In doing so, the Third Circuit noted that ERISA contains elaborate vesting procedures for pension plans, but it does not require vesting of welfare (i.e., medical) plans. In this regard, the court cautioned, it must be remembered that to vest benefits is to render them forever unalterable. Because vesting of welfare plan benefits constitutes an extra-ERISA commitment, an employer's commitment to vest such benefits is not to be inferred lightly and must be stated in clear and express language. Id. at 139. The court then considered the relevant provisions of the collective bargaining agreements at issue and held, under applicable contract law principles, that the agreements did not unambiguously state that medical benefits would continue unchanged for the life of the retiree but, rather, were terminable by the employer at the expiration of the agreement under which the benefits were provided.