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Kolbe v. Tibbetts

New York Court of Appeals

December 12, 2013

Herbert Kolbe, et al., Appellants,
Christine J. Tibbetts, & c., et al., Respondents.

Paul S. Bamberger, for appellants.

Karl W. Kristoff, for respondents.

New York State Public Employees Federation, AFL- CIO; Civil Service Employees Association, Inc., Local 1000, AFSCME, AFL-CIO; and New York State School Boards Association, amici curiae.

LIPPMAN, Chief Judge

This case calls on us to decide whether certain collective bargaining agreements conferred upon plaintiff-retirees a vested right to the same health insurance coverage they had when they retired and, if so, whether unilateral modifications to that coverage are nonetheless permissible under either the contract terms or the New York Insurance Moratorium Law. We hold that the contracts establish a vested right to a continuation of the same health coverage under which plaintiffs retired, until they reach age 70, and that the Insurance Moratorium Law does not provide a basis for abrogating retirees' vested contractual rights. However, because issues of fact remain as to the intended scope of plaintiffs' right, remittal for further factual development is required to determine whether the challenged increases in co-pays for prescription drugs amount to a breach of contract.

Plaintiffs are four former non-instructional employees of the Newfane Central School District in Niagara County who retired between 2003 and 2008. Defendants are the Newfane Superintendent of Schools, the Newfane Board of Education and its President, and the Newfane Central School District (collectively, the District). During their employment, plaintiffs were members of a collective bargaining unit represented by the Civil Service Employees Association (CSEA) in negotiations concerning a series of collective bargaining agreements (CBAs) with the District. One of the plaintiffs retired while the 1999-2003 CBA was in effect; the other three plaintiffs retired under the 2003-2007 CBA. [1]

Each CBA contained a section describing the health insurance plans available to employees, including the various co-pay amounts the insured would owe under each plan for prescription drugs. The 1999-2003 and 2003-2007 CBAs provided that employees could choose between three insurance plans. Although two of the plans in the 1999-2003 contract were supplanted by a different plan in the 2003-2007 version, the co-pay amounts in both contracts were based on a two-tiered system assigning co-pays depending on a prescription drug's classification as either generic or brand-name. The co-pays ranged from $0 to $5.

The CBAs in effect when plaintiffs retired also provided that employees could opt into a "flexible spending" benefit program that allowed them to contribute pre-tax dollars into an account to be used for health care expenses, including co-pays. Contributions were capped at varying amounts, depending on an employee's enrollment status. The 1999-2003 CBA established flexible spending maximums at $215 for single enrollees, $430 for couples, and $480 for families. The 2003-2007 CBA increased these caps to $250, $500, and $540, respectively.

In January 2010, well after plaintiffs had retired, the CSEA and the District executed a successor CBA, which was retroactively effective to 2007 and set to expire in 2012. The 2007-2012 CBA implemented changes to both the co-pay regime and the flexible spending benefit. The two-tiered co-pay system was converted to a three-tiered model with charges of $7 for generic, $15 for "preferred brand-name, " and $35 for "non-preferred brand-name" prescription drugs. The new CBA also increased the caps on enrollees' flexible spending contributions to $325 (single), $625 (couple), and $700 (family). In addition, the 2007-2012 contract introduced an employer matching program under which the District would furnish $1 for each dollar contributed by enrollees, up to $50, $75, and $100, for each respective category.

Provisions concerning health insurance benefits for retirees were identical across the three CBAs. Section 6.4.6, entitled "Health Insurance for Retired Employees, " provided that "[r]etired employees shall be eligible to continue group health insurance upon payment of premium to the District five (5) days prior to the first of the month in which the premium is due." [2] Section 6.5.3 provided that "[f]ull-time employees who retire from the Newfane Central School District under the New York State Employees Retirement System plan shall be entitled to receive credit toward group health insurance premiums (including District contribution toward Flexible spending account) for accumulated sick leave." The premium credit was to be calculated as a percentage according to a formula and to be paid by the District "until the employee reaches age 70." The same provision contained the sentence that gave rise to the present litigation, "[t]he coverage provided shall be the coverage which is in effect for the unit at such time as the employee retires."

By letters dated December 30, 2009, the District informed plaintiffs that their co-pays would now be governed by the three-tier system under the terms of the 2007-2012 CBA, resulting in an increase from their previous co-pay charges of between $7 and $30. Plaintiffs were also notified of the increased flexible spending caps, though the letter made no mention of the employer matching program.

Plaintiffs subsequently commenced this action for breach of contract, alleging that by increasing their co-pays, the District had violated the terms of the CBAs in effect when plaintiffs retired. They sought a declaratory judgment as to their rights under the CBAs, reinstatement of the co-pay rates in effect at the time of their retirement, and reimbursement for additional expenditures made as a result of the modifications.

The complaint alleged that the language in section 6.5.3, which applied to plaintiffs as full-time employee-members of the New York State Employees Retirement System who retired with accumulated sick leave, entitled them to the same health insurance coverage they were receiving upon retirement, until they reached age 70, and that the co-pay increase violated that right. After Supreme Court denied its motion to dismiss, the District filed an answer asserting, insofar as relevant here, the affirmative defenses that plaintiffs failed to state a cause of action, that the CBAs in effect when plaintiffs retired had expired and were superseded by the 2007-2012 CBA, and that the challenged modifications were permissible under New York State law.

Plaintiffs then moved for summary judgment and submitted extrinsic evidence in the form of their own affidavits attesting that the parties intended for the District to maintain health insurance coverage for retirees until age 70 that was identical to the coverage in effect upon their retirement, along with the draft and final versions of the CBAs and predecessor agreements. The District cross-moved for summary judgment. Defendants argued, in relevant part, that the modifications to plaintiffs' health care benefits were permitted under Chapter 30 of the 2009 Laws of New York State (Insurance Moratorium Law) because corresponding changes were made to the benefits of active employees. They also argued that the complaint failed to allege an injury since plaintiffs made no claim that the enhanced flexible spending benefit was insufficient to offset the more expensive co-pays. In support, ...

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