DeGeare v. Alpha Portland Industries, Inc. (652 F. Supp. 946, 1986)

MEMORANDUM

HUNGATE, District Judge.

This matter is before the Court after a three-day nonjury trial to determine the merits of class plaintiffs’ claim on Count I of their complaint.

Pursuant to the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001, et seq., named plaintiffs, retired salaried, non-union employees of defendant Alpha Portland Industries, Inc. (Alpha), in general seek relief on behalf of themselves and others for defendants’ allegedly improper termination of life and health insurance benefits previously provided to Alpha retirees and their dependents. Defendant The Equitable Life Assurance Society of the United States (Equitable) provided and participated in the administration of the insurance policies at issue here. Plaintiffs urge Alpha’s obligation to furnish retirement insurance benefits to the salaried retirees in plaintiff class arises out of the parties’ relationship over many years and the creation of non-terminable rights through that relationship. Defendants deny liability.

Having carefully considered the record herein, including the pleadings, the parties’ joint stipulation of uncontested facts, the relevant exhibits, depositions and testimony, and the parties’ argument, the Court hereby makes and enters the following findings of fact and conclusions of law.

Findings of Fact

1. Prior to their retirement, named plaintiffs each worked as a salaried employee of the cement division of defendant Alpha Portland Industries, Inc. (Alpha).

2. Defendant Alpha was at all relevant times a corporation and an employer engaged in commerce and in activities affecting commerce. Until 1972, defendant Alpha was known as Alpha Portland Cement Company, and since 1985 it is known as Slattery Group, Inc.

3. During all relevant times, Alpha administered the Insurance and Health Program for Salaried Employees (“Program”) and its predecessor insurance programs for salaried employees.

4. Defendant The Equitable Life Assurance Society of the United States (Equitable) participated in the administration of the Program.

5. Named plaintiffs represent a certified class consisting of:

All retired, salaried employees of defendant Alpha Portland Cement Company, a division of Alpha Portland Industries, Inc. (“Alpha”), who at the time of retirement from Alpha had sufficient years of continuous service with Alpha to entitle them to retiree insurance benefits under the Alpha Insurance and Health Program for Salaried Employees (the “Program”), and the executors, heirs, dependents and beneficiaries of deceased retirees described above whose decedents died since May 1, 1982, with the exception of Alpha retired, salaried employees who previously have settled and/or compromised their claims against Alpha arising out of Alpha’s May 1, 1982, termination of retiree insurance benefits. Salaried employees who retired from Alpha after the May 1, 1982, termination of retiree insurance benefits under the program are not included within the class.

Due to settlements reached with two class members in earlier litigation, see Bettye Kane, et al. v. Alpha Portland Industries, Inc., cause no. 83-2647C(B) (E.D.Mo.), and notices received by the Court that seventeen potential class members “opt-out” of this class, there remain approximately 169 retirees in plaintiff class.

6. For many years, Alpha was engaged in the manufacture and sale of Portland cement. Although it once owned and operated as many as ten cement plants, four were closed or sold prior to 1981. The remaining plants, including Jamesville, New York; Birmingham, Alabama; St. Louis, Missouri; Orange, Texas; Cementen, New York; and Limekiln, Maryland, were shut down or disposed of during 1981 and 1982.

7. In 1946, Alpha instituted its “Plan for Group Life Insurance, Group Hospital Expense and Surgical Benefits” (the “Plan”), to provide certain health and life insurance benefits to salaried employees.

8. Except for the Major Medical Expense Insurance Plan that became effective December 21,1957, between 1946 and 1966, employees contributed toward the Plan through paycheck deductions. Starting in 1966 and through 1978, the Plan required no employee contributions except with respect to life and salary continuance insurance.

9. From 1946 through 1972, individual certificates and descriptive booklets, rather than formal Plan documents, were distributed to Alpha’s salaried employees. The individual certificates “contain[ed] complete details of the benefits provided under [the] Plan.” For the Plan as revised in 1948, 1950, and 1952, the booklets stated they gave “all the details” or furnished the “full details” of the Plan to be underwritten by Equitable. Subsequent booklets for the Plan as revised indicated they outlined the “principal features” of the Plan evinced by the contracts between Alpha and Equitable. The last page of each booklet for the Plan as revised in 1948, 1950,1952, and 1956, and the first pages of later booklets, referred the employee to the contracts between Equitable and Alpha for the terms or “exact provisions” of each Plan.

10. The record has two certificates for the Plan effective during this period, in particular during 1961 and 1963. The certificates note they are not a contract of insurance and specify the insurance policy of which the certificate is evidence. Except as noted below, the certificates do not expressly refer to insurance benefits for retirees. The 1963 Plan certificate provides the following as the only termination provision:

Termination of Insurance: The insurance of an Insured shall immediately terminate on the earliest of the following dates: (a) the date the policy is terminated as provided therein; (b) the date the Insured ceases to be a member of a class described in the policy; (c) the premium due date if the Policyholder fails to pay the required premium for the Insured, except as a result of inadvertent error; (d) the first day of the month following the Insured’s 65th birthday.

The 1961 Plan certificate contains the following statements regarding termination:

[I] TERMINATION: The insurance of any Employee under a Group policy shall cease automatically upon the occurrence of any of the following events:

(a) the termination of the policy, (b) the cessation of premium payments on account of the Employee’s insurance thereunder, (c) the termination of his employment in the classes of Employees insured thereunder.

Note: In case of cessation of active work the Employee should consult the Employer to see what arrangement, if any, can be made to continue the insurance.

(emphasis in original); regarding hospital expense, accident, and health insurance:

[II] TERMINATION AND CHANGE OF POLICY. On any premium due date the Employer may terminate the policy or, subject to the Society’s approval, may modify, amend or change the provisions, terms and conditions of the policy. No consent of any Employee or any other person referred to in the policy shall be required to effect termination of the policy or any modification, amendment, or change thereof.

and regarding Major Medical Expense insurance:

[III] The Major Medical Expense Insurance of any Employee shall cease automatically upon the occurrence of any one of the following events:

1. the termination of Major Medical Expense Insurance under the Group policy,

2. the termination of the Employee’s insurance under the Group policy,

3. the cessation of premium payments on account of the Employee’s Major Medical Expense Insurance,

4. the Employee’s retirement,

5. the payment of the Maximum Amount of Benefits with respect to the Employee.

The 1961 Plan certificate also specified (a) limited extensions of benefits under certain circumstances, for instance, employee disability on the date insurance terminates; and (b) coverage and termination provisions for employees’ dependents.

11. Each booklet for the 1946 Plan, as revised through 1970, noted that Equitable (a) would decide the amount of reimbursement paid for “cutting operations” not listed in the booklet; arid (b) would provide to any terminated employee upon application within thirty-one days after termination and “without medical examination,” certain life insurance up to the amount provided under the Plan if bought by the employee.

12. The booklet for the 1946 Plan and its amendments through 1956 explicitly provided:

[T]he Company hopes to continue the plan indefinitely but reserves the right to change, modify or discontinue it if future conditions make such action necessary or if reduction of Company earnings make it impossible to continue.

This language does not appear in later booklets.

13. The 1946 Plan booklet stated that life insurance benefits, and Hospital and Surgical Expense Insurance benefits would continue for no more than six months without cost to the employee during

any periods of temporary layoff by the [Alpha] Company which may be due to a curtailment in production or which may be due to a shutdown occurring in the normal course of business [and only during such periods].

(hereinafter “extension provisions”). The booklet further stated that life insurance “will be continued for 31 days after termination of employment” and subject to specified exceptions, the Hospital and Surgical Expense Insurance “will be terminated upon termination of employment” (hereinafter “termination statements”). Otherwise, the booklet contains no explicit reference to termination of benefits or to the availability, if any, of these benefits to retired salaried employees.

14. The 1948, 1950, 1952, and 1956 booklets contained the same extension provisions and termination statements as the 1946 Plan booklet. The 1948 and 1950 Plan booklets also stated:

Employees who retire with the consent of the Alpha company and have completed 25 years of service at the time of retirement will have the privilege of continuing one-half the amount of Group Life Insurance for which they were insured immediately prior to retirement, at the regular contribution to such coverage of $.50 per month per thousand [of insurance].

15. With respect to Hospital and Surgical Insurance for retirees, the 1950 Plan booklet provided:

Employees who retire with the consent of the Alpha Company will have the privilege of continuing their Hospitalization and Surgical Insurance for themselves and dependents. However, the hospital benefits for each covered person will be limited to a total of 31 days in any calendar year and Surgical Expense Benefits not to exceed one maximum surgical claim in any calendar year.

16. The 1950, 1952, and 1956 Plan booklets set forth an explanation of Sickness and Accident Insurance which

will be suspended during any period of temporary layoff or leave of absence but will be reinstated immediately upon the employee’s return to active employment. It will be terminated upon termination of employment.

17. The 1952 and 1956 Plan booklets contained the same provision for continuing Life Insurance for retirees, as was contained in the 1948 and 1950 Plan booklets, except that employees having completed 15 years, rather than 25 years, of continuous service were now eligible for the coverage. As with the 1950 Plan, the 1952 Plan booklet provided for continuation of Hospitalization and Surgical Insurance for retirees, except the hospital benefits for each covered person were expressly limited to “a total of 31 days and a maximum reimbursement for additional charges not to exceed $100 in any one calendar year[.]”

18. The continuation of Hospitalization and Surgical Insurance for retirees was set forth in the 1956 booklet as it had been in the 1952 Plan booklet, except now each covered person was limited

to a total of 60 days and a maximum reimbursement of $300 for additional charges [in Hospital Expense Benefits and] a maximum of $250 in any one calendar year [for Surgical Expense Benefits].

19. The new Major Medical Expense Insurance Plan that became effective on December 21, 1957, did not require employee payments, did not explicitly provide for benefits to retirees, and stated it “ceases on termination of your active employment with Alpha,” except for a limited extension of benefits for totally disabled employees who terminate such employment.

20. Similar to earlier booklets, the 1961, 1963, 1966, 1968, and 1970 booklets stated that “[f]or 31 days after you leave Alpha your group life insurance continues in force.” With regard to Hospital Expense Insurance, Surgical Expense Insurance, Maternity Expense Insurance, and Major Medical Expense Insurance, the 1961, 1963, 1966, 1968, and 1970 Plan booklets explicitly provided that under certain circumstances, e.g., disability or pregnancy on the termination date, these benefits would be extended to a limited extent beyond the date the insurance terminated. On the last page of the booklets was the “termination of insurance” provision:

Group insurance for you and your dependents terminates upon termination of your active service except as previously discussed. Insurance on dependents terminates when they cease to be dependents as defined. Your group insurance certificate and this booklet set forth instances where protection continues after termination of insurance.

These booklets separately specified the continuation of benefits if a covered employee became disabled or a retiree.

21. In relevant part, the 1961 Plan booklet stated:

Upon your retirement with the consent of the company, you may continue:

1. Life insurance in the amount of $2,500 plus 50% of that shown in Plan A provided you are enrolled in Plan A or B and have completed 15 years of continuous service, as of the date you retire.

2. Hospital expense and surgical expense insurances on yourself and your dependents. However, in a calendar year, hospital room and board benefits will be limited to a maximum of $13 per day for a total of 60 days and reimbursement for additional charges will be limited to $300. Surgical expense benefits may not exceed $250 in a calendar year. These benefits apply to each insured member of a family separately. Any number of confinements or operations may make up these máximums.

Your monthly cost for insurance after retirement will be:

$1.00 for you, or

2.50 for you and one dependent, or 3.00 for you and more than one dependent

Plus 50$ per month per $1,000 of life insurance in excess of $2,500. (hereinafter “retirement provision”).

22. The 1963 Plan booklet contained a retirement provision similar to the retirement provision in the 1961 Plan booklet except in paragraph (2): major medical expense insurance was included with a limit on such benefits “to a lifetime maximum of $2,500, without reinstatement;” the maximum for hospital and board benefits was increased from $13 per day for sixty days to $18 per day for seventy days, with a maximum reimbursement of $360 rather than $300 in additional charges; and the maximum in annual surgical expense benefits was increased from $250 to $300. The 1963 Plan booklet retirement provision also stated in paragraph 2, after setting forth the maximum benefits:

All other provisions will continue to apply. Your monthly cost for insurance after retirement is 50$ for each $1,000 of life insurance in excess of $2,500.

23. In the 1966 Plan booklet, the introductory and first paragraphs of the retirement provision were the same as in the 1961 and 1963 Plan booklets. The remaining portion, however, read as follows:

2. Hospital expense, surgical expense and major medical expense insurances on yourself and your dependents. However, in a calendar year, hospital room and board benefits will be limited to the hospital’s regular charge for semi-private accommodations for a total of 120 days and reimbursement for additional charges will be limited to $700. Surgical expense benefits may not exceed $450 in a calendar year. Major medical expense benefits will be limited to a lifetime maximum of $2,500 for all causes. These benefits apply to each insured member of a family separately. All other provisions will continue to apply.

Special Note: The expense insurances, described in the paragraph above, will be continued on individuals as long as they are ineligible for Medicare.

Your monthly cost for insurance after retirement is 50$ for each $1,000 of life insurance in excess of $2,500.

24. The 1966, 1968, and 1970 Plan booklets provided for the coordination of benefits. In summary, thd provision explained its purpose was to disallow payment of benefits beyond the amount of expenses incurred. Thus, payments made by another private group insurance plan or by a government benefit program reduced or eliminated the payments made under the Plan for the otherwise covered expenses.

25. As of July 1, 1966, Alpha established “The Alpha Post-65 Health Insurance Plan for Salaried Employees” (“Post-65 Plan”). The stated purpose of the Post-65 Plan was “to provide coverage for certain medical expenses which are not covered under either the Hospital or Supplementary Medical Insurance Plans offered under Medicare.” All salaried employees, “active or retired,” were eligible for the Post-65 Plan. This plan provided for coordination of benefits and reduced the amount of benefits actually paid by Alpha, although there was greater coverage to the employee, and did not specify a termination date or other indication of duration. Alpha terminated the Post-65 Plan in 1973.

26. The 1968 Plan booklet had the following retirement provision:

Upon your retirement after fifteen years of continuous service, you may continue:

1. Life insurance amounting to:

a. $2,500 if you are insured for the Minimum Amount only, or

b. one-half of that shown in the Plan A total column on page 4, if you are enrolled in Plan A or Plan B just prior to retirement.

2. Hospital expense, surgical expense and major medical expense insurances on yourself and your dependents. However, in a calendar year, hospital room and board benefits will be limited to the hospital’s regular charge for semi-private accommodations for a total of 120 days and reimbursement for additional charges will be limited to $700. Surgical expense benefits may not exceed $540 in a calendar year. Major medical expense benefits will be limited to a lifetime maximum of $2,500 for all causes. These benefits apply to each insured member of a family separately. All other provisions will continue to apply.

Special Note: The expense insurances, described in the paragraph above, will be continued on individuals as long as they are ineligible for Medicare.

Your monthly cost for insurance after retirement is 50