77 N.Y.2d 144 (1990)
Employers can contract to provide nonterminable postemployment welfare benefits to retirees irrespective of ERISA’s vesting protection, but retirees bear the burden of proving an employer’s intent to create such rights, primarily through benefit plan documents.
Summary
A class of retired Consolidated Mutual Insurance Company (CMIC) employees sought restoration of life, medical, and health insurance benefits terminated by the Superintendent of Insurance during CMIC’s liquidation. The retirees claimed these benefits were intended as lifetime rights. The Court of Appeals reversed the lower court’s decision, holding that the primary plan document, CMIC’s Employee Guidebook, contained ambiguous language regarding the right to terminate benefits. This ambiguity allowed for the consideration of extrinsic evidence, which supported the retirees’ claim that CMIC intended to provide nonterminable benefits.
Facts
CMIC provided group term life, medical, and health insurance coverage to its retirees. The Employee Guidebook outlined these benefits. In 1979, the New York State Superintendent of Insurance, as liquidator of CMIC, terminated these benefits. The Guidebook contained a “reservation of rights” clause on the inside back cover, stating that many plans were subject to modification or termination at the discretion of the Board of Directors. However, the clause did not specify which plans were terminable. Retirees presented letters and memoranda indicating that their benefits would remain unchanged for life.
Procedural History
The retirees initially sought restoration of benefits in federal court (Levy v. Lewis, 635 F.2d 960 (2d Cir)). A State Supreme Court Referee found that the Superintendent had the authority to withdraw the benefits based on the Guidebook’s language. Supreme Court confirmed the Referee’s report against the retirees. The Appellate Division affirmed, finding the reservation of rights clause sufficient to apprise claimants of CMIC’s right to terminate the plans. The Court of Appeals granted leave to appeal.
Issue(s)
Whether CMIC’s Employee Guidebook and other plan documents unambiguously demonstrate CMIC’s intent to provide nonterminable life, health, and medical benefits to its retired employees; and therefore, whether the liquidator-Superintendent had the authority to terminate those benefits.
Holding
No, because the Employee Guidebook and related documents contained ambiguous language regarding the right to terminate benefits, making resort to extrinsic evidence appropriate, and that evidence supported the retirees’ claim of nonterminable benefits.
Court’s Reasoning
The Court of Appeals emphasized that while ERISA’s vesting requirements did not automatically apply to these welfare benefit plans, employers could still contractually agree to provide nonterminable benefits. The court focused on interpreting the intent of CMIC based on the plan documents. The court found the “reservation of rights” clause to be ambiguous because it did not specify which plans were subject to termination, stating, “The employees and we, as a Court, are left to speculate which of the `many’ plans and benefits described in the Guidebook are terminable. The ambiguity is self-evident.” Because of this ambiguity, the court allowed for the consideration of extrinsic evidence, such as letters and memoranda from CMIC stating that benefits would last for the retiree’s life. These representations, combined with the ambiguous plan documents, satisfied the retirees’ burden of proving CMIC’s intent to provide nonterminable benefits. The court distinguished the case from others where the right to terminate benefits was expressly and unambiguously reserved. The court stated, “Inasmuch as the Employee Guidebook and other plan documents, when read together, do not supply an unambiguous answer… resort to extrinsic evidence is appropriate and necessary.” The dissenting opinion argued that the plan documents, including the reservation of rights clause, clearly reserved CMIC’s right to terminate the plans and that the court improperly resorted to extrinsic evidence. The dissent cited cases where employers had expressly reserved the right to terminate benefits, and argued that the extrinsic evidence was itself ambiguous and should not have been considered.