The retirees were employed by White Farms while th...

The retirees were employed by White Farms while the company was an affiliate of the White Motor Corporation.  The dispute concerned the White Motor Corporation Insurance Plan for Salaried Employees, a non-funded, noncontribu­tory benefit plan that provided life, health, and welfare insurance, prescription drugs, hearing aid benefits, and dental care to retirees and their eligible dependents.  White Motor employ­ees periodically received booklets describing their benefits under these plans.

The 1980 booklet described insurance pro­vided and carried the explicit disclaimer that it was “not the contract of insurance.”  The book­let differentiated between different categories of salaried employees and appeared to have been prepared for distribution to both active and retired employees.

The 1985 booklet was addressed specifi­cally to retired employees.  Much of the infor­mation in the booklet made no distinction between the Welfare Benefit Plan and the Pen­sion Plan, and its summary of an alleged can­cellation clause referred to both plans:

“The Company fully intends to continue your plans indefinitely.  However, the Company does reserve the right to change the Plans, and, if necessary to discontinue them.  If it is necessary to discontinue the Pension Plan, the assets of the Pension Fund will be used to pro­vide benefits according to the Plan document.”

No similar clause appeared in the 1980booklet.

While the company was undergoing court supervised reorganization under Chapter 11 of the Bankruptcy Code, it decided to dis­continue its noncontributory insurance coverage for its retired employees.

On the basis of the facts presented, assess whether the company is free to discontinue its noncontribu­tory insurance coverage for its retired employ­ees.  Explain your conclusion and use applicable law to support your response.


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