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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