Viles v. VT State Colleges

Viles v. VT State Colleges  (97-306); 168 Vt. 459; 724 A.2d 448

[Filed 13-Nov-1998]



       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                                 No. 97-306


  Perry Viles	                                Supreme Court

                                                On Appeal from
       v.		                        District Court of Vermont,
                                                Unit No. 3, Caledonia Circuit

  Vermont State Colleges	                June Term, 1998


       Brian L. Burgess, J.

       William P. Neylon and Lisa A. Warren of Swainbank, Morrissette &
  Neylon, St. Johnsbury, for Plaintiff-Appellant.

       Stanley Carpenter, Waterbury, and Nicholas DiGiovanni and Anne M.
  Kinnane of Morgan, Brown & Joy, Boston, Massachusetts, for
  Defendant-Appellee.


       PRESENT:  Amestoy, C.J., Dooley, Morse, Johnson and Skoglund, JJ.


       DOOLEY, J.   Plaintiff Perry Viles appeals from a decision of the
  Caledonia Superior Court holding that defendant, Vermont State Colleges, is
  not obligated by its employee benefits policies to provide health insurance
  coverage to plaintiff's wife.  We hold that the applicable section of
  defendant's employee handbook is ambiguous and must, therefore, be
  construed to provide the benefits plaintiff seeks.  We reverse.

       After employment with Lyndon State Colleges for over ten years, most
  recently as special assistant to the president, plaintiff retired in 1993. 
  At the time he retired, plaintiff was over 60 years of age and was a
  widower.  In 1995, he remarried and sought health insurance benefits for
  his spouse, Barbara Viles, pursuant to defendant's Personnel Handbook for
  Administrators and Administrative Staff.  The applicable section on
  "Benefits After Retirement" provides:

     Upon retirement at age 55 and above with at least twenty (20)
     years of continuous service, or age 58 and above with at least 
     fifteen (15) years of continuous service, or age 60 with at least ten
     
  

     (10) years of continuous service, or age 65 and above
     with at least five (5) years of continuous service, an employee shall
     receive medical and dental insurance for self and spouse for the rest 
     of their respective lives and for his/her family for one (1) year.

  Defendant denied him benefits on the basis that the personnel section
  authorizes provision of health insurance benefits to a spouse only if the
  retiree had a spouse on the date of retirement.

       Plaintiff brought this declaratory judgment action claiming that
  Barbara Viles was entitled to health insurance coverage under the policy. 
  Following cross motions for summary judgment, the Caledonia Superior Court
  held for defendant reasoning that the language of the provision
  unambiguously vests entitlement to health insurance at time of retirement. 
  Thus, the court held that, if the employee has no spouse at time of
  retirement, subsequent spouses are not entitled to health insurance under
  the policy.	On appeal, plaintiff argues that the handbook provision is
  ambiguous and the ambiguity should be resolved in favor of coverage.

       This case was decided on summary judgment motions.  Summary judgment
  is appropriate if the submissions before the court show that there is no
  genuine issue as to any material fact and a party is entitled to judgment
  as a matter of law.  See V.R.C.P. 56(c)(3); Miller v. Town of West Windsor,
  ___ Vt. ___, ___, 704 A.2d 1170, 1171 (1997).  The standard in this Court
  is the same as in the trial court.  See City of St. Albans v. Northwest
  Reg'l Planning Comm'n, ___ Vt. ___, ___, 708 A.2d 194, 196 (1998).

       This is a contract construction case.  The personnel handbook provides
  the terms of the contract between plaintiff and defendant with respect to
  retirement benefits.  See Amoco Fabrics and Fibers Co. v. Hilson, 669 So. 2d 832, 833-35 (Ala. 1995) (employee manual setting out policies on vacation
  pay is binding on employer); Fulton-DeKalb Hosp. Auth. v. Metzger, 417 S.E.2d 163, 164 (Ga. Ct. App. 1992) (handbook is a contract as to employee
  benefits provided therein); Hamilton v. Memorex Telex Corp., 454 S.E.2d 278, 282-83 (N.C. App. 1995) (employer bound by vacation pay provisions in
  manual); Oregon Police Officers' Ass'n v. State, 918 P.2d 765, 777 (Ore.
  1996) (once employee provides services in reliance on promise to provide
  benefits on retirement, employer is contractually bound to honor promise);
  cf. Taylor 

  

  v. National Life Ins. Co., 161 Vt. 457, 464-65, 652 A.2d 466, 471 (1994)
  (obligation to follow manual provisions comes from benefit employer
  receives from their existence, quoting Toussaint v. Blue Cross & Blue
  Shield of Michigan, 292 N.W.2d 880, 892 (Mich. 1980)).  Thus, we must
  construe the applicable provision of the personnel handbook to apply it to
  the circumstances before us.  In doing this, plaintiff urges that we apply
  the rule applicable to insurance policy interpretation that ambiguities
  must be resolved in favor of the insured.  See Select Design, Ltd. v. Union
  Mut. Fire Ins. Co., 165 Vt. 69, 72, 674 A.2d 798, 800 (1996).

       There are a number of similarities between construction of insurance
  policies and construction of the employee benefit provision before us.  The
  employee handbook was drafted by the employer, and the employer is in the
  best position to avoid ambiguity.  Compare Peerless Ins. Co. v. Wells, 154
  Vt. 491, 494, 580 A.2d 485, 487 (1990) (insurance contract); Sanders v. St.
  Paul Mercury Ins. Co., 148 Vt. 496, 500, 536 A.2d 914, 916 (1987)
  (insurance contract) with Enyeart v. Shelter Mut. Ins. Co., 693 S.W.2d 120,
  124 (Mo. Ct. App. 1985) (employment handbook drafted by employer).  The
  handbook is a standardized contract imposed by the employer, and the
  employee cannot bargain over its terms.  Compare City of Burlington v.
  Associated Elec. & Gas Ins. Servs., Ltd., 164 Vt. 218, 221, 669 A.2d 1181,
  1183 (1995) (insurance contract); Wilson v. Commercial Union Assurance Co.,
  90 Vt. 105, 109-10, 96 A. 540, 542 (1916) (insurance contract) with Dieter
  v. Fidelcor, 657 A.2d 27, 30 (Pa.. Super. Ct. 1995) (retirement plan);
  Zuelsdorf v. University of Alaska, 794 P.2d 932, 934 (Alaska 1990)
  (personnel policies).  In most cases, the employee enters the employment
  relationship well before retirement and does not focus on the details of
  retirement coverage in forming the employment contract.  See Maynard v.
  City of Burlington, 149 Vt. 40, 41, 537 A.2d 995, 996 (1987) (alleging such
  facts as basis for claim against employer for breach of fiduciary duty). 
  Because of these similarities, we conclude that the insurance rule on
  construction of ambiguous provisions

  

  should apply to this employee benefit provision.(FN1) We note that many
  courts have reached the same conclusion in comparable circumstances.  See
  Kuta v. Joint Dist. No. 50(J), 799 P.2d 379, 382 (Colo. 1990) (uncertainty
  in contract prepared exclusively by employer must be construed against
  employer); McLean v. Continental Wingate Co., 442 S.E.2d 276, 278 (Ga. Ct.
  App. 1994) (ambiguity in employment contract must be construed against
  employer which drafted the agreement); Mitchell v. Jewel Food Stores, 568 N.E.2d 827, 832 (Ill. 1990) (language of employment manual must be
  construed against employer).

       This conclusion does not mean plaintiff necessarily prevails.  The
  fact that plaintiff finds an ambiguity in the handbook language does not
  make it so.  See Troy v. American Fidelity Co., 120 Vt. 410, 418, 143 A.2d 469, 474 (1958).  We will not engage in a forced reading of the language to
  find an ambiguity.  Id. at 417; see Peerless Ins. Co., 154 Vt. at 495, 580 A.2d  at 488.  Nor will we deprive the insurer of unambiguous terms inserted
  in the policy for its benefit.  See Select Design, 165 Vt. at 72, 674 A.2d 
  at 800.

       Whether a contract term is ambiguous is a question of law.  See Hunter
  Broadcasting, Inc. v. City of Burlington, 164 Vt. 391, 395, 670 A.2d 836,
  839 (1995).  An insurance contract is ambiguous "if it is reasonably or
  fairly susceptible of different constructions."  Northern Sec. Ins. Co. v.
  Hatch, 165 Vt. 383, 386, 683 A.2d 392, 395 (1996) (citations omitted). 
  "Equivocation and uncertainty, whether in the significance of terms used or
  in the form and construction of sentences" can create ambiguity that will
  require a construction in favor of the insured.  Id.

  

       The parties' positions turn mainly on the significance and placement
  of the words "upon retirement" in the benefit provision.  Defendant argues
  that the words fix the date of retirement as determining all eligibility
  questions including the eligibility of a spouse for medical and dental
  insurance.  This view is reinforced, defendant argues, by the use of the
  word "employee" to describe the person entitled to the health insurance. 
  In defendant's view, the benefits provision requires the retiree to vest
  the spouse's right to insurance benefits at the time of retirement, when
  the retiree is still an employee.  Since there was no vested right at the
  time of plaintiff's retirement, the entitlement was gone.(FN2)

       Emphasizing the placement of the words "upon retirement," plaintiff
  argues that they describe how age and service eligibility is determined. 
  In plaintiff's view, the significance of the words is to say that age and
  period of service are measured as of the date of retirement.  Thus,
  plaintiff argues that the eligibility of a spouse for insurance benefits is
  not related at all to the date of retirement.  Further, plaintiff gives no
  significance to the use of the term "employee" because the handbook does
  not define the term, never uses the term "retiree" and, thus, draws no
  distinction between active and retired employees.

       Defendant's interpretation is undercut by the language of the
  following paragraph in the handbook:

       If an employee otherwise eligible for retirement
       benefits dies or becomes disabled, his or her spouse shall 
       receive medical and dental insurance for the rest of his/her 
       respective life if no other employer-provided coverage is available.

  The circumstances present here could apply to a disabled worker who
  acquires a spouse after the onset of the disability.  The provision
  covering the disabled worker lacks the temporal 

  

  language on which defendant relies in construing the retirement provision,
  although it does use the term "employee."

       We conclude that, because of the way the benefit sentence is worded,
  either of the  interpretations is reasonable and is not forced.  Although
  defendant may have intended to use the term "employee" to exclude retirees,
  there is no evidence of this narrow usage.  Indeed, our impression from the
  handbook language is that defendant failed to anticipate the presence of
  subsequent spouses and clearly specify whether they are eligible for
  insurance benefits.  In the absence of a clear exclusion, we must hold that
  plaintiff's spouse is eligible for insurance benefits.(FN3)

       Reversed.

       	FOR THE COURT:



       	_______________________________________
  	Associate Justice

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                                  Footnotes


FN1.  We can reach the same result by applying the rule that pension
  plans are construed liberally in favor of the employee.  See, e.g., Conner
  v. Phoenix Steel Corp., 249 A.2d 866, 868 (Del. 1969).  Moreover, whatever
  rule would apply in a case involving a private employer, here plaintiff
  worked for an entity that is at least for some purposes a government
  agency.  Its personnel policies may be seen as a form of governmental rule
  or regulation that courts construe liberally in light of its evident
  purposes.  See, e.g., Duhaime v. Treasurer, State of Vermont, 161 Vt. 157,
  160, 636 A.2d 754, 756 (1993) (act providing retirement benefits for state
  employee is remedial and must be interpreted "liberally in favor of the
  beneficiaries").

FN2.  At oral argument, defendant's counsel stressed the need for
  defendant to know its benefits exposure at time of the employee's
  retirement.  In explaining this vested rights theory, counsel indicated
  that, if an employee had a spouse on the date of retirement, medical
  insurance would be available to any subsequent spouse following the death
  of or divorce from the spouse in existence at retirement.  The vested
  rights theory may be advantageous to the employer, and in some
  circumstances also advantageous to the retiree, but we have difficulty
  finding it in the wording of the handbook provision.


FN3.   Defendant argues that we should follow the decision of the
  Vermont Labor Relations Board in Kelly v. Vermont State Colleges, 19
  V.L.R.B. 100 (1996), which held that under similar language in the
  collective bargaining agreement the subsequent spouse of a retired worker
  was not eligible for insurance.  The language of the collective bargaining
  agreement, while similar, contains additional wording that supports
  defendant's position.  More importantly, the collective bargaining
  agreement was drafted by both defendant and the union, and the terms were
  subject to bargaining.  See Dieter v. Fidelcor, Inc., 657 A.2d 27, 30 (Pa.
  Super. Ct. 1995) (general rule that agreements are to be construed against
  employer may be true in case of general retirement plan "presented to
  employees on a take-it or leave-it basis" but not where retirement
  agreement is individually negotiated).  Therefore, there is no requirement
  that ambiguity in the collective bargaining agreement be resolved in favor
  of the employee.  See Vermont State Colleges Faculty Fed'n v. Vermont State
  Colleges, 151 Vt. 457, 461, 561 A.2d 417, 419 (1989) (traditional
  principles of contract law govern construction of collective bargaining
  agreement); Grievance of Gorruso, 150 Vt. 139, 143, 549 A.2d 631, 634
  (1988) (where contract language is ambiguous, court must "look at the
  situation and motives of the parties, the subject matter of the contract,
  and the object sought to be attained by it" to determine drafters' intent).