When Mark Petersen retired from the Raritan, New Jersey Police Department, he was provided health insurance, without cost, pursuant to the terms of the contract then in effect between the Township and the Police Benevolent Association Local 337. Several years after he retired, Petersen was notified that the Township discontinued all municipal employee participation in the insurance plan in which Petersen was enrolled. Because he and other retirees were afforded the same benefits as full-time employees, Petersen was given the option of receiving free benefits under a different health plan or continuing his participation in the original plan, subject to his payment of a portion of the premium expense.
Petersen sued, contending that the Township’s modification of the level and type of benefits granted at retirement violated the terms of the contract. An appeals court disagreed, and refused to overturn the Township’s decision.
The contract clause at issue, Section 5 of the contract’s health insurance article, provided that retirees “shall continue to receive all health and medical benefits provided by the employer for the remainder of his life. Such coverage shall be provided at the expense of the employer.” Section 1 of the article listed the specific plans provided to active employees, including the plan Petersen was on.
Petersen’s position was that the language of Section 5 required the Township to continue to provide him with the benefits under the traditional plan even if it no longer offered the plan to active employees. The Court disagreed, reasoning that “Section 1 applied to current employees and their dependents. That provision specifically included language fixing the level of benefits for the term of the agreement. Section 5, in discussing the benefits extended to retirees, however, contained no similar language. Section 5 obligated the Township to provide Petersen with health benefits for life as ‘provided by the employer’; it did not extend a particular plan or level of coverage.
“Other terms of the contract reflect the parties’ intention that modification was acceptable and the provisions remained unaltered for a limited period. For example, the contract included a savings clause, allowing its modification by agreement of the PBA and the Township. In fact, the contract under review was amended in 1998 following a grievance involving Petersen, which modified the necessity that the predicate 25 years of service were not exclusively with the Township. These changes reflect the parties’ intention that the agreement’s terms were not immutable, thus defeating Petersen’s contention.
“Past dealings between the parties also belie Petersen’s claim. The Township’s practice was to uniformly administer the health insurance plan to both employees and retirees, in real time. Whatever changes were made to co-pays and/or deductibles (always the insured’s responsibility), these changes were made across-the-board, whether the change was pro or con.”
Petersen v. Township of Raritan, 12 A.3d 250 (N.J. Super. A.D. 2011).