City Can Change Mistaken Practice Of Fully Reimbursing Medical Expenses of Retired Firefighters, Police Officers

A group of 33 retired firefighters and police officers previously employed by the City of Warwick, Rhode Island brought a lawsuit against the City, contending that the City had wrongfully stopped the practice of fully reimbursing them for their medical expenses. At various points over the past three decades, each of the retirees sustained a debilitating injury in the line of duty, resulting in a grant of disability leave by the City’s Board of Public Safety. When it became apparent that the plaintiffs’ injuries precluded a return to active duty, the Board exercised its discretion to place them in retirement.

The City funded the payment of retirees’ medical expenses through health insurance, which covers part, but not all, of those costs. For many years, the City also reimbursed excess medical expenses (that is, expenses not covered by insurance). This meant that 100 percent of each retiree’s medical expenses was reimbursed.

In 2003, the City concluded that, in accordance with a recent decision of the Rhode Island Supreme Court, it was not obliged to reimburse all of a disabled retiree’s medical expenses. When the City notified each of the retirees that it intended to stop reimbursing for excess medical expenses, the retirees brought the lawsuit against the City.

The federal First Circuit Court of Appeals rejected the retirees’ lawsuit. The retirees’ primary argument was that the City’s prolonged reimbursement of medical expenses “estopped” it from later changing course. The Court rejected the argument, holding that “to succeed on an equitable estoppel claim, a party must establish that the defendant made an affirmative representation directed to him for the purpose of inducing him to act or fail to act in reliance thereon” and that such representation induced him to act or fail to act to his injury.

“The first flaw is the absence of any evidence that the Board made either a promise or an affirmative representation to disabled firefighters and police officers generally that the City would fully reimburse disabled retirees’ medical expenses. For aught that appears from the record, the Board was not consulted. The second flaw is equally destructive to the fabric of the plaintiffs’ argument. The doctrine of equitable estoppel should not be applied against a governmental entity when, as here, the alleged representations or conduct relied upon were ultra vires or beyond the power of the governmental agency. Because the City’s full reimbursement of medical expenses was ultra vires, the claims for equitable estoppel founder.”

While the Court had some sympathy for the position of the retirees, it was not enough to sway the day. As the Court put it, “to sum up, government officials have a solemn duty to expend public funds in accordance with law. Although we understand the plaintiffs’ frustration – after all, the City buoyed their hopes when it mistakenly plunged ahead, over a period of years, to make full reimbursement of disabled public safety retirees’ medical expenses – they have not, as a class, shown any basis in law or in equity sufficient to force the City to perpetuate this erroneous practice. Taxpayers, too, have rights.”

Cahoon v. Shelton, 2011 WL 2937424 (1st Cir. 2011).