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EMPLOYMENT LAW - Interpretation of group health plan re LFUCG firefighters: Lexington-Fayette Urban County Government v. Norman Johnson, et al. (SC 3/19/2009)

By Michael Stevens

Lexington-Fayette Urban County Government v. Norman Johnson, et al.
2007-SC-000294-DG March 19, 2009
Opinion by Justice Schroder; Justice Noble not sitting.

Appellees were three retired firefighters who opted out of the Lexington-Fayette Urban County Government (LFUCG) group health insurance plan. At the time they opted out, LFUCG?s terms required retirees to pay 100% of the premium and stated decisions to terminate coverage were considered irrevocable. Retirees were ineligible to ever rejoin the plan once they left. In 1999, LFUCG passed an ordinance that, in part, authorized payment of a portion of group health insurance premiums for retired police and firefighters ?who retired prior to July 1, 1999 and who were participants in the group health insurance plan coverage? (emphasis added). Appellees attempted to enroll in the plan, but were refused by LFUCG, who told them that coverage was not available to them since they had previously opted out. Appellees brought suit. In 2000, LFUCG passed another ordinance clarifying the 1999 ordinance by specifically stating that those who previously opted out were not eligible to reenroll. The Appellees then amended their suit to include a claim that the 2000 ordinance violated their rights to equal protection under the state and federal constitutions.

The trial court held that there were no patent ambiguities in the 1999 ordinance and that Appellees were eligible to reenroll up until the countervailing ordinance was passed in 2000. The trial court also upheld the constitutionality of the 2000 ordinance. The Court of Appeals affirmed the trial court?s decision regarding the 1999 ordinance, but reversed on the 2000 ordinance on the ground there was no rational basis for excluding Appellees from coverage after having admitted them in 1999.

The Supreme Court found a latent ambiguity in the wording of the 1999 ordinance and determined that the ordinance did not include Appellees among those eligible to participate in the plan. The Court construed the phrase ?who were participants? to exclude Appellees for two reasons: 1) presumably the phrase was there to exclude someone, otherwise it was meaningless; and 2) intent of the 1999 ordinance could be inferred from the subsequent ordinance which specifically excluded Appellees. Having determined Appellees were not eligible for the plan under the 1999 ordinance, the Court further held the question of the constitutionality of the 2000 ordinance was rendered moot.

Justice Abramson (joined by Justice Cunningham) dissented, writing that the phrase ?who were participants? only excluded those who had never enrolled in the plan (for example, those who were covered by a spouse?s plan). The minority also disagreed with the Court of Appeals conclusion that the ordinance violated equal protection, stating there was a rational basis under federal law and a reasonable basis under state law for the 2000 ordinance?and that merely because the LFUCG had redrawn the classification  was not a de facto equal protection violation.

Full post as published by Kentucky Cases on September 30, 2009 (boomark / email).