Opinion
No. 5-854 / 04-1967
Filed February 15, 2006
Appeal from the Iowa District Court for Wapello County, E. Richard Meadows, Jr., Judge.
A retired city employee and his wife appeal the district court's denial of their petition for writ of mandamus to compel the City of Ottumwa to provide retiree health insurance. AFFIRMED.
Allan C. Orsborn and Ryan J. Mitchell of Orsborn, Bauerle, Milani Grothe, L.L.P., Ottumwa, for appellants.
Thomas F. Kintigh of Griffin, Dew Kintigh, Ottumwa, for appellee.
Considered by Zimmer, P.J., and Miller and Vaitheswaran, JJ.
A retired city employee and his wife sought to compel the City of Ottumwa to provide retiree health insurance. The district court denied their petition for writ of mandamus and damages. We affirm.
I. Background Facts and Proceedings
The City of Ottumwa provides health insurance to retired city employees. Prior to fiscal year 1994-95, the City program did not include a "years of service" requirement.
In March 1994, a City committee recommended the adoption of a minimum "years of service" eligibility requirement. The recommendation was as follows: current employees retiring within five years of March 1, 1994 would need ten years of service to be eligible for retiree health insurance; employees retiring between March 1, 1999 and March 1, 2004, would need fifteen years of service; and employees retiring after March 1, 2004 would need twenty years of service. The city council issued a resolution approving the recommendation "for fiscal year 1994-95."
Clair Martin was employed by the City of Ottumwa for twelve years. He retired in 2002. Clair knew the city council passed a "years of service" requirement, but believed the resolution, which would have required that he work fifteen years to receive retiree health insurance, did not apply to him. His belief was corroborated by the City's human resources manager, who told Martin shortly before his retirement that he would qualify for retiree health insurance.
After Martin retired, the City furnished family health insurance coverage for several months. The City discontinued that coverage in 2003 on the ground that Martin had not met the "years of service" requirement. The City offered to return Martin to the payroll to fulfill the additional three years of service needed for eligibility under the 1994-95 resolution. Martin declined the offer.
The City's director of finance testified that the assumptions contained in the 1994-95 resolution were incorporated into each budget year after that.
Martin and his wife sued the City, seeking a writ of mandamus to compel the provision of retiree health insurance. They also asserted the City was equitably estopped from denying benefits, in light of the human resources manager's representations concerning eligibility. They sought damages based on the amount expended for health insurance after the City discontinued benefits. Following trial, the district court denied their petition. This appeal followed.
On appeal, the Martins contend the district court (1) "erred in failing to order the City of Ottumwa to adhere to its unwritten policy of providing health care insurance to all retired employees and their family," (2) judicially usurped legislative authority, and (3) erred in rejecting their equitable estoppel claim. The parties state that our review of these issues is de novo. We will use that standard of review.
II. Unwritten Policy
The Martins contend the City of Ottumwa suspended its policy of providing retiree health care insurance only for the fiscal year 1994 through 1995. They argue that "if the City wishes to completely suspend the policy or repeal the policy beyond fiscal year 1994-1995 then this should be done by the City Council." There is no disagreement that the City did not explicitly take such action. In the Martins' view, therefore, the City reverted to the original unwritten practice of affording all retirees health insurance, regardless of years of service.
The City concedes "the resolution adopted in 1994 was effective only for that fiscal year" but counters that the "years of service" requirement contained in the 1994-95 resolution was "implicit in the budget assumptions which accompanied the budget for each year after."
In our view, it matters little whether the City's actions were explicit or implicit, as all parties are focused on the City's informal practices rather than formal practices such as the adoption of resolutions or ordinance. Cf. Bryan v. City of Des Moines, 261 N.W.2d 685, 687 (Iowa 1978) (stating employee job classifications could be established or amended by resolution as well as by ordinance). The Martins wish to have the City return to the practice of affording all retirees health insurance regardless of their years of service, a practice that was never formally adopted. Similarly, the City advocates enforcement of a "years of service" requirement that was never formally extended beyond the 1994-95 fiscal year. Therefore, the question before the district court and before us is which of these informal practices should legally prevail.
On this question, the starting point is what the legislature has said on the subject. As the district court pointed out, our legislature has not required cities to afford retirees health insurance. See Iowa Code § 364.25 (2003) ("A city may provide health or medical insurance coverage or supplemental health or medical insurance coverage to retired employees of the city.") (emphasis added); cf. id. § 509A.7 (in chapter on group insurance for public employees, excluding from definition of employee "temporary or retired employees except as otherwise provided in this chapter"). It follows that the legislature has not set forth a scheme for the vesting of health insurance. Cf. id. § 97B.1A(25)(a) (describing vesting of Iowa public employee retirement benefits); Colorado Springs Firefighters Ass'n, Local 5 v. City of Colorado Springs, 784 P.2d 766, 771-72 (Colo. 1989) (noting distinctions between pension benefits and retiree health benefits including the fact that payment of health insurance premiums were made out of current revenues, city employees were not required to contribute a percentage of their salary to fund health insurance program, and employee participation was optional); Davis v. Wilson County, 70 S.W.3d 724, 727-28 (Tenn. 2002) (noting retirement benefits vest automatically while welfare benefits such as health care benefits do not). But see Duncan v. Retired Public Employees of Alaska, Inc., 71 P.3d 882, 888 n. 23 (Alaska 2003) (citing contrary authority). To the contrary, the legislature has allowed cities to restrict the coverage of health insurance. Iowa Code § 364.25 ("A city . . . may establish such requirements or restrictions concerning the coverage provided. . . .").
The City of Ottumwa elected to impose such a restriction. Specifically, it extended the "years of service" eligibility requirement beyond the 1994-95 fiscal year. The Martins have cited no city ordinance or resolution precluding the imposition of such a restriction or expressing an intent to abide by the original unwritten practice of affording health insurance to all retirees. Cf. Willetts v. City of Preston, 433 N.W.2d 58, 62 (Iowa Ct.App. 1988) (holding sick leave not a vested benefit for city employees). As the district court concluded in its considered opinion, "the plaintiff did not have a vested right in the benefits, and the City was entitled to modify or terminate its practice [of providing all retirees these benefits] at any time."
The Martins do not allege that retiree health benefits were the equivalent of accrued compensation. See Vanous v. City of Cedar Rapids, 255 N.W.2d 334, 336 (Iowa 1977) (holding city employee was entitled to compensation for benefits that accrue during the period of his employment).
Because we agree with the district court's conclusion, we find it unnecessary to address the Martins' second contention that the district court judicially usurped legislative authority. We proceed to their third argument: equitable estoppel.
III. Equitable Estoppel
The Martins contend that the City should be equitably estopped from refusing to provide retiree health insurance, in light of the human resources manager's statement that Martin was eligible for such insurance. They concede that estoppel only lies against governmental agencies in exceptional circumstances. ABC Disposal Sys., Inc. v. Dep't of Natural Res., 681 N.W.2d 596, 607 (Iowa 2004). They argue the standard was satisfied in that the erroneous advice they received "seriously injured" them.
We cannot find exceptional circumstances warranting application of the equitable estoppel doctrine against the City. When the City discovered its mistake in affording the Martins retiree health insurance, it gave Clair Martin the option of returning to work to complete the years of service required for eligibility. Martin declined the offer. Given these facts, we conclude the City did not take "unfair advantage" of Martin to his "prejudice." ABC Disposal, 681 N.W.2d at 606.
IV. Disposition
We affirm the district court's denial on the Martins' petition for mandamus and damages.