employer may not terminate disability benefit plan that was in force during term of employee’s employment despite express reservation of right to terminate benefit plan
How later courts described this case
- employer may not terminate disability benefit plan that was in force during term of employee’s employment despite express reservation of right to terminate benefit plan
- “where the employee has satisfied all conditions precedent to becoming eligible for benefits under a plan, . . . the employee has a vested right to the benefits”
- condition described as “degenerative arthritis of the hip and spine”
Written by the judges who cited it.
The opinion
DENECEE, J.,
specially concurring.
I would affirm by reasoning which differs at least in terminology from that expressed by the majority.
The contract fixing the terms of the disability income plan was negotiated by the defendant company and a union. The contract provides: “The Company reserves the right to interpret and administer the plan, and such decisions shall be final.”
I believe the majority’s assumption that the decision that plaintiff was not entitled to disability benefits is included within the phrase, “to interpret and *335 administer the plan,” is correct. The question is, of what effect is the phrase, “and such decisions shall he final.” Without such phrase I suppose the court would retry de novo the same issues the company decided. With such phrase the judicial review will have to be something less or else the phrase means nothing. The trial court found “that Plaintiff has established by a preponderance of the evidence that he is totally disabled” or in the alternative, “that the denial of benefits would be an arbitrary exercise of authority by the Defendant.”
This court has held that the fact that one of the parties to the contract is given the deeision-maldng power in disputes between the parties does not render such a clause illegal or void. In Elliott Contracting Co. v. Portland, 88 Or 150 , 171 P 760 (1918), the plaintiff contractor and the defendant city entered into a construction contract. The contract provided that as to certain disputes the decision of the city engineer would be “final and binding.” We held:
“* * * While it might be improvident for the plaintiff to agree that the measurement of its work should be left to the defendant’s officer we are not aware of any law preventing it from maldng such a stipulation. It is not contrary to public policy and if it chose thus to put itself at the mercy so to speak of the other contracting party’s servant it had a right to do so. * * 88 Or at 155 .
It may be thought that such a clause should only be valid in construction contracts in which the expertise of an engineer or architect is used and there is a necessity for expeditious decision. However, we upheld such a clause in circumstances much like the present. In Rueda v. Union Pacific Railroad Co., 180 Or 133 , 175 P2d 778 (1946), plaintiff and the defendant *336 company contributed to a hospital fund which was ad-i ministered pursuant to a negotiated contract. The'contract provided that the Chief Surgeon of thé company would decide questions arising under the contract and there would be no appeal from his decision except to the “General Manager, whose decision shall be final.” 180 Or at 137 . We held this provision to be valid. 180 Or 170 -173.
When there is a valid clause in the contract stating that the decision of a party is “final,” we have held that such decision “is final and can only be set aside by proof of fraud or gross mistake.” Highway Com. v. Heintz Constr., 245 Or 530, 541 , 423 P2d 175 (1967); Barbour & Son v. Highway Com., 248 Or 247, 262 , 433 P2d 817 (1967).
Assuming we adhere to those standards, they are not all-inclusive. A decision of a party to a contract administering or interpreting that contract should not be given any weight if it is contrary to the terms of the contract.
The only evidence of why the company decided the plaintiff was not totally disabled is an exhibit which is a letter from the company to plaintiff. The letter states, in part:
“On June 30, 1972 we showed Dr. Davis some movies taken of you during the month of June. In a recent letter Dr. Davis reports: ‘As a result of reviewing the actions of this individual at the time these pictures were taken, I would be led to believe that his actions are not compatible with the examination and expression of physical findings that he made when he was here in my office---I would be led to believe that he would have been incapable of carrying out the things I saw him doing in these movies.’
*337 “In other words, the evidence .clearly indicates you misrepresented your condition to Dr. Davis and to the Company. Therefore your disability payments from the Company will stop immediately and you are terminated as of this date.”
The. letter states that plaintiff’s disability status is being terminated because “you misrepresented your condition to Dr. Davis and to the Company.” The inference could be drawn from the letter that the company is terminating his disability status because of a finding by Dr. Davis that plaintiff is not totally disabled. However, the trial court was justified in finding that the letter meant what it literally says, — that the company terminated plaintiff, not necessarily because he was not totally disabled within the meaning of the plan, but because he misrepresented his condition to the company. That this v«s the basis of the company’s decision is substantiated by testimony of the author of the letter that the company would not give plaintiff employment that possibly he could perform because “plaintiff wasn’t honest with us.”
The plan does not provide that an employee can be denied total disability benefits because the employee misrepresented his condition. It provides that if an employee is totally disabled he shall receive benefits unless the disability was caused by certain excluded causes which are not involved here.
If this had been an arbitration in which these two parties had selected a third, supposedly impartial, person to decide the controversy, the decision of the arbitrator might have to be affirmed even though we were of the opinion that the decision was not in accordance with the contract. Brewer v. Allstate Insurance Co., 248 Or 558, 561-563 , 436 P2d 547 (1968). We need *338 not decide whether that proposition is applicable here because the principle stated in the Brewer case should not be applicable when the party making the decision is one of the parties to the controversy. ①
Rueda v. Union Pacific Railroad Co., 180 Or 133 , 175 P2d 778 (1946), assumed that a provision stating that a provision that the decision of one of the parties to the contract was final was a provision for arbitration. Assuming without deciding, that such a statement is correct, the Rueda decision is not contrary to this holding as we did not decide in Rueda what the effect was of a company decision contrary to the terms of the contract.