Trustees and other fiduciaries are often described as having to act fairly in discharging their responsibilities to pension and health and welfare plan members. While most people have a strong sense of what is generally fair and unfair, the concept becomes more complicated when it is applied to the interests of a single member relative to a group. What may seem fair to an individual may be unfair to the group as a whole. In dealing with such situations, fiduciaries must take care to act honestly and in a way that is even-handed, having regard to what is fair and reasonable for the entire group of beneficiaries for whom they are responsible.
A recent decision of the Nova Scotia Supreme Court in Downey v. Cranston provides a useful example of this principle.
Terrence Downey, who had worked as a non-union longshoreman for 26 years on the Halifax waterfront before becoming a member of the union in July 1991, became permanently disabled following a workplace injury in December 1991. Mr. Downey claimed a disability pension under the Halifax Port ILA/HEA Pension Plan (the Pension Plan) and benefits under the Halifax Port ILA/HEA Health and Welfare Trust Fund Benefits Plan (the Welfare Plan), both of which he had become eligible to join as a union member, subject to satisfying certain minimum work requirements (300 hours of work in the year for the Pension Plan and 450 hours of work for the Health and Welfare Plan).
At the time of his disability Mr. Downey had worked only 245.5 hours as a union member. Nevertheless, he was mistakenly credited with hours worked while in receipt of Workers Compensation Benefits and was reimbursed for certain medical expenses under the Welfare Plan for which he was not entitled. Once the mistake was realized, the Trustees of the Welfare Plan instructed the plan administrator to advise Mr. Downey that he was not eligible for such coverage going forward.
The Trustees did not seek reimbursement of the amounts paid in error. Mr. Downey continued to assert his right to medical expense and disability pension coverage. Subsequently, he was offered additional compensation for three years’ worth of medical expenses in final settlement of his claims, however, he declined to settle on this basis and brought an action against the Trustees, the union and the employers association.
In dismissing Mr. Downey’s action, the Court held that he had to meet certain eligibility requirements for membership under the Pension Plan and the Welfare Plan, and that his union membership alone did not automatically entitle him to coverage. The Court’s findings included that the Trustees owed all eligible members a duty of good faith and even-handedness and they would have breached these duties had they authorized the payment of either disability or welfare benefits to Downey as an ineligible person under the plans.