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Miners' Benefits Vanish With Bankruptcy Ruling
|MITHERS, W.Va., Oct. 22 - After 31 years, Carl Leake retired last year
from the Cannelton mine near here with what he thought was a rock-solid promise
of health insurance for life under his union contract. And a vital promise
it was: this summer, his wife was found to have breast cancer and her treatment
has cost more than $200,000.
But last month, a federal bankruptcy judge in Kentucky authorized Cannelton's owner, Horizon Natural Resources, to terminate its collective bargaining agreements with the United Mine Workers of America. And just like that, Mr. Leake's guaranteed health insurance was gone.
"I figure we could lose everything if we have to pay her bills," Mr. Leake, 61, said.
Mr. Leake is one of nearly 3,800 union coal miners and their dependents in West Virginia, Kentucky, Illinois and Indiana whose company-financed health insurance vanished with a swipe of Judge William S. Howard's pen last month. The union has pledged to cover their health insurance for six months. But beyond that, many workers are facing a future with no insurance or monthly premiums they can barely afford.
In a region where union benefits have long been the bedrock of middle-class life, Judge Howard's decision has been a shocking blow. Though similar decisions left thousands of unionized steelworkers without retiree benefits during the 1990's, the Horizon case marks the first time bankruptcy law has been used to void union contracts in the coal industry, experts said. Now, the mineworkers union is bracing for new bankruptcy filings by coal companies seeking to alter or eliminate collective bargaining agreements.
"We're fearful this will set a precedent," said Cecil E. Roberts, president of the United Mine Workers. "We're going to resist this with every means possible."
The case has become a campaign issue in West Virginia, with the mine workers
union - which has endorsed
"We want to prevent another Horizon," said Jim Zoia, a spokesman for Representative Nick J. Rahall II, a West Virginia Democrat who is drafting legislation to tighten bankruptcy rules.
Horizon, based in Ashland, Ky., had been among the nation's largest coal producers before going deep into debt. In 2002, it sought Chapter 11 protection from its creditors. This year, it asked Judge Howard to abrogate its union contracts, asserting that the high cost of union benefits had made the properties unattractive to potential buyers.
Judge Howard agreed. In a ruling in August, he said "unrefuted evidence" showed that Horizon's mines could not be sold as long as its expensive obligations to union retirees remained in place. He asserted that elimination of the benefits, while painful, was in the public interest because it would preserve nonunion jobs at about two dozen other mines that might have closed in a liquidation.
His decision paved the way for Horizon to release about 800 union workers and to sell two dozen mining operations, both union and nonunion, for $786 million to International Coal Group, led by the financier Wilbur T. Ross. International Coal Group then sold two of the union mines to Massey Energy Company. Mr. Ross has also led consortiums that acquired steel mills through similar bankruptcy proceedings in recent years.
The sale has not affected about 2,000 retirees, whose health benefits are covered under a 1992 law known as the Coal Act that created a benefit fund financed by coal companies. But 3,000 other retirees and 800 active miners must now apply for coverage from smaller union funds that are already short of for cash, union officials say. For that reason, the union is guaranteeing continued coverage for only six months.
In an interview, Mr. Ross said International Coal Group intends to keep its newly acquired mines, all of them nonunion, operating with their current employees. Massey has said it plans to reopen its two mines, Cannelton and Starfire in eastern Kentucky, perhaps early next year. But it has said it will hire only nonunion workers. The union has pledged to protest any nonunion hiring.
The mineworkers union has asserted that Mr. Ross conspired with Massey and Horizon to engineer the bankruptcy so that the mines could be sold at low prices. Mr. Ross denied that. But he argued that the sale could not have occurred without voiding the agreements, and he asserted that thousands of nonunion jobs had been preserved as a result.
"I very much sympathize with the position of the U.M.W.A.," he said in an interview. "It's awful that these people are displaced. Unfortunately, that's our system right now."
For many workers, losing health benefits may prove worse than losing jobs. Most have lived through layoffs before, and many believe they can find new work. But they are less certain those jobs will come with health coverage. Most are in their 40's or 50's and many suffer health problems related to lifetimes of labor underground. They fear that no insurance plan will cover their health problems or their spouses'.
Larry Vassil, who went to work in Cannelton in 1978, is one. At 44, he is not confident he can find another good paying union job. Complicating matters, his wife, Tammy, 39, suffered blood poisoning and possibly heart damage from a kidney stone operation last month.
Her medical bills have totaled over $42,000. Horizon's insurance paid part of that before Mr. Vassil lost his job, and he expects the union to cover most of the rest. But his wife is likely to need care for months to come, and he is worried he will not find an insurer willing to cover her.
"If we don't, I'll have to file for bankruptcy," he said.
Bankruptcy experts said the Horizon case was likely to encourage other coal companies to try to shed expensive union agreements through Chapter 11 filings. Daniel Keating, a law professor and bankruptcy expert at Washington University in St. Louis, said the best way to protect retiree benefits is to require companies to provide long-term financing for benefit funds, so they will survive even if the companies fail.
"Coal is like steel," Professor Keating said. "You have an industry that's not growing. You've got retirees that are increasing in numbers relative to current workers. When you look at a particular coal company's ability to make a profit, you are faced with a stark reality that as long as they have to honor retiree benefits, they probably can't make a profit."
A union meeting at a high school here on Thursday night underscored Professor Keating's observations. Most of the workers in the crowd were retired or in their 40's or 50's. The meeting, called to draw attention to the Horizon bankruptcy, turned into a raucous Democratic rally, with hundreds of union supporters stamping their feet and chanting "Kerry." But amid the calls to fight, there was a sense of loss.
"Every time a union mine closes, we lose business," said Eddie O'Brien, 63, the owner of a barbershop in Smithers. "And this is the last union mine in the area. It's like a chain. Every link affects the other links. And we're losing our links."