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
Senator John Kerry -
asserting that the Bush administration has opposed measures that would protect
retiree benefits. It has also spurred calls from some West Virginia lawmakers
to restrict the use of bankruptcy laws to void union contracts.
"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."
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