Tobacco Third Party Suits

cc ROBEIN, URANN & LURYE (A Professional Law Corporation) P.O. BOX 6768 2540 SEVERN AVENUE SUITE 400 METAIRIE, LA. 70009-6768 (504) 885-9994 FAX No. 1-504-885-9969 LOUIS L ROBEIN. JR ROBERT H. URANN WILLIAM LURYE JULIE RICHARD-SPENCER Tobacco- NANCY PICARD MARIA c CANGEMI MARK A SWEET October 1, 1997 WILLIAM KEN HAWKINS 3rd EDWARD K NEWMAN 'party suits ADMITED IN WI ONLY VIA FACSIMILE NO. (504) 769-2121 Mr. Vic Bussie President Emeritus Louisiana AFL-CIO Post Office Box 3477 Baton Rouge, LA 70821-3477 Dear Vic: You have asked that we explain what legal standing Taft-Hartley Health & Welfare Funds ("Funds") have to pursue claims against the Tobacco Industry for recovery of medical and hospitalization benefits to Fund participants and beneficiaries afflicted with tobacco-related illnesses and diseases. Specifically, you have asked that we distinguish such claims from those that could arguably be advanced by private group health insurance carriers against the Tobacco Industry under the same or like legal theories. As you know, our Funds are not funded by individual or group-based premiums. Instead, they are funded by fixed collectively bargained employer contributions and to a certain degree by employee self-pay contributions.¹ These contributions are submitted on an hours-worked formula by employers. They are paid on a pre-tax basis (as deductible expenses), and are typically part of an overall "pay package" negotiated by a union. At contract ratification time covered members traditionally allocate these monies and as an hourly contribution to the applicable Fund. While the Tax Code considers these contributions as employer-made, the reality is that working people simply act collectively to dedicate a portion of their hourly compensation package to finance a voluntary group health plan. Funds typically do not have the contractual authority to adjust hourly contributions. The administered benefit package is formulated on expected contributions and, to a limited extent, Fund reserves. If claims experience critically increases, the trustees of an affected Fund have two choices: 1 Self-pay rights are generally accorded to temporarily unemployed participants.