Rossetto v. Pabst Brewing Company, Inc., 217 F.3d 539 (7^th Cir. 2000)-Judge Posner clarified the test for whether language in a collective bargaining agreement (not an ERISA plan) creates vested rights to health benefits which survive the termination of the agreement. Although there is a default rule against vesting, or a presumption when "all the court has to go on is silence," either party can overcome this presumption if either party shows patent or latent ambiguity sufficient to require a trial on the meaning of the agreement. See Bidlack v. Wheelabrator Corp., 993 F.2d 603 (7th Cir. 1993) (en banc).

Here, Posner found latent ambiguity in the collective bargaining agreement by pointing out that Pabst had negotiated an agreement with another union which explicitly limited health and welfare benefits for the "term of this agreement." Additionally, the machinists union had an identical collective bargaining agreement with Schlitz, who "continues to this day to provide health insurance to the retired machinists of its Milwaukee facilities, which it closed in 1981."

Latent ambiguity is an ambiguity that is discovered when an apparently unambiguous contract is applied to objective extrinsic facts on which it is based. (Posner gives the classic example from Raffles v. Wichelhaus, 2 H. & C. 906, 159 Eng. Rep. 375 (Ex. 1864), in which a contract referring to a ship named "Peerless" was rendered latently ambiguous by the fact that there were two ships of that name.) Thus, the above evidence "does not prove that the [plaintiffs' interpretation] is correct, but it shows that the silence of the collective bargaining agreement with respect to vesting makes the agreement genuinely ambiguous and not merely incomplete."