The company had filed voluntary petitions for reorganization under a Bankruptcy Code citing failure to secure $150m in annual labor cost savings to regain profitability. However, the United Mine Workers (UMW), representing 1700 current Patriot workers and 13,000 retirees and their relatives, have claimed their benefits.

US court has ruled that Peabody Energy Corporation is responsible for healthcare benefits it assumed during the spin-off of Patriot Coal.

Patriot president and CEO Bennett Hatfield said that the appellate court adopted the position that Patriot has advocated all along – Peabody should not be permitted to use Patriot’s bankruptcy to escape its healthcare obligations to thousands of retirees.

"Patriot remains committed to a fair outcome for our stakeholders, while securing the necessary savings to successfully emerge as a long-term coal producer," Hatfield concluded.

Nevertheless, Peabody Energy claimed that the court has not ordered on how Peabody’s level of funding would be determined with this new agreement in place.

"We are not concerned with, and express no opinion on, what effect a new labor agreement would have on Peabody Holding’s obligation to the assumed retirees," the company said.

With the approval for a new labor agreement, the provisions of the contract with Patriot would apply and any future funding levels are yet to be determined, Peabody added.