Benefits & Compensation News

COBRA ruling: No harm done, but employee can sue anyway

The courtroom has become a very unforgiving place for employers who fail to strictly abide by COBRA’s notice requirements.

Fines for non-compliance can be pretty steep. The feds can fine an employer up to $110 per day for each and every notice that was supposed to go out to prospective beneficiaries but didn’t.

In addition, a group health plan can be sued for COBRA violations, and courts have been known to award attorney’s fees in connection with these suits.

And if you think having a TPA handle your COBRA administration will shield you from having to pay non-compliance penalties, think again. A court recently awarded statutory penalties of $2,500 to each of 741 former employees of Visteon, an automotive supplier, who failed to receive their COBRA election notices due to a mistake on the part of the company’s TPA. The total cost to Visteon was $1.8 million.

As bad as all that sounds, this may be the most troublesome aspect of COBRA litigation: An employee doesn’t even have to be harmed by an employer’s COBRA mistake to be allowed to sue for damages.

Despite lack of notice, employee remained insured

That fact was just reiterated in the case of Fleck v. WILMAC Corp.

Lindsay Fleck was a physical therapist for one of WILMAC’s nursing rehabilitation centers.

During her time at the rehab center, Fleck underwent ankle surgery and was approved for FMLA leave to recover.

After her recovery, WILMAC determined her ankle injury prevented her from being able to perform the essential functions of her job — even with an accommodation. As a result, she was terminated.

The company promised to send Fleck a COBRA election notice shortly after her termination. But the notice didn’t arrive in her mailbox for nine months.

During this time, however, an administrative glitch kept her group health insurance active. So Fleck was never without WILMAC’s sponsored health insurance. It was not terminated until 10 months following her firing.

By that time Fleck already had an individual policy, which she had purchased shortly after her termination. She’d assumed her group coverage was terminated in the month following her firing.

After receiving her COBRA election notice nine months following her termination, she sued, claiming WILMAC had infringed upon her rights under COBRA.

WILMAC tried to get the case thrown out, but it was unsuccessful.

The company gave the court three reasons why her case should be shot down:

  • Since Fleck’s insurance was never terminated, she didn’t suffer any damages
  • The clerical error, which caused her group coverage to last so long, was fixed within 30 days of being discovered, and
  • Fleck took out an individual health insurance policy shortly after her termination, which would’ve made her ineligible for COBRA benefits.

Court presented three reminders about COBRA

The court wasn’t swayed by any of the arguments.

In its ruling that the case could proceed to trial (in which it appears WILMAC will be forced to settle or pay the per-day fine — and then some), the court pointed out three specific rules under COBRA law:

  • COBRA liability can exist even if an individual isn’t harmed — failing to provide a COBRA notice is enough to trigger litigation
  • The clock starts running on the amount of time an employer has to present a COBRA election notice to an employee on the qualifying event date (i.e., the date Fleck was terminated) and not the date a clerical error is discovered, and
  • Obtaining individual coverage isn’t enough to render a person ineligible for COBRA benefits, only coverage obtained through an employer group health plan can terminate COBRA eligibility.

Notification timetable

The DOL is very specific about how long an employer has to provide the COBRA election notice to individuals after they’ve experienced a qualifying event (e.g., termination or reduction in work hours).

Following a qualifying event, an employer has 30 days to notify its health insurance plan administrator of an employee’s COBRA eligibility.

After that, the plan administrator has another 14 days to issue the COBRA election notice.

And as you can see, courts are not lenient toward employers who fail to abide by these requirements — no matter the reason.

Cite: Fleck v. WILMAC Corp.

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  • Frederick King

    Interesting. My employer just did a medical separation on me, because a job injury. The turned off my health insurance, before the date on the Cobra forms said I had. They also did offer me medical insurance. The only reason I found out that my insurance had been terminated, was when I went to the Dr. to confirm whether I had dry or wet Macular Degeneration. I have dry Macular Degeneration. I’m hearing impaired and have a hearing test scheduled so I can get better hearing aids. I also have a procedure scheduled on October 3 2016 for severe osteoartritis of my lower back. These people from UC Davis Medical center have been harassing me ever since I was injured and had surgery. One of the boss people that had harassed was fired for among other things unethical hiring practices. I had to apply for long term disability insurance, as UC Davis Medical Center Radiology department managers refuse to accommodate me unless I’m 100% no restrictions. They only want me to do the most manual and physically demanding duties in an x-ray department. During the IME examination, I found out I have been under surveillance for fraud. The IME Dr. used watching the videos as evidence that I was indeed and injurred, and permanently disabled person. UC Davis had already put me under surveillance before this. I believe there are 17 videos spread out over about 18 months, and none of them show me doing anything wrong. The also just did the medical termination one month before I turned 60, and said they I had used all my sick leave and vacation time. I just recieved a check in the mail for payment of over 200 hours of accumulated vacation time, and it showed that I still have about 40 hours of sick leave.
    This was signed by the Radiology Department Dave Delpizzio. He is trying to cheat me out of retirement pay, and medical benefits. He was a good buddy of gthe lady that got fired for unethical labor practices, and other bad things. By the way, I had just ordered medication, that I use every day for serious medical conditions, and did not get my breathing medicine.

    I’m happy to see that the courts impose fines, and allow victims to sue for damages. I’ve contacted the disability advocate department here in Napa, and was referred to an Attorney. I’m waiting for him to return the call, and I will take this to court. I owe it to my old fellow coworkers, who are still there at UC Davis, and are still being harassed, and being victimized by the unfair behavior of UC Davis medical center managers.

    By the way, I have already been paying full price for all of my benefits, and was over charged for a very long toime. They are going to have to refund a few thousand dollars in over payment for my medical insurance.

    I think a jury will just love these managers at UC Davis Medical Center. I’m sure the jury will agree that disabled old men, that are now on Social Security disability, have no right to keep medical insurance, and should have their retirement pay cut by managers that want to show other workers what will happen to them if they get injured at work and report the injury.

    I hope many people read this and it makes it way to some news paper. These people are real creaps. This is the same UC Davis that pepper sprayed a bunch of students, and ended up paying a couple of million dollars in damages for their illeagal behavior.

  • Raven Quinn Neese

    My previous employer never marked me as terminated in their system until today, 90+ days after termination. Only reason I know about this is I received notice about my 401K about to be in default because they havent recieved payment, but they could not set me up on repayment plan when I first terminated because my status was still active. Now Fidelity is telling me to not be in default of my loan I have to bring the past amount current (over $1400 before Christmas).I feel like this is wrong and I am in a “catch 22” situation. Is there anyway to make my previous employer responsilbe for this and make them pay for this??

  • Kristine Cezar

    It has now been 21 days past my last day of work and still waiting for my COBRA package

  • Self Interest

    My situation is even worse. As required, they notified me about the COBRA option; however, I just found out that after making premium payments for 6 straight months, they still canceled my insurance the day I was terminated. COBRA was never set up.

    So, I have been paying the ridiculous COBRA premiums and now that I need to make a claim, I have no insurance. Attempts to contact HR department are ignored. There is no department in business more incompetent than HR.