Worker Alleges Late COBRA Notice; Says Employer Violated 14-Day Limit

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Worker Alleges Late COBRA Notice; Says Employer Violated 14-Day Limit

April 23, 2003
Santa Rosa, CA

This recent lawsuit concerns a matter of ongoing confusion: How many days does an employer, who is also the plan administrator, have to notify an employee of the right to elect COBRA benefits? Is it 14 or 44 days? The source of the confusion may well be the law itself.

What are the time limits under COBRA law?

Within 30 days of the date of a COBRA qualifying event, an employer must notify the administrator of the occurrence of that event; and

Within 14 days of the date on which the administrator is notified of the event, the qualified beneficiary must be notified of the right to elect COBRA benefits.

Although the law appears to be straightforward, it is silent on the queston of how many days does an employer have to send the election notice when it also acts as the plan administrator - and this case doesn't provide any hard answers.

What happened in this lawsuit:
Bradley Anderson was fired by his employer, Royal Crest Dairy, after being injured on his job as a route delivery driver. He sued for wrongful termination and also asserted that Royal Crest Dairy violated COBRA law by failing to provide him with an election notice within 14 days of being terminated. The employer countered that it had 44 days in which to provide the COBRA notification. Here's a step-by-step account of how things occurred, ending in a lawsuit:

On February 28, 2001, Royal Crest Dairy notified Anderson he was being terminated and canceled his group health plan coverage.

On March 13, Mrs. Anderson learned that they had no health insurance coverage when she attempted to refill a prescription for medication she used regularly for multiple sclerosis. She immediately called Royal Crest's benefits manager, Keith Gaertner, begging him to reinstate her insurance so she could fill necessary prescriptions and have important tests done.

On March 13, Gaertner sent the Qualifying Event Form to COBRA Compliance Systems, Inc (CCS), a third party with whom Royal Crest Dairy contracted to assist in administering its COBRA benefits.

On March 26, 13 days later, CCS sent the COBRA Election Notice to the Andersons.

On April 1, the Andersons returned the election form.

On April 4, their health insurance coverage was reinstated and made retroactive to February 28, the date on which coverage was originally lost.

Was CCS the plan administrator? First, Royal Crest argued that because CCS was under contract to act and assist in COBRA administration, it was the plan administrator. If this were the case, then Royal Crest would have had a full 44 days in which to provide the COBRA event notice. But the court examined Royal Crest's contract with CCS, and determined that CCS did not assume the legal status of a plan administrator. In fact, Royal Crest Dairy was designated in the contract as the "administrator." As written, the contract only required that CCS assist the administrator (Royal Crest) in carrying out its legal obligation to provide continuation coverage.

Next, Royal Crest asserted that even if it was the plan administrator, it still had 44 days in which to notify the Andersons of their right to elect COBRA. In making this argument, Royal Crest relied on a 1995 Department of Labor opinion letter, which concluded that an employer who is also the plan administrator has 44 days to notify a qualified beneficiary of COBRA rights

Court refuses to follow DOL's guideline. The court refused to rely either on the DOL's opinion letter or prior court decisions to give Royal Crest 44 days for notifying the Andersons. Because Royal Crest had actual knowledge of the qualifying event on the day of the event, the court asked: "Why should the administrator/employer be given an additional 30 days when the COBRA statute specifically says the administrator should have 14 days?"

What harm did the Andersons suffer? Royal Crest maintains that applying the 44-day limit didn't harm the Andersons because they were able to elect continuation coverage well within the 44-day time limit and coverage was reinstated retroactively for the entire period it had been lost. But, during the 34 days that she was without coverage, Mrs. Anderson had been unable either to fill her prescriptions or to undergo medical tests, such as MRI, cat scan and blood tests, that were necessary for the proper monitoring and treatment of her multiple sclerosis. The court commented that when a qualified beneficiary suffers from a chronic illness and must forego treatment and medication during the longer notice period, "the retroactive nature of the coverage means little."

Conclusion:
The federal district court was unwilling to conclude in this preliminary proceeding that, simply as a matter of law, the 44-day notice period applied to Royal Crest in these circumstances. The way was cleared for the issue to be raised at trial for a definitive ruling.

(Anderson v. Royal Crest Dairy, Inc., U.S. District Court, District of Colorado, Dkt. No. 001-K-2096, March, 2003)



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