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Employer Ordered To Pay Nearly $100,000 In Penalties |
September 18, 2003
Santa Rosa, CA |
In this case, the U.S. Court of
Appeals approved the assessment of nearly $100,000 in penalties and attorney's fees against an
employer who failed to provide a COBRA election notice, a copy of the Summary Plan Description (SPD),
and the option to obtain a conversion insurance policy.
What happened in this lawsuit:
Linda Brown was employed by Aventis Pharmaceuticals, Inc. for 14 years when she took a
six-month disability leave. When she failed to return to work at the end of this leave,
she was terminated. Aventis sent Brown a letter on November 15, 2000 informing her that the
effective date of her termination was October 29, 2000 and that she would receive further
information regarding her benefits. However, no benefits information was forthcoming, even
after Brown contacted Aventis' human resources department requesting it.
Next, Brown's attorney sent two letters requesting a copy of the employer's Summary
Plan Description as well as insurance conversion forms because Brown was entitled to obtain
individual life insurance upon termination. Once provided with the application form, Brown
applied for conversion insurance, but was denied. She was not given a Summary Plan Description.
Penalty for failing to provide COBRA notice:
According to the appeals court, Brown was properly awarded the maximum ERISA penalty allowed
under the circumstances even though Aventis admitted it had erred in not providing the COBRA
election notice. Aventis even provided retroactive health coverage so Brown did not suffer any
loss of benefits. But the appeals court noted that even though the failure appeared to be an
administrative error likely due to the company moving its offices, it could still be considered
bad faith. In approving the penalty of $8,030, the court said, "Although Brown did not suffer any
loss of health benefits due to the delay, she was forced to invest time, effort and money in
hiring an attorney to gain access to information that she was legally entitled to."
Penalty for failing to provide a Summary Plan Description: Aventis was properly
assessed $11,550 for failing to provide Brown with a copy of the SPD. Although Brown
originally had been provided a plan document, it was stored in her company locker while she
was out on disability leave. Maintenance crews emptied her locker and did not forward the
document to her. When she did not receive the benefits information that Aventis promised in
its termination letter, Brown called the human resources department at least twice. But after
two months had passed since her termination without receiving notice of her benefits, Brown
hired an attorney.
The attorney wrote two letters to Aventis, in which he requested information about COBRA, insurance
conversion, and other benefits. Nearly four months after Brown's termination, Aventis finally provided COBRA
information and insurance conversion forms, but no Summary Plan Description. The appeals court approved the
penalty even though Brown's attorney did not ask specifically for the SPD. Instead, he satisfied the requirement
of making a written request for the document by asking for "notice of termination of any of her other
benefits," which Aventis failed to provide.
Penalty for failing to provide insurance conversion rights: Upon being terminated, Brown was
entitled to convert her group life insurance policy to an individual policy, but was not informed of this right
until several months after requesting benefits information. After two requests from her attorney, Aventist
finally provided her with the application forms, which she returned. However, after she applied, the employer
denied her the right to convert the life insurance policy based on the fact that her application was made too
late. Aventis unsuccessfully argued that it had no obligation to provide information about life insurance
benefits upon termination because it had previously provided a SPD to the employee. However, the appeals court
noted that Aventis actually had prevented Brown's access to the plan document, effectively denying her the
option to elect a conversion insurance policy.
Conclusion: This lawsuit resulted in an award to Brown of $8,030 for violation of COBRA notification;
$11,550 for failure to supply a Summary Plan Description after written request; $39,000 for a conversion life insurance policy; and $31,295 for the employee's attorney's fees. The cost to Adventis of defending the suit all the way through to the U.S. Court of Appeals was not reported.
(Brown v. Aventis Pharmaceuticals, Inc., U.S. Court of Appeals, Eighth Circuit, Dkt. No. 02-4063/03-2084,
September 9, 2003) |
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Related COBRA Tip™
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Description of COBRA rights must be included in SPD
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