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Publisher of COBRA OnQue ®,
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| HR Manager Gives Wrong Information About COBRA Benefits |
August 14, 2003
Santa Rosa, CA |
This recent COBRA case looks at the fiduciary duty under ERISA to administer benefits
plans in a way that protects the participants. An employer's designated Human Resources
Manager erroneously advised a qualified beneficiary that group health continuation coverage
was not available to him. The qualified beneficiary and his family relied on that wrong
information and made no further requests for COBRA coverage. After the beneficiary's death,
his estate sued, claiming that the employer breached its fiduciary duty under ERISA to
correctly advise the employee of the terms of its health plan.
What happened in this lawsuit:
Perry Weeks worked for Western Auto Supply and was covered under its group health plan.
He was employed there for approximately five months before resigning. One week after leaving
his job, Weeks entered a hospital in another state due to an acute leukemia relapse and
remained in the hospital until his death more than two months later. During the period
of his hospitalization, a bone marrow transplant was planned and Weeks asked his mother
to call his employer for the purpose of asking about any health benefits that might be
available to him.
Weeks' mother called Karen Yates, the employer's Human Resources Manager.
Yates had earlier provided Perry with his employee handbook, which contained
her card in its front cover to be used in case he had any questions about his benefits. Yates informed Mrs. Weeks that her son's group health plan benefits had ended on the last day
of his employment, but she failed to tell her that COBRA continuation coverage
was available. She did not refer her to anyone else in the company for further
information. Based on this misinformation, the Weeks family made no further inquiries
about continuation coverage. It was not until three months after Weeks' death that his
mother learned he would have been eligible to elect COBRA.
Did the Human Resources Manager have a fiduciary duty to give accurate information?
A COBRA notice was evidently mailed to Weeks within the required time period, but because
he was hospitalized in another state and his parents remained at his bedside until his death,
no one read the notice advising him of his right to elect COBRA. However, this case didn't
turn on whether the COBRA election notice was properly provided, or whether it was actually
received by the beneficiary. The court dismissed the case saying that the employer's Human
Resources Manager did not qualify as a fiduciary under ERISA and, therefore, she had no duty
to provide correct and accurate COBRA information.
The court reasoned that because the beneficiary had been given notice of his right to
elect COBRA, as well as an employee handbook explaining those rights, the employer had no
further obligation to advise him or his mother of any rights under the benefits plan. So,
in the eyes of this judge, Yates was an ordinary (rather than fiduciary) person who
performed purely ministerial administrative duties, having no discretionary authority or
responsibility in her position as a human resources manager. Even though she gave erroneous
COBRA information to the beneficiary, she did not breach any fiduciary duty under the statute.
The conclusion in Weeks appears contrary to the intent of ERISA to protect the rights of
participants and contrary to other court decisions, which when faced with similar facts have
had no problems finding that a breach of duty occurred when the employer's designated
representative committed errors.
Conclusion: ERISA provides little in the way of guidelines for determining
who is a fiduciary and what acts will constitute a breach of duty. According to the Department
of Labor, fiduciary responsibility is to be determined on a case-by-case basis. It is
important that employers make every effort to ensure that responsible parties give
accurate information to plan participants, particularly when specific inquiries are made.
(Weeks v. Western Auto Supply Co., U.S. District Court, Western District of Virginia, Civil Dkt.
No. 7:02cv00724, June 25, 2003)
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