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| Supreme Court Refuses to Hear COBRA Appeal
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November 22, 2002
Santa Rosa, CA |
Language in SPD controlled COBRA
rights
The U.S. Supreme Court
refused to consider an appeal in a case involving the denial of the 29-month
disability extension of COBRA continuation coverage. By denying a hearing in
this case, the Court let stand a federal appeals court decision that an
employer wrongfully failed to offer the 11-month disability extension available
under COBRA rules.
After Scott
Fallo's employment with Piccadilly Cafeteria ended in February 1992, he tried
to extend his health insurance coverage under COBRA due to his wife's
disability. The trial court ruled that the Fallos did not meet the plan's
requirements to obtain the extended disability coverage, but the Fifth Circuit
Court of Appeals reversed that ruling. According to the appeals court, the
Fallos were entitled to the extended coverage because they had complied with
the terms of the employer's Summary Plan Description (SPD).
Background: During the initial 18-month
period of COBRA coverage, Kasey Fallo suffered serious complications related to
her pregnancy. Two months prior to the end of that period, the Fallos informed
Piccadilly that Kasey was disabled and requested extended COBRA benefits.
Piccadilly refuse to extend COBRA coverage, arguing that the Fallos had not
obtained the Social Security Administration (SSA) disability determination
until after the end of the initial 18-month COBRA period. The Fallos countered
that they had relied on the language in the employer's SPD. That document did
not state that the qualified beneficiary must send notice of the SSA disability
finding before the end of the initial 18-month period, nor did it state that
the disability must exist at the time of the termination.
Ruling: The appeals court ruled that the
language of the SPD, which was more lenient than the employer's plan or COBRA
regulations, controlled. Under the SPD, the Fallos needed only to obtain a SSA
disability finding that Kasey had been disabled during the 18-month COBRA
period and to notify the employer within 60 days of that determination. The
Fallos met this requirement and were entitled to the 11-month extension.
According to the appeals court, the SPD is intended to simplify the language of
the plan, allowing the average participant to understand his rights and duties.
Ambiguities in the SPD are resolved in favor of the qualified
beneficiary.
NOTE: This case
points up the importance of using clear language in the SPD. In addition to the
Fifth Circuit Court of Appeals, five other federal appeals circuits have
accepted the rule that if the language of the SPD conflicts with the language
of the Plan, the SPD is given effect.
(Fallo v. Piccadilly Cafeteria, Fifth Circuit Court
of Appeals, Dkt. No. 97-30874, May 29, 1998; U.S. Supreme Court, No. 02-334,
cert. denied November 4, 2002. The Fifth Circuit Court of Appeals covers
Louisiana, Mississippi and Texas.)
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