Virtually everyday, some employer group informs us that they only experience a few qualifying events per year and therefore “it’s not that big of a deal.” Be assured, COBRA’s mandate applies equally across the board; regardless if you have hundreds of qualifying events or just a few per year. A recent court case illustrates this exact scenario.

In the case of Tufano v. Riegel Transportation, Inc. [2006 WL 335693 (E.D.N.Y., Feb 11, 2006)], Robert Tufano was terminated from Riegel Transportation, accumulated large medical claims and sued for COBRA noncompliance. The court found that Riegel Transportation’s COBRA procedures were virtually nonexistent and awarded $10,233.00 in damages. The following description is being offered as an example of how NOT to administer COBRA.

Riegel Transportation never established who was the Plan Administrator but Dawn Salerno, the Office Manager was responsible for other administrative functions such as payroll, human resources, customer service and answering employee questions. The company was insured by GHI but Ms. Salerno, nor the firm’s President, could recall if the COBRA General Notice was provided to employees upon enrollment in the plan. The final COBRA regulations state that the General Notice should be mailed to the employee (and covered spouse) within ninety days from enrollment into the plan.

Riegel Transportation did not have written procedures on the handling of office documents but merely relied on oral instructions from the President, Robert Riegel. Most of insurance plan communication was from meetings, payroll notices, an insurance broker or packets sent directly to the employee by the insurance carrier. Ms. Salerno received minimal training on COBRA procedures from their insurance broker who also provided a Qualifying Event Election Notice. The insurance broker advised Ms. Salerno to send the QE notice within two weeks but Mr. Riegel informed her to send it within thirty days. (The law states you have thirty days to notify the Plan Administrator of the qualifying event and they have fourteen days to produce and send the document.)

In court, Ms. Salerno testified that she followed these procedures for COBRA qualifying events:

1) Opened a form letter in her computer and inserted the employee’s name, address and cost of premiums;

2) Prepared two copies, one on letterhead to be sent to the qualified beneficiaries and the other on plain paper;

3) Signed the letterhead copy, placed it in an envelop with postage; and

4) Placed it in a mailbox outside the office building.

In December of 2002, Mr. Tufano was hospitalized whereby he received authorization from the insurer, GHI. Initially, GHI paid some of the claims but later started denying them because they were informed by Riegel Transportation of his termination from the plan effective September 30, 2002. Riegel stated they continually notified GHI of the termination but it was not processed until December. Because of the situation, Tufano sued for COBRA noncompliance.

The court found fault in Ms. Salerno’s testimony because,

1) She testified that she did not specifically recall producing or sending the qualifying event election notice to Mr. Tufano. She also stated she could not recall the “class of postage” (i.e. first class) which was placed on the envelop.

2) She also testified that the copy she faxed to Tufano’s lawyer may or may not have been the copy of the notice she states “would have been” sent. The court reviewed the “sample” letter and found typographical errors and had no indication it had been mailed. Lastly, she could not recall placing the envelop in the mailbox.

Because of this inability to prove the notice was sent, the court found in favor of Mr. Tufano and awarded $10,233.00. This is just another example of an employer who did not have standards and procedures for handling COBRA. Your COBRA software can provide reports detailing when documents are produced but the user should maintain a record as to the actual mailing of the document.

COBRA Solutions - Staff