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November 2017


Record Keeping Makes the Difference

As part of a recent discrimination lawsuit, an employer was able to prevail when charged with COBRA Notification Failure due to explicit record keeping. In the suit Perkins v. Rock-Tenn Servs., Inc, 2017 WL2829100 (6th Cir. 2017) the employee claimed she did not receive a COBRA election notice following her resignation. Even after the employee challenged the fact the court was simply depending upon an affidavit from the Third Party Administrator’s delivery manager, the trial court still found the employer had sufficiently provided proof that its TPA had mailed the notice.

In this case the TPA was contracted by the employer to provide recordkeeping services as well as sending COBRA notices to all terminated employees. The delivery manager for the TPA explained that even though they did not retain hard copies of COBRA notices they did keep computer records. While the manager himself did not send the election notice to Ms. Perkins, he was able to show screen shots from their computer system, corroborating the fact the notice had been sent. This evidence, along with the fact that the manager was a long time TPA employee well versed in proper recordkeeping, caused the appellate court to determine the proper notification had occurred.

In this author’s opinion, this case is a reminder that when COBRA notification lawsuits occur, courts often look to the employer or Third Party Administrator’s ability to provide written COBRA notice procedures and records that show these procedures are consistently followed. Remember, proof of receipt is not required. The crucial element in these cases is simply to prove that the notice was sent by means reasonably calculated to reach the qualified beneficiary. It is critical to retain records that back up the fact the procedure is being followed like clockwork.

Extraordinary Circumstances During Election Period

What happens when a qualified beneficiary is incapacitated during the COBRA election period? A recent court case sheds light on this predicament. The case is Regents of the Univ. of Ca. v. Stidham Trucking, Inc., 2017 WL 3840259 and the following are the facts:

Jack Franklin, an employee of Stidham Trucking, Inc. voluntarily resigned on Sept, 26, 2014. The company then properly sent him a COBRA notice giving him 60 days to elect COBRA benefits. Toward the end of the 60 day period, Franklin was in an accident and was hospitalized at University of California Davis Medical Center for 10 days. According to the lawsuit, Franklin was incapacitated during his hospital stay and never elected COBRA.

Upon admission, Regents of the University of California (Regents UC) on behalf of the medical center, alleged that Franklin signed over all of his insurance rights and that his 10-day incapacitation was reason for equitable tolling of the 60-day COBRA election period. In their lawsuit, Regents UC argued that Franklin should have received a new 60 day notice at that point from the plan administrator.

Strangely enough, it wasn’t until 2 years later that Regents UC decided to sue in order to seek a brand new election period. They filed a suit against Stidham, The insurance broker (CobraHelp) and the insurer (Anthem) for COBRA violations, alleging that the defendants denied Franklin the statutory benefits of COBRA by failing to adequately provide him with an opportunity to elect COBRA coverage under the equitable tolling principle.

In the end, the court decided the claim was based on a “misconstruction” of the equitable tolling principle, therefore dismissed the ERISA claims against all parties. The court explained that equitable tolling means the “clock stops running when the extraordinary circumstances arise, but the clock resumes running once the circumstances have ended or when the petitioner ceases to exercise reasonable diligence, whichever occurs earlier.” (Luna v. Kernan, 784 F. 3d. 640, 651 (9th Cir. 2015).

So in this case, Franklin’s election period would have been 70 days at the most. It would not have created another 60 day period, and most certainly would not have extended it another 2 years as requested in this lawsuit! Remember, equitable tolling simply pauses the election period during extraordinary circumstances. If a QB becomes incapacitated or dies during the COBRA election period, the courts have allowed time for recovery or for a legally appointed guardian to either represent the qualified beneficiary or to represent his/her estate.


In this Issue:

Record Keeping Makes the Difference

Extraordinary Circumstances During Election Period

See Also:

COBRA Solutions
Cafeteria Plan Manager
QSE HRA Manager
COBRA Administration Manager
U.S. Department of Labor
COBRA and the Trade Act of 2002
COBRA and Medicare Entitlement

Technical Information
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