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October 2017


Class Action Suit for COBRA Notice Violations

In a recent class action suit Pranav Bhattancharya and Navanneetha Koothapillai sued Capgemini North America, Inc. and Capgemini Financial Services, USA, Inc., on behalf of themselves and others for alleged violations of the COBRA provisions in the Employee Retirement Income Security Act (ERISA). The case is Bhattancharya vs. Capgemini North America, Inc. 2016 WL 7049082 (N.D. Ill. December 4, 2016). They claimed that the defendants, as plan administrators, failed to provide them initial COBRA notices as well as COBRA election notices.

As part of their lawsuit, they were seeking injunctive relief, the reimbursement of medical expenses and the cost of insurance premiums paid while they should have been covered. They also asked for statutory penalties of $110 per day for failure to prove a summary plan description (SPD) and a COBRA notice, along with attorneys’ fees and costs.

The penalty claim was promptly dismissed; the court sided with the defendants noting that statutory penalties are not assessed for failing to provide an SPD, but rather when a plan administrator fails or refuses to comply with an information request. The court, however, did not accept the defendants request to dismiss all claims due to their argument that the plaintiffs failed to properly name the plan administrator. The defendants tried to offer a copy of an SPD that listed the Plan administrator as Peter Kornoswke but because “Capgemini Financial Services” followed his name the court rejected their request. The court determined that this could imply the plan administrator was either Kornowske alone or both Kornowske and Capgemini. The court suggested the plaintiffs amend their claim by adding Kornowske as a defendant to remove any confusion.

Furthermore, the defendant’s argument that procedural ERISA violations should only entitle a plaintiff to monetary compensation in the case of bad faith, concealment or prejudice was rejected by the court. They concluded these components are used in determining whether to impose penalties – not as requirements for initially asserting a claim. Again, the court suggested the plaintiffs amend their complaint to allege bad faith, concealment and/ or prejudice. Lastly the defendant’s request to dismiss the injective relief claim was also shot down by the court citing procedural reasons.

In this author’s opinion, this case serves as a reminder for employers and plan administrators to carefully review their COBRA notice procedures as well as content requirements to make sure they are compliant. Using the model COBRA election forms as set forth by the U.S. Department of Labor (DOL) is a smart move so as not to find yourself in hot water with a lawsuit that could result in a settlement or award of damages.

Dangers of Verbal Elections

In order to avoid the game of “who said what” the election notice should require the qualified beneficiary to complete and return the election form provided. This offers proof of their intent as well as documentation for whom they are electing. The following cases are examples of how risky it can be to use verbal elections:

Lackman v. Recovery Service of New Jersey Inc.

During the exit interview the qualified beneficiary, Lackman misunderstood the conversation regarding the coverage being offered when his employer stated it would extend coverage one month as a courtesy. Lackman then believed he would have extended coverage for two months.

When taken to court it was determined that the verbal conversation between Lackman and his employer was irrelevant as Lackman did indeed receive a COBRA election notice a few days after his termination. That notice informed him that he had 60 days from his termination date to make his election. The court ruled that this was a misstatement of the law as the election period is actually 60 days from the latter of the loss of coverage date, or the date that the notice is sent. In this case, that extra month of coverage that the employer offered him should have also extended his election period. Additionally, the notice did not include one very important element – the loss of coverage date.

Lloyd v. Harrington Benefit Services, Inc.

In this case, the qualified beneficiary, Lloyd, alleged he had been given a verbal agreement by his new employer to process and pay for his COBRA coverage from his former employer until he could obtain coverage under the new employer’s health care plan. Both Lloyd and the employer failed to send the COBRA election or payment to the former employer; however it was soon discovered that his coverage had mistakenly continued anyway when Lloyd ended up being rehired by the former employer. The plan was able to obtain reimbursement from the health care providers that had received the mistaken payments for $15,000 in medical claims incurred by Lloyds’ wife during his employment with the new employer. The health care provider’s then came after Lloyd, whereby Lloyd then sued the plan administrator for failing to follow through with the verbal agreement to take care of the election as promised.

The court ultimately dismissed the case because it was determined that he had received his COBRA election notice from his former employer and furthermore the plan administrator did not have any responsibility for the employee’s failure to elect and pay for COBRA coverage. The court determined that Lloyd was not entitled to COBRA coverage and rejected his argument that the other employer was obligated to pay for the claims because no election or payment was ever received.

In this author’s opinion, when an employer receives a verbal election, it would be prudent to make the acceptance of the verbal election conditioned upon receiving a written acceptance so that there are no misunderstandings and lack of documentation. In case the election period is nearby, request that the qualified beneficiary send an email or fax to be safe.


In this Issue:

Class Action Suit for COBRA Notice Violations

Dangers of Verbal Elections

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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