District Court Allows COBRA Election Notice Claims to Proceed

Practical Law Legal Update w-024-1986 (Approx. 5 pages)

District Court Allows COBRA Election Notice Claims to Proceed

by Practical Law Employee Benefits & Executive Compensation

Alleged COBRA Notice Violations Include Failure to Name COBRA Administrator

The plaintiffs in this case, a participant and his spouse, were covered under the employer's health plan. In January 2018, the participant was terminated from his job – a qualifying event for COBRA purposes. After the participant's termination, the employer sent the participant two notices concerning health plan continuation coverage under COBRA.

The participant sued the employer under ERISA, alleging that the notices failed to fully comply with content requirements for COBRA election notices under the DOL's implementing regulations (see Practice Note, COBRA Overview: COBRA Notice Requirements and Standard Document, COBRA Election Notice). As a result of the allegedly deficient COBRA election notices, the participant argued that he and his spouse lost their health insurance coverage and sustained "informational injury." The participant and his spouse also asserted that they incurred medical bills relating to the spouse's appointments and surgery. The employer moved to dismiss for failure to state a claim.

District Court Denies Employer's Motion to Dismiss

Calling the case a "close call," the district court concluded that the participant sufficiently alleged COBRA notice violations and denied the employer's motion to dismiss.

Four Alleged Violations of COBRA Election Notice Content Requirements

Under COBRA, group health plans must provide COBRA qualified beneficiaries with an election notice that describes their rights to continuation coverage and how to make an election. The DOL has issued:

Regulations outlining the required content for election notices (29 C.F.R. § 2590.606–4(b)(4)).
A model election notice that health plans may, but are not required to, use.

(For more information on COBRA's notice requirements, see COBRA Toolkit.)

The participant alleged that the employer's notices violated four of the content requirements set out in the DOL COBRA notice regulations.

First, the participant argued that the employer violated the DOL regulations' content requirements for COBRA election notices by sending multiple notices, rather than a single notice. The court agreed, for motion to dismiss purposes, reasoning that sending multiple notices rather than a single notice might be non-compliant with the DOL regulations. The court noted that the regulations require provision of "a notice" rather than multiple notices.

The participant also argued that the notices failed to identify the plan administrator or COBRA claims administrator. In concluding that this allegation sufficiently alleged a notice claim, the court found persuasive a Florida district court decision holding that an election notice that omitted contact information for the COBRA administrator in an election notice violated the DOL's notice requirements. (The Florida district court acknowledged, however, that the DOL's COBRA notice regulations eliminated the requirement that COBRA initial notices identify both the plan administrator and the COBRA administrator.)

The participant's third claim was based on the employer's failure to provide a physical COBRA enrollment form in either of the notices it sent. In support of this claim, the participant alleged that the employer's notices directed them to an "unhelpful website and phone number." Rejecting the employer's argument that it closely followed the DOL's model notice, the court observed that the model notice includes a physical election form.

Finally, the participant alleged that the notices failed to include information regarding the address where COBRA payments should be sent (see Standard Document, COBRA Election Notice: Important Information About Payment). After comparing the employer's notices and the DOL's model notice, the court held that the participant's allegations were sufficient.

Court Rejects Employer's Good Faith Defense

The district court rejected the employer's good faith defense at the motion to dismiss stage, noting:

That it is unclear whether a good faith defense is available for COBRA notice claims.
The participant 's allegations that the employer knowingly provided deficient notices.

Practical Impact

Although early on procedurally, this case is a good reminder of the litigation risks associated with non-compliant COBRA notices. In addition to the expense of having to defend a COBRA claim, employers may face equitable remedies and statutory penalties under ERISA (both of which the participant in this litigation is seeking) if a district court finds that the employer's COBRA notices were deficient (see Practice Notes, ERISA Litigation: Causes of Action and Remedies Under ERISA Section 502 and ERISA Litigation: Penalties for Failing to Provide Documents). An interesting issue that may be addressed as this case moves forward is whether the DOL's COBRA notice regulations require strict compliance – as the participant appears to argue.

District Court Allows COBRA Election Notice Claims to Proceed | Practical Law