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.
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