Court Dismisses Former Employee’s COBRA Claims Against TPA

An employee with cancer elected COBRA after being terminated by her employer. She then took a job with a second employer but resigned after working 15 days. After receiving notice from the second employer’s TPA that she was eligible for COBRA under the second employer’s health plan, the employee contacted the first employer’s TPA and dropped her existing COBRA coverage. But after the first employer’s TPA canceled her COBRA coverage, the employee learned that the second employer’s TPA had misinformed her and she was not eligible for COBRA through her second employer after all. The employee then asked the first employer’s TPA to reinstate her COBRA coverage, but the TPA informed her that it could not rescind the termination of coverage because a termination notice had already been given to the insurer. The employee sued both employers and their TPAs.

In this decision, the court dismissed the employee’s claims against the first employer’s TPA for COBRA notice violations and breach of fiduciary duty. (The decision indicates that the claims against the employers and the second employer’s TPA had been resolved.) The court found that due to a mistake, the employee’s insurance coverage was not actually terminated by the insurer, and her benefit claims were paid during the remaining two-month COBRA coverage period under the first employer’s plan. Noting that the insurer had not attempted to recoup any benefits, the court concluded that the employee had suffered no damages. The court also rejected the employee’s claim that she should have received a notice of termination of COBRA coverage from the first employer’s TPA, explaining that COBRA does not require that such a notice be provided to a qualified beneficiary who voluntarily terminates coverage.

EBIA Comment: Mistakes happen, and there were plenty to go around in this case. Clear (and correct) communications about the right to elect COBRA are fundamental—even where there are no damages (and no matter who prevails), COBRA litigation can be costly. For more information, see EBIA’s COBRA manual at Sections XXIII (“Notice of Termination of COBRA Coverage”), XXIV (“Mistakes Happen: Identifying, Correcting, and Preventing COBRA Compliance Problems”), and XXV (“Consequences of Failing to Comply With COBRA”).

Contributing Editors: EBIA Staff.