TPA Escapes Liability for Sending COBRA Notice to Employee’s Former Address, but Claims Proceed Against Employer

A terminated employee sued her employer and the TPA of its self-insured health plan for failing to provide a COBRA election notice to her last-known address and for failing to provide requested plan documents. Shortly after her termination, the employer had mailed a letter to the employee’s current address notifying her that her health insurance had lapsed and that she would receive COBRA information separately. On the same day, the employer mailed to the current address an election notice for dental coverage—but not medical coverage—because its TPA was contractually responsible for providing notices for the medical plan. The TPA subsequently mailed an election notice to the employee’s former address in a different city. (According to the TPA, the employer had never notified it of an address change.) The notice was returned undelivered to the TPA, which notified neither the employee nor the employer. Several months later, the employee inquired about the missing health plan election notice and requested plan documents describing her COBRA benefits. Receiving no response, the employee sued, seeking statutory penalties, payment of accrued medical bills and premiums, and attorney’s fees. All parties sought judgment without a trial.

The court rejected the employer’s argument that it had complied with its statutory duty because it had delegated to its TPA the obligation to mail COBRA notices. Stating that the delegation did not absolve the employer of liability, the court allowed the case to proceed to trial for the determination of whether the employer attempted in good faith to notify the employee of her COBRA rights (e.g., by taking steps to ensure that the TPA had access to the employee’s current address). The court also advanced the employee’s claim against the employer for failing to produce plan documents upon request. In contrast, the court ruled in favor of the TPA, finding that it had no statutory liability or fiduciary responsibility toward the employee—even though it may have breached its contractual agreement with the employer.

EBIA Comment: This case is a reminder of the importance of establishing and following procedures for timely providing COBRA notices to qualified beneficiaries using a method calculated to ensure receipt. As the court pointed out, a plan administrator need not ensure that a qualified beneficiary actually receives the required notice. Rather, it need only make a good faith effort to provide the notice, such as through hand-delivery, first-class mail to the last-known address, or electronic delivery under certain conditions. For plans that engage TPAs to handle COBRA responsibilities, it is especially important to maintain a system for sharing information such as employees’ current addresses. For more information, see EBIA’s COBRA manual at Sections XVIII.C.3 (“Plan Administrator Remains Liable for Notice Obligations”), XVIII.J (“Sending the Election Notice and Proving It Was Sent”), and XXXI.D (“COBRA Third-Party Administration”). See also EBIA’s Self-Insured Health Plans manual at Section XXIII.B (“Contracting With Service Providers”).

Contributing Editors: EBIA Staff.