The U.S. District Court for the Middle District of Florida has ruled, in Marrow v. Carpenter Company, that a mere “good faith effort” to comply with COBRA’s notice requirements is an insufficient reason to dismiss a lawsuit from a former employee claiming that a defective COBRA notice caused her financial loss because the notice influenced her decision to reject continuation coverage.
Law. Under COBRA, group health plans must provide covered employees and their families with certain notices explaining their COBRA rights. A group health plan administrator must provide each covered employee and spouse with a “general” notice of COBRA rights at the time of commencement of coverage under the plan. The plan must also provide qualified beneficiaries with an “election” notice describing their right to elect COBRA continuation coverage when certain qualifying events occur, including termination of employment.
Facts. After an employee was terminated, her employer sent her a COBRA election notice. However, the employer did not use Department of Labor’s Model COBRA notice, and instead, provided a notice that, among other things, provided incorrect or inconsistent information about the time period for her to make an election and the required time for making COBRA payments.
The employee did not elect COBRA continuation coverage and then incurred “significant medical bills.” She claimed that her failure to enroll in COBRA continuation coverage was due to deficiencies in the employer’s COBRA notice. She then filed a lawsuit demanding that the employer reimburse her medical expenses.
The employer requested that the lawsuit be dismissed because the employee failed to allege facts demonstrating that she suffered an “injury-in-fact” that was traceable to its allegedly deficient notice. The employee responded that the employer’s COBRA notice violations had a tangible impact by ultimately causing her not to elect COBRA continuation coverage.
The employer also asserted that, “even if the election period in the notice was incorrect, it made no difference since the employee never attempted to elect coverage….Thus, the ‘alleged deficiencies are not a plausible cause’–not even a remote or indirect one– behind [the employee’s] choice to decline coverage.”
Finally, the employer argued that a “good faith attempt to comply with a reasonable interpretation of the COBRA requirements is sufficient to satisfy these requirements.”
Court Decision. The court stated that, “to establish ‘injury in fact,’ a plaintiff must show that he or she suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent’, not conjectural or hypothetical.” To survive a motion to dismiss for failure to state a claim, a plaintiff must present sufficient facts to state a claim that is “plausible on its face.” A claim is plausible on its face when a “plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
The employee claimed that, “[t]he deficiencies in Defendant’s COBRA notice ultimately caused Plaintiff to not elect COBRA continuation coverage, lose insurance coverage (medical, dental, and vision), and incur medical bills as a result.”
The court then ruled that, with regards to the motion to dismiss, while the employer argued that any deficiencies did not interfere with the employee’s ability to make a meaningful choice about continuing coverage under COBRA for purposes of the dismissal request, the employee’s reasonable allegations must be accepted as true. It therefore rejected the employer’s contention that the employee had not properly claimed an “injury in fact.”
Finally, in response to the employer’s “good faith” argument, the court noted that the COBRA notice regulations require that the notice be “accordance with regulations prescribed by the Secretary [of Labor]. These regulations do not include a ‘good-faith’ defense.” Therefore, the court allowed the lawsuit to continue.
Note. The employer might have been able to avoid this lawsuit if it had used the DOL’s model COBRA notices which can be found at: https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra