Required Notifications of Insurance to Employees

When employment ends an employee must receive notice of their options to continue health insurance for a period of time. In Deckard v Interstate Bakeries, the Eighth Circuit, considered a case wherein the employer failed to give notice of the employee's COBRA benefits. The employer also did not process aspects of the employee's termination for two years due to an apparent clerical oversight. During this post-termination period, the employee continued to enjoy health care coverage under the Plan, paying no premiums but receiving benefits through the Plan. The Plan belatedly identified the employee's status as terminated and cancelled his coverage retroactive. CIGNA attempted to recover, or “claw back,” Plan benefits that had been paid to various health care providers on the employee's behalf during the period of his post-termination coverage.

The employer notified the employee that his employment was terminated soon after the employee was determined to be disabled under the Social Security Act. COBRA also requires an administrator to give each participant a notice of certain health insurance coverage rights upon a “qualifying event,” such as the
termination of the participant’s employment. See 29 U.S.C. § 1166(a).

The employee counterclaimed for civil penalties for the failure to give the required COBRA notices at the commencement of coverage and at the termination of his employment. Despite the eventual reinstatement of coverage, the employee alleged that he suffered damages during the approximately six-month period in which his Plan coverage was revoked.

The bankruptcy court granted summary judgment to the employer on the employee's claim for civil penalties for the failure to provide COBRA notices at both his commencement of participation and termination of employment, reasoning that his damages after cancellation of his coverage were not “proximately or logically” connected to the lack of notice two years earlier and, even if they were, “the prejudice [Deckard] experienced [from the cancellation of coverage] was insignificant compared to the benefit he received from two years of uninterrupted free health care.”

This case shows that if an employer fails to give notice of COBRA benefits, there can be civil penalties if damages are sustained that are related to the failure to give notice.

If you are en employer hoping to learn more about your legal duties to give notice of continuing insurance benefits, or an employee who was not informed about your benefits, contact Madathil Law Office for a free consultation.

Madathil Law Office, LLC
Employment and Business Law

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Omaha, NE 68102

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