Class Action Suit for COBRA Notice Violations
In a recent class action suit Pranav Bhattancharya and Navanneetha
Koothapillai sued Capgemini North America, Inc. and Capgemini Financial
Services, USA, Inc., on behalf of themselves and others for alleged violations
of the COBRA provisions in the Employee Retirement Income Security Act (ERISA).
The case is Bhattancharya vs. Capgemini North America, Inc. 2016 WL 7049082
(N.D. Ill. December 4, 2016). They claimed that the defendants, as plan
administrators, failed to provide them initial COBRA notices as well as COBRA
As part of their lawsuit, they were seeking injunctive relief, the
reimbursement of medical expenses and the cost of insurance premiums paid while
they should have been covered. They also asked for statutory penalties of $110
per day for failure to prove a summary plan description (SPD) and a COBRA
notice, along with attorneys’ fees and costs.
The penalty claim was promptly dismissed; the court sided with the defendants
noting that statutory penalties are not assessed for failing to provide an SPD,
but rather when a plan administrator fails or refuses to comply with an
information request. The court, however, did not accept the defendants request
to dismiss all claims due to their argument that the plaintiffs failed to
properly name the plan administrator. The defendants tried to offer a copy of an
SPD that listed the Plan administrator as Peter Kornoswke but because “Capgemini
Financial Services” followed his name the court rejected their request. The
court determined that this could imply the plan administrator was either
Kornowske alone or both Kornowske and Capgemini. The court suggested the
plaintiffs amend their claim by adding Kornowske as a defendant to remove any
Furthermore, the defendant’s argument that procedural ERISA violations should
only entitle a plaintiff to monetary compensation in the case of bad faith,
concealment or prejudice was rejected by the court. They concluded these
components are used in determining whether to impose penalties – not as
requirements for initially asserting a claim. Again, the court suggested the
plaintiffs amend their complaint to allege bad faith, concealment and/ or
prejudice. Lastly the defendant’s request to dismiss the injective relief claim
was also shot down by the court citing procedural reasons.
In this author’s opinion, this case serves as a reminder for employers and
plan administrators to carefully review their COBRA notice procedures as well as
content requirements to make sure they are compliant. Using the model COBRA
election forms as set forth by the U.S. Department of Labor (DOL) is a smart
move so as not to find yourself in hot water with a lawsuit that could result in
a settlement or award of damages.
Dangers of Verbal Elections
In order to avoid the game of “who said what” the election notice should
require the qualified beneficiary to complete and return the election form
provided. This offers proof of their intent as well as documentation for whom
they are electing. The following cases are examples of how risky it can be to
use verbal elections:
Lackman v. Recovery Service of New Jersey Inc.
During the exit interview the qualified beneficiary, Lackman misunderstood
the conversation regarding the coverage being offered when his employer stated
it would extend coverage one month as a courtesy. Lackman then believed he would
have extended coverage for two months.
When taken to court it was determined that the verbal conversation between
Lackman and his employer was irrelevant as Lackman did indeed receive a COBRA
election notice a few days after his termination. That notice informed him that
he had 60 days from his termination date to make his election. The court ruled
that this was a misstatement of the law as the election period is actually 60
days from the latter of the loss of coverage date, or the date that the notice
is sent. In this case, that extra month of coverage that the employer offered
him should have also extended his election period. Additionally, the notice did
not include one very important element – the loss of coverage date.
Lloyd v. Harrington Benefit Services, Inc.
In this case, the qualified beneficiary, Lloyd, alleged he had been given a
verbal agreement by his new employer to process and pay for his COBRA coverage
from his former employer until he could obtain coverage under the new employer’s
health care plan. Both Lloyd and the employer failed to send the COBRA election
or payment to the former employer; however it was soon discovered that his
coverage had mistakenly continued anyway when Lloyd ended up being rehired by
the former employer. The plan was able to obtain reimbursement from the health
care providers that had received the mistaken payments for $15,000 in medical
claims incurred by Lloyds’ wife during his employment with the new employer. The
health care provider’s then came after Lloyd, whereby Lloyd then sued the plan
administrator for failing to follow through with the verbal agreement to take
care of the election as promised.
The court ultimately dismissed the case because it was determined that he had
received his COBRA election notice from his former employer and furthermore the
plan administrator did not have any responsibility for the employee’s failure to
elect and pay for COBRA coverage. The court determined that Lloyd was not
entitled to COBRA coverage and rejected his argument that the other employer was
obligated to pay for the claims because no election or payment was ever
In this author’s opinion, when an employer receives a verbal election, it
would be prudent to make the acceptance of the verbal election conditioned upon
receiving a written acceptance so that there are no misunderstandings and lack
of documentation. In case the election period is nearby, request that the
qualified beneficiary send an email or fax to be safe.