The issue of COBRA notices and penalties can create problems when considering who is entitled to the notice and when they have to be issued. When claims are brought for alleged violations of the provision of COBRA notices, some employers assume that they can just avoid penalties if there are not actual damages, say for example the employer agrees to pay any medical expenses.  This case illustrates that this assumption can be a costly mistake.

In Honey v. Dignity Health, the Court for the District of Nevada looked at a case where the employer, acting as its own plan administrator, failed to issue a timely COBRA notice. The employee repeatedly asked about COBRA but was not provided with a notice. It so happened that the employee also sought to return to work and her employer agreed to reinstate her and even reimburse her for her uncovered medical expenses. She filed suit for her employer’s failure to provide COBRA notices to her, her husband, and her two children.

First, the court dismissed the husband’s claim because he was not married to the employee at the time of her COBRA qualifying event. But the court did award damages to the employee and her children at the rate of $110 a day for the employee and $20 a day for each of her children. Even though the employee’s bills were paid, the court reasoned that payment of the expenses did not actually cure the failure. The notice obligation is separate from the coverage. Since the children had no actual harm (that is no medical expenses), they received the lower award, but still received some recovery. All told, the employer was ordered to pay more than $25,000 in penalties.

This case should serve as a warning that the obligation to provide COBRA notices is not simply about providing coverage or making coverage available. Simply paying unreimbursed expenses does not cure the statutorily defined harm. The notice requirement exists to make sure the notices are timely issued and not tied to any actual loss. So employers should not assume that the remedy for COBRA violations is limited to simply covering unpaid expenses. The notice requirements carry their own risk and should be strictly followed to avoid those separate penalties.

Keith R. McMurdy is a partner with Fox Rothschild focusing on labor and employment issues; he can be reached at kmcmurdy@foxrothschild.com or (212) 878-7919.

The information in this legal alert is for educational purposes only and should not be taken as specific legal advice.

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