Court Dismisses COBRA Notice Suit

September 28, 2007 (PLANSPONSOR.COM) - A federal judge in Indiana has thrown out a lawsuit by two former Indianapolis hospital system employees over not being notified of their continuing health care coverage rights.

U.S. District Judge Sarah Evans Barker of the U.S. District Court for the Southern District of Indiana ruled that plaintiffs Joyce Brown-Pfifer and Kathleen Wood had not proven they had suffered losses from the failure of their former employer, the St. Vincent Health, Inc., system to inform them of their coverage rights under the Consolidated Omnibus Reconciliation Act of 1985 (COBRA). According to the opinion, St. Vincent is made up of 15 affiliated Indiana hospitals and administered the group health plans of 16 affiliated hospitals during the period involved in the dispute.

In ruling for the employer and turning away the plaintiffs’ request to certify their case as a class action, Barker asserted that the plaintiffs had likewise failed to show the employer had acted in bad faith.

Barker pointed out in her opinion that neither Brown-Pfifer nor Wood contacted St. Vincent about their COBRA rights after leaving the organization and that the women’s lawsuit provided the first notice to St. Vincent of its failure to provide the required notifications. The court noted that the employer “promptly” provided COBRA notices after getting the complaint.

Barker refused to impose the legal penalty for COBRA violations of up to $110 per day.

“… we do conclude that the factual circumstances of this case do not support the award of such a penalty. No damages were suffered by Plaintiffs and no prejudice was experienced by them attributable to the failed notifications,” Barker wrote. “Plaintiffs made absolutely no effort to obtain information on their COBRA rights from St. Vincent at the time of or following their departure, and they incurred no losses as a result of St. Vincent’s failures. In addition, no evidence has been adduced to support a claim of bad faith, ill intent or gross negligence on the part of St. Vincent towards the two named Plaintiffs.”

Barker turned away the employer’s arguments that the plaintiffs were first required to exhaust their administrative remedies under the plan and the plaintiffs could not recover damages because neither elected COBRA coverage when they were provided the rights notices.

Barker’s ruling is  here .