Judge: COBRA Mandates Not Met

November 25, 2002 (PLANSPONSOR.com) - An employer didn't properly notify an employee's estranged wife of her COBRA health-care rights when it relied on the employee to give her COBRA documents after divorcing her, a federal judge ruled.

US District Judge Lawrence Kahn of the US District Court for the Northern District of New York said the company should have known that spouses in many divorces have too much bitterness to be relied on to deliver notifications like that required under COBRA, Washington-based legal publisher BNA reported.

“While some married couples are able to dissolve their marriages amicably, it is well known that separations and divorces often turn once-loving spouses into bitter enemies. As such, it is unreasonable to depend on a healthcare plan beneficiary’s former spouse to deliver a COBRA notice to the beneficiary,” Kahn wrote.

The BNA report presented this case background:

In October 1994, Frank Studenroth obtained a divorce in the Dominican Republic from his wife Melody Edwardsen Phillips. Phillips, unaware of the foreign divorce proceeding, had already filed for divorce in a New York state court.

Soon after the foreign divorce decree was entered, Studenroth remarried and informed his employer, Saratoga Harness Racing Inc., that he had divorced and remarried and wished to drop Phillips from his medical coverage.

Saratoga’s health plan administrator terminated Phillips’s coverage and, instead of providing Phillips with direct notice of her coverage termination and her right to COBRA continuation coverage, the administrator gave the notice to Studenroth.

Estranged Spouse Finds Insurance Gone

After Phillips underwent surgery in 1996, she discovered that she no longer had health insurance under Studenroth’s health plan. Phillips claimed she never received notice of her COBRA rights and sued Saratoga in federal court.

In an earlier decision, the district court found that the eventually nullified foreign divorce did not constitute a “qualifying event” that triggered Saratoga’s notice obligations under COBRA, and so the court lacked jurisdiction over Phillips’s case.

On appeal, the US 2 nd Circuit Court of Appeals reversed the decision, finding that Saratoga’s notice obligations under COBRA were triggered when Studenroth informed Saratoga that he had divorced Phillips and remarried.

When the case came back from the appeals court, the district court rejected Saratoga’s argument that the delivery of Phillips’s COBRA notice to Studenroth was reasonably calculated to notify Phillips of her COBRA benefits.

“Noting that this issue appears to be one of first impression, Plaintiff argues that ‘handing the notices to a [self-professed] ex-husband who married his secretary within 48 hours of divorcing plaintiff’ does not constitute a good faith attempt reasonably calculated to notify Plaintiff of her COBRA rights. This Court agrees,” Kahn wrote.

The case is Phillips v. Saratoga Harness Racing Inc., N.D.N.Y., No. 96-CV-1487 (LEK/RWS), 11/4/02.