Costly Settlement Due to Lack of Details
A recent court case offers a reminder for employers and plan administrators
to carefully review their COBRA elections notices to make sure their notices
comply with content requirements as specified in the COBRA regulations. This
case proves that even a small departure from the established regulations can
have detrimental consequences, resulting in litigation. The case is Gilbert vs.
SunTrust Banks, Inc., Case No: 9:15-80415-Civ-Brannib (S.D. Fla., Feb. 16,
2016). The facts of this case are as follows:
Eric Gilbert and Laura Pinho filed a class action lawsuit against SunTrust
Bank, claiming that the COBRA election forms sent to them and other class
members by SunTrust did not properly advise them of their COBRA election rights.
The suit alleged the notice was deficient for two reasons. First, the notice
failed to provide the name and address of the COBRA administrator. And secondly,
they alleged that the notice did not offer an explanation of the plan’s
procedures for electing COBRA coverage. The notice simply referred the plan
participants to log onto a general human resources website along with a
telephone number to call for assistance.
SunTrust tried to counter these allegations of deficiency by providing more
than 1200 pages of documents – examples of its COBRA notices, screen shots from
its “MyHR” website, and other pertinent correspondence. The court then required
the parties to participate in “settlement discussions” which resulted in a
settlement that defined the class members, required changes to SunTrust’s COBRA
notices, and established a monetary relief fund of $290,000 used to compensate
settlement class members. Furthermore, the class counsel sought an award of
attorneys’ fees of no more than $110,000.00 along with service awards of up to
$5000 compensation that could be awarded to the named plaintiffs for their time.
The class members were defined by those persons who were sent COBRA election
notices from June1, 2014 through January 6, 2016 which ultimately resulted in
approximately 9000 members. The court noted that the $290,000 settlement fund
offered a gross recovery of approximately $32.22 per class member which
represents close to 1/3 of the maximum $110 –per-day statutory penalty for
violations of COBRA notices. The court felt this was substantial compensation,
along with the agreement from SunTrust that they would amend their notices to
properly comply with COBRA regulations.
This case serves to reinforce the need for scrutinizing your COBRA notice to
ensure it does meet the DOL’s COBRA notice content regulations. Although the
DOL’s model election notice was modified in May of 2014, it does not hurt to
look at the previous model notice established in 2004 which provides more
detail. In this author’s opinion more is better when it comes to details. It is
always better to be safe than sorry then to find yourself in costly litigation
for not providing adequate notification.
Be Careful with Change of Address Procedures
According to COBRA mandate, an employer or plan administrator does not have
to prove actual receipt of COBRA notices to a qualified beneficiary; instead,
the employer or plan administrator must simply operate in good faith and use
reasonable measures to reach qualified beneficiaries. That generally entails
mailing the notices to the last known address. This is where it can go sideways.
Sloppy record keeping can cause a change of address to fall between the cracks.
If the change of address was not properly updated and recorded and the employer
or plan administrator sends it to the old address, the courts could deem they
did not act in good faith. The following court case illustrates this alleged
misstep: Newton v. Steve Prator, Sheriff of Cadido Parish, Louisiana, 2016 WL
698170 (W. D. La., Feb. 18, 2016).
In this case Cory Scott Newton, a deputy sheriff in Cadido Parish, La. was
put through disciplinary actions in February of 2014 for using excessive force
after two previous warnings. When asked to sign a written reprimand Newton
refused, therefore Sheriff Prator terminated him. After his termination neither
Newton nor his family members received a COBRA election notice. Mr. Newton then
proceeded to bring four claims against Sheriff Prator. His first three causes of
action claimed the manner in which Sheriff Prator fired him violated his
constitutional rights to due process. In the fourth cause of action he claimed
that Sheriff Prator violated COBRA by knowingly sending the plan administrator,
Ameriflex, the wrong address for his COBRA notice.
Three days after his termination Parish personnel advised Ameriflex of
Newton’s termination and provided an address for him that he not lived at since
2010. According to Newton, he had notified Parish’s personnel department of his
change of address in March of 2010. Furthermore, he cited mailings from his
health insurer along with a 2010 IRS Form W-4 with the updated address as proof
of his employer’s knowledge of his address change. According to testimony Newton
claimed that about a month after his termination he spoke to Parish Human
Resources personnel about his pension and health insurance and then submitted
another change of address form. HR informed him that they had already sent his
COBRA notice to the old address. Newton believed that the Sheriff’s Office
violated COBRA by intentionally giving Ameriflex his old address.
Newton then sued Prator asserting that these constitutional and statutory
violations entitled him to the following: “reinstatement with full back pay and
expungement of the February 4 incident from CPSO’s records; compensatory
damages; damages for pain, suffering, mental anguish, emotional distress,
embarrassment, humiliation, inconvenience, and any other loss cause by the
Defendant’s conduct; and reasonable attorney’s fees, costs, and legal interest.”
Sheriff Prator has moved for summary judgment on all of Mr. Newton’s claims.
The court found that Newton was not entitled to statutory damages. As for
compensatory damages, the court also noted that there was little evidence that
Newton or his family had any out of pocket medical expenses that would have
exceeded the amount of his premiums had he taken COBRA coverage. But the court
could not rule as a matter of law that Newton was not indeed entitled to relief
on his COBRA claim, thereby denying the summary judgment motion by Parish.
In this author’s opinion employer’s and plan administrators should take
change of address procedures very seriously. Making every effort to act in good
faith with regards to sending COBRA notices means keeping meticulous records,
processing changes and properly notifying Human Resources and plan
administrators. Hanging your hat on simply saying you sent it to the last known
address will not hold up in court if careless record keeping proves you were