COBRA notifications must be sent to eligible individuals by employer
Phillips v Saratoga Harness Racing Inc., USDC, NDNY, 240 F.3d 174
U.S. District Judge Lawrence E. Kahn ruled that the employer did not satisfy the Consolidated Omnibus Budget Reconciliation Act of 1985's [COBRA] notification requirements when it relied on its employee, Frank Studenroth, to give his former spouse information concerning her rights under COBRA to continue her health insurance.
In 1994 Studenroth, without his wife's knowledge, obtained an ex parte divorce in the Dominican Republic. He told Saratoga to discontinue his group health insurance plan coverage for his former spouse as a covered dependent and to substitute his newly married spouse as his dependent.
Saratoga Harness gave Studenroth the necessary information advising his former spouse of her right to maintain her health coverage under COBRA. According to Judge Kahn, although Studenroth promised Saratoga that he would have the documents delivered to his former spouse, she did not get these materials. She first learned that she no longer had health insurance coverage when her claims for health insurance benefits were rejected for “lack of coverage.”
Judge Kahn said Saratoga was incorrect when it relied on an employee to transmit COBRA information to an estranged spouse. It is the employer's duty to supply such information and it cannot escape this responsibility by relying on its employee's agreement to give the necessary information to a former spouse.
Judge Kahn said that:
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 health care plan beneficiary's former spouse to deliver a COBRA notice to the beneficiary. The very nature of divorce itself forecloses this avenue as a reasonable attempt to comply with the notification requirements.
Judge Kahn held Saratoga liable for the medical expenses incurred by the former Mrs. Studenroth.
The lesson here is that an employer must assure itself that the party who is to be advised of his or her COBRA rights must actually receive such information in a timely manner. The best way to do this is for the employer to provide the information directly rather than to rely on a third party to deliver the information on its behalf. In addition, it would be prudent to obtain proof that the individual actually received the information and the date on which that event took place in order to be able to demonstrate it compliance with COBRA's requirements.