Reminder ― It Is Important to Provide COBRA Notices on Time

Federal law imposes strict deadlines for notifying qualified beneficiaries of their rights to elect COBRA continuation coverage after a qualifying event occurs. (For example, for a plan where the employer is also the plan administrator, the COBRA notice deadline is generally 44 days after an employee terminates.) Most plan administrators know that, under ERISA, a court can award a penalty of up to $110/day for each day that a COBRA notice is late, plus attorneys' fees. Several recent cases have awarded sizeable amounts to punish administrators for providing late notice.

Less well-known is the fact that a plaintiff is also entitled to recover the medical expenses he or she incurred that would have been covered by COBRA if timely notice had been provided (reduced by any COBRA premiums due from the date of the loss of coverage). While these expenses are often relatively modest (such as the cost of a doctor visit or a prescription), they can quickly become substantial if the plaintiff experiences a serious health problem. In fact, in some cases it is the medical provider who pays the costs associated with bringing a COBRA lawsuit. If the participant has little money, such a lawsuit may be the medical provider's only hope of getting its bills paid.

Some COBRA plaintiffs have gone even further and sought recovery for other items of damage that arguably would have been avoided if a timely notice had been provided. For example, if the plaintiff was forced to discontinue a drug or a course of treatment because he or she could not afford to pay for it out-of-pocket, the plaintiff may seek to recover for the resulting physical pain or emotional distress. If the plaintiff was unable to land a new job because his or her medical condition got worse, the plaintiff may seek to recover for lost wages. Some plaintiffs have even sought to recover for the costs of medicines they did not purchase but would have purchased if coverage had been in place, on the theory that otherwise the plan is unjustly enriched by its failure to provide notice. Courts thus far have not been receptive to these types of additional damage claims because, among other things, harm to the plaintiff is one of the factors taken into account when determining whether to award the up-to-$110/day penalty. However, plaintiffs can be expected to keep trying, and the cost of defending against such a claim can be substantial.

The ultimate lesson, of course, is that "an ounce of prevention is worth a pound of cure." Employers and plan administrators can avoid these problems by making sure that their COBRA notices contain the correct information and are provided to participants and beneficiaries in a timely fashion.