Human Resources: Evidence on Proper Notice Procedures Defeats COBRA Claims

Background
Under COBRA, an employer and plan administrator will be determined to have met COBRA´s good faith notification compliance standard by sending proper COBRA notices by first class mail addressed to the last known mailing address of each affected qualified beneficiary. (See 1300 of the Guide.) Courts regularly find that the plan administrator has the onus of proving that the COBRA notice was actually mailed in accordance with its procedures.

For example, in Keegan v. Bloomingdale´s, Inc. (see 1900), a federal district court noted that, "[P]roof of procedures followed in the regular course of operations which give rise to a strong inference that the [notice] was properly addressed and mailed" was deemed sufficient to establish that a COBRA notice was actually mailed. Several other courts also have indicated that testimony regarding standard operating procedures and evidence that the procedures were consistently followed are sufficient to satisfy the good faith standard. (See Jachim v. KUTV Inc., 1900.)

Smith Case
A computer generated log showed that an employer had consistent notice procedures in Smith v. AT&T Broadband Network Solutions, Inc., 2002 WL 370217 (N.D. Ill., March 8, 2002). In that case, Roy Smith was an employee of AT&T Broadband Network Solutions, Inc. In January 1999, his supervisor told Smith that his job performance was unsatisfactory and he had been observed violating certain company policies. Therefore, the supervisor wanted to discuss his job options. On Jan. 8, 1999, Smith met with his supervisor, telling him that he did not like the options and wanted to discuss them further.

His supervisor then told Smith that he could resign and would be given three months´ severance pay and benefits. In the supervisor´s view, Smith agreed to resign effective on that date. However, Smith continued to report to work for AT&T until Jan. 15, 1999, and began working for another employer for a short period thereafter. He believed he was involuntarily terminated from AT&T four months after the meeting with his supervisor, on April 19, 1999.

After Smith´s severance period expired, the group health insurer sent Smith a May 14, 1999, letter stating that his health coverage ended on May 1, 1999, as well as a COBRA election notice. (COBRA provides that a termination or reduction in hours of employment is a qualifying event that entitles qualified beneficiaries to up to 18 months of COBRA coverage. See 1122. An employer has 30 days to notify the plan administrator of a qualifying event, who then has 14 days to provide the qualified beneficiary with a COBRA election notice from the date of the qualifying event or the loss of coverage, whichever is later. See 1311 and 1313.)

Smith sued AT&T for, among other things, failing to provide a COBRA notice on a timely basis. He argued that he never received the COBRA notice that accompanied his coverage termination letter.

After reviewing the evidence, the court concluded that AT&T provided "competent" evidence that it was its regular procedure to notify its third-party administrator (TPA), through electronic means, at the end of the pay period when employees were no longer on the payroll. In turn, the TPA would send a COBRA notice to those former employees by first class U.S. mail. The court noted that although AT&T did not retain copies of mailed notices, it regularly kept a computer generated log of COBRA notices, which it provided to the court. Because Smith offered no evidence to dispute AT&T´s regular COBRA notice procedures, the court ruled that the company satisfied its notice obligation, and ruled in its favor.

Gibbs Case
Similarly, an employer´s computer records and standard mailing procedures confirmed that a COBRA notice was mailed on a timely basis, a federal district court ruled in Gibbs v. A. Finkl & Sons Co., 2002 WL 318291 (N.D., Ill. Feb. 26, 2002).

John Gibbs, an employee of A. Finkl & Sons, Co., was terminated on April 26, 1999, for insubordination. He then sued Finkl for, among other things, failing to provide COBRA election notices.

The court rejected this argument, finding that Finkl met the good faith standard based upon the evidence - the benefits administrator´s testimony on the company´s standard COBRA procedures. Specifically, the company benefits administrator noted that computer records confirmed that Gibbs´s COBRA notice was generated on May 12, 1999, and recalled mailing it to him based upon standard procedures "on or about" that date. Based upon this evidence, the court ruled in the company´s favor.

Implications
These cases show how a plan administrator can defeat a claim concerning improper COBRA notifications by maintaining and producing clear and complete records demonstrating COBRA compliance. It is not always necessary to keep an exact copy of the notice that was sent as long as definitive proof exists that the procedures were being followed. This will shift the burden to the qualified beneficiary to prove either that the procedures were insufficient (something that is very difficult to prove) or were not followed in that qualified beneficiary´s case.

Generally, it is not sufficient for a qualified beneficiary to merely claim that he or she did not receive the COBRA notice. If the plan administrator proves that the COBRA notice was mailed to the last known address, the law will presume that the notice was received by the intended recipient.

For more information on the procedures to follow in providing COBRA notices, see 1330 through 1339 and 1350 through 1354.