Benefits Monthly Minute – Employee Rights/ Labour Relations

The October Monthly Minute highlights a class action
that hinges on deficient COBRA notices, the new 2023 benefit plan
limits, and a case that held the benefit plan provisions in effect
at the time of a claim denial control.

Insufficient COBRA Notice Haunts Employer

This month, a Florida district court gave the green light to
Thompson, III v. Ryder System, Inc. to move forward as a
class action, based on allegedly defective COBRA notices. In the
case, plaintiff alleged the employer’s COBRA notice was
deficient, causing him to misunderstand the notice and fail to
elect COBRA resulting in a lack of coverage for his ensuing medical
bills. The court found plaintiff plausibly alleged a violation of
the requirement to provide an address to submit COBRA payment and a
violation of the requirement to provide a description of the COBRA
election procedures. Notably, the court took issue with the notice
insofar as it included a catch-all HR phone number (operated by a
third party) and an unhelpful website. Despite the
plaintiff-friendly outcome, the court did reject plaintiff’s
objection to the notice’s failure to identify the plan
administrator, instead relying on case law to support the position
that reference to the COBRA administrator, as the party responsible
for COBRA administration, is sufficient.

KMK Comment: While the administrative
convenience of directing qualified beneficiaries to a human
resources contact for additional COBRA information is tempting, it
does not obviate the need to include all of the regulatory COBRA
content in the COBRA notice. COBRA notices must expressly include
all required information and it is important to have your COBRA
notices reviewed by legal counsel for compliance.

2023 Benefit Plan Limits

The numbers are in! See below for select 2023 benefit plan
limits:

Plan Provisions in Effect at Time of Benefit Denial
Control

In a recent 2022 district court case, Foote v. Beverly Hills
Hotel, a California court grappled with the question of what
plan document controls when medical bills brought about by an
accident span over several years. In the case, the plaintiff had
incurred over $4 million dollars in medical bills after a scooter
accident. At the time of the accident, the plan then in-effect
included an “illegal acts” clause which served as the
basis to deny coverage as plaintiff was unlicensed when she had the
accident. A later-adopted plan document, however, in effect when
the claims were denied, did not include the “illegal
acts” exclusion. Relying on Ninth Circuit precedent for the
propositions that an ERISA cause of action arises when benefits are
denied and that rights to benefits under an ERISA welfare plan do
not vest unless and until the employer says they do, the court
sided with the plaintiff and applied the version of the plan which
omitted the “illegal acts” exclusion. In the court’s
view, where a plan may be unilaterally amended and benefits are not
vested, once the later plan was in effect, neither party could rely
on the earlier version.

KMK Comment: Whether this
controversial decision will be applied outside of the Ninth Circuit
remains to be seen. However, it serves as a cautionary tale to plan
administrators to be mindful when updating plan documents and to
confirm that all exclusionary clauses are appropriately included to
ensure accuracy in benefit determinations.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.