Benefits and Compensation

Employer Faces Class Action Claim for 3-Year COBRA Notice Lapse

By Gwen Cofield

Employers and plan administrators should frequently review their Consolidated Omnibus Budget Reconciliation Act (COBRA) procedures to ensure initial and election notices are distributed on a timely basis. Systemwide notice failures can lead to costly class action litigation.

A class action lawsuit was recently brought against an employer that allegedly failed to provide COBRA initial and election notices for 3 years despite the employer being aware of its obligations under COBRA. The lawsuit is currently only at the pleading stage, so the court has not yet issued any rulings. The case is Novick v. Shipcom Wireless, Inc., Case 4:16-cv-01020 (S.D. Tex., April 15, 2016).

Facts of the case

Justin Novick was employed by Shipcom Wireless, Inc., from May 2014 until March 2015, and participated in the company’s group health plan. When his employment ended, Novick allegedly did not receive a COBRA election notice even after his attorney informed Shipcom’s legal counsel about the notice failure.

As a result of the notice failure, Novick brought a class action lawsuit against Shipcom on behalf of the following class: All employees of Shipcom who elected health coverage provided by Shipcom together with their spouses and other covered dependents who were plan participants or beneficiaries at any time from March 2013 to the present. The complaint alleges that enough common questions of law and fact exist between the class members to warrant a class action lawsuit.

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