Ward v. Bethenergy Mines, Inc.

• Decision Date: 11 May 1994
• Docket Number: Civ. A. No. 2:93-0904.
• Citation: 851 F. Supp. 235
• Court: U.S. District Court — Southern District of West Virginia
• Parties: James W. WARD, Plaintiff, v. BETHENERGY MINES, INC. and Pen-Wel, Inc., Defendant.

851 F. Supp. 235

James W. WARD, Plaintiff, v. BETHENERGY MINES, INC. and Pen-Wel, Inc., Defendant.

Civ. A. No. 2:93-0904.

United States District Court, S.D. West Virginia, Charleston Division.

May 11, 1994.

William D. Turner and Sandra K. Henson, Crandall, Pyles & Haviland, Charleston, WV, for plaintiff.

Michael D. Foster, Jackson & Kelly, Charleston, WV, for Bethenergy.

James A. McKowen, Hunt, Lees, Farrell & Kessler, Charleston, WV, for Pen-Wel.

MEMORANDUM OPINION AND ORDER

HADEN, Chief Judge.

Pending are Plaintiff's motion to join a necessary party and the cross-motions of the Plaintiff and defendant Bethenergy Mines, Inc. ("Bethenergy") for summary judgment. For reasons following, the Court DENIES the Plaintiff's motion for joinder, GRANTS the Plaintiff's motion for summary judgment, in part, and DENIES Bethenergy's motion for summary judgment.

I.

The facts are not in dispute. Plaintiff was an employee of Bethenergy until his termination from employment on December 18, 1990. Bethenergy provides a health plan for its employees pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation Act, popularly known as COBRA. The applicable portions of COBRA have been summarized as follows:

"COBRA provides that employers must allow former employees the opportunity to continue health care coverage under the employer's plan if a qualifying event occurs. 29 U.S.C. § 1161. Such coverage usually is provided by the employer at the employee's own expense, not to exceed 102% of the employer's cost. 29 U.S.C. § 1162(3). The plan administrator must give appropriate notice of COBRA rights on two separate occasions. Under 29 U.S.C. § 1166(a)(1), covered employees must be notified of their rights under COBRA at the time of the commencement of coverage under the plan. The second round of notice-giving is triggered by a qualifying event. 29 U.S.C. § 1166(a)(4). Termination of employment is a qualifying event. 29 U.S.C. § 1163(2). In the event of termination of a covered employee, an employer must notify the administrator of the group health plan within thirty days of the termination. 29 U.S.C. § 1166(a)(1). The plan administrator, in turn, must notify the discharged employee and other qualified beneficiaries within fourteen days of their COBRA rights and allow them at least sixty days to decide whether to elect continuation of their group health plan coverage. 29 U.S.C. §§ 1165(1), 1166(a)(4) and (c), 1167(3)(B). Discharged employees generally may elect such coverage for up to eighteen months following their termination. 29 U.S.C. § 1162(2)(A)(i)." Phillips v. Riverside, Inc., 796 F.Supp. 403, 405-06 (E.D.Ark.1992).

See generally Michael J. Canan, Qualified Retirement and Other Employee Benefit Plans § 2.8, at 58-65 (1994).

Bethenergy admits it did not notify the administrator of its group health plan within thirty days of the plaintiff's termination as required by 29 U.S.C. § 1166(a)(1). In fact, Bethenergy did not notify the plan administrator, defendant Pen-Wel, Inc. acting on behalf of the Secretary of the Insurance Board of Bethlehem Steel Corporation, of Plaintiff's termination until April 5, 1991, over fifteen months after the Plaintiff's termination. The plan administrator promptly informed Plaintiff of his right to continued COBRA health plan coverage within fourteen days of Bethenergy's belated notification of Plaintiff's termination, as required by 29 U.S.C. § 1166(a)(1).

After being notified of his right to continue COBRA coverage, Plaintiff timely exercised that right in June of 1991. It is clear Plaintiff had the option to extend his health plan coverage only for the eighteen months following his termination. 29 U.S.C. § 1162(2)(A)(i). Thus, Plaintiff's coverage was due to expire at the end of June, 1991. Although no demand was made for the first twelve months of premiums¹, the plan administrator immediately billed Plaintiff for $3340.86, the entire amount of the last six months of premiums he would owe. Plaintiff could not pay the entire amount at once, and the plan administrator did not provide the requested coverage.

During the period Plaintiff desired continuation coverage, he incurred medical expenses. Although the total monetary amount of medical bills incurred by Plaintiff during the desired continuation coverage period is unclear from the record, Plaintiff has submitted exhibits showing medical expenses incurred. Plaintiff's motion for summary judgment, Exhibits 1-7. Had continuation coverage been in effect, Plaintiff's medical expenses would have been covered and paid for by the health plan.

II.

A.

Plaintiff seeks to join Bethlehem Steel Corporation ("Bethlehem") to this case. Plaintiff contends Bethlehem was the plan administrator, and that the plan administrator is liable to him for damages for not providing him with timely notice of his COBRA continuation rights. However, under COBRA, the plan administrator's obligation to notify a plan participant of continuation rights does not arise until the administrator is informed of the qualifying event, in this case termination, by the employer. 29 U.S.C. § 1166(a)(1). After the employer notifies the administrator of the qualifying event, the administrator has fourteen days to notify the participant of his continuation rights. 29 U.S.C. § 1165(1).

Bethenergy belatedly notified the plan administrator of Plaintiff's qualifying event. However, the administrator notified Plaintiff of his continuation rights within the fourteen days prescribed by 29 U.S.C. § 1166(a)(3). This precise issue was addressed by the Court of Appeals for the Fifth Circuit in Kidder v. H & B Marine, Inc., 932 F.2d 347, 356-57 (5th Cir.1991), where the court stated:

"While a plan administrator ... generally does have ... a duty to notify a plan participant of continuation rights, see § 1166(a)(4), that duty does not come into play unless the administrator is properly notified of the occurrence of a qualifying event by the employer. See 29 U.S.C.A. § 1166(a)(3)."

The Kidder court held that because the employer failed to notify the plan administrator of the qualifying event, the duty of the administrator to notify the plan participant of his continuation rights "never arose." 932 F.2d at 357. See also Bruno v. United Steelworkers of America, 784 F.Supp 1286, 1319 (N.D.Ohio 1992), aff'd, 983 F.2d 1065 (6th Cir.1993) (where employer complies with Section 1166(a)(2) it cannot be held liable for plan administrator's failure to notify plan participant of his continuation rights or failure to continue coverage). Likewise, in the instant case, the duty of the plan administrator did not arise until the Bethenergy gave notice of the Plaintiff's termination. The plan administrator then timely gave notice to the Plaintiff of his continuation rights within the fourteen day period. Because the plan administrator² cannot be liable for Bethenergy's failure to notify it of Plaintiff's termination, there is no reason to join it in this action.³ Thus, Plaintiff's motion for joinder is DENIED.

B.

For essentially the same reasons outlined in Part II., A., supra, the Plaintiff's motion for summary judgment against Pen-Wel, Inc. must fail. Simply put, Pen-Wel did not fail in its responsibility to notify the Plaintiff of his continuation coverage rights within fourteen days of receiving notice of his termination from Bethenergy. Because Pen-Wel's duty to notify Plaintiff of his rights did not arise until after notification from Bethenergy, Pen-Wel did not violate the notice provisions of COBRA. Plaintiff's motion for summary judgment against Pen-Wel is therefore DENIED.⁴

III.

A.

Both parties seek summary judgment. The issue boils down to whether Bethenergy may be held liable for its late notice of Plaintiff's termination to the plan administrator. Plaintiff argues the late notice prevented him from electing coverage earlier and thus prevented him from being in a position to pay for COBRA continuation. Bethenergy argues Plaintiff was not prejudiced by the late notice and it should not be held responsible for Plaintiff's failure or inability to pay the premiums owed. Because the Court concludes Bethenergy is in violation of COBRA, Plaintiff is entitled to summary judgment.

Title 29 U.S.C. § 1166(a)(2) states: "(2) the employer of an employee under a plan must notify the administrator of a qualifying event described in Section 1163 ... within thirty days ... of the date of the qualifying event." Bethenergy acknowledges it failed to notify the plan administrator of Plaintiff's qualifying event seasonably. It admits Plaintiff "should have been notified of his COBRA conversion rights as early as February 1, 1990."⁵ Plaintiff was not notified of his continuation coverage rights until April of 1991. He then timely elected to receive such coverage. Due to the tardiness of Bethenergy's notification of the qualifying event to the plan administrator, however, the plan administrator demanded payment of six months worth of premiums in a lump sum.

The Court agrees with Plaintiff's argument. For the notice provisions of COBRA to have meaning, failure to abide by those provisions to the detriment of another must impose liability upon the violator for his detrimental conduct. Here the Plaintiff was harmed by Bethenergy's late notice to the plan administrator of the Plaintiff's termination. He was not given the option to make monthly installment payments on his premiums as required by Title 29 U.S.C. § 1162(3)(B).⁶ See Note 3, supra. Bethenergy's failure to abide by the notice requirement of Section 1166(a)(2) operated to the detriment of Plaintiff: he was unable to pay the entirety of six months of health plan premiums, thus precluding access to continuation coverage made available by the statute.

The instant case is similar to the situation addressed in Kidder v. H & B Marine, Inc., supra, 932 F.2d at 355-57. The Kidder court held an employer 100% liable for an employee's medical costs...