Court Dismisses Former Employee’s COBRA Claims

In McKenna v. ZO Skin Health, Inc., 2021 WL 4078291 (N.D. Ohio 2021), an employee sued two of her employers and their third party administrators (“TPA”) after she was denied coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”).

After a cancer diagnosis, plaintiff Vicki McKenna elected COBRA after being terminated by her employer, PuraCap Pharmaceutical LLC (“PuraCap”). In April 2018, McKenna notified the benefits plan administrator for PuraCap that she wished to enroll in its health plan under COBRA’s continuation coverage, which would allow her to remain enrolled until November 1, 2019.

In August 2019, McKenna started employment with defendant ZO Skin Health Inc. (“ZO Skin Health”) but resigned 15 days later. In September, a month later, she received notice from Defendant Infinisource, Inc. dba Infinisource Benefit Services (“Infinisource”) that she was eligible for COBRA continuing coverage under ZO Skin Health’s plan.

Relying on Infinisource’s representations, on or about October 17, 2019, McKenna notified Triton that she was terminating the continuing insurance coverage she was receiving through PuraCap, effective as of August 31, 2019.

After receiving McKenna’s termination notice, Triton canceled her COBRA continuing coverage as she requested. However, McKenna later learned that Infinisource misinformed her, and she was not eligible for continuing insurance coverage under ZO Skin Health’s plan.

In October 2019, McKenna requested that Triton rescind the termination of her COBRA continuing coverage through PuraCap’s health plan. Triton advised that Plaintiff could not rescind because Triton had already sent the termination notice to the insurance provider under the PuraCap plan.

McKenna filed a complaint In April 2020 against ZO Skin Health, Infinisource, Triton, and PuraCap. For Triton’s alleged violation, she sought statutory damages under 29 U.S.C. §§ 1161-1169 (listing COBRA continuation-coverage amendments).

She also alleged against Triton a breach of fiduciary duty under the Employee Retirement Income Security Act of 1974 (“ERISA”). McKenna sought an injunction, or other equitable decree, reinstating her coverage under the [PuraCap] health plan for the months of September and October 2019.

In its decision, the U.S. District Court (N.D. Ohio) court dismissed McKenna’s claims against her first employer’s TPA for COBRA notice violations and breach of fiduciary duty. This decision indicates that she had resolved the claims against the employers and the second employer’s TPA.

The court found that due to a mistake, the employee’s insurance coverage was not actually terminated by the insurer, and her benefit claims were paid during the remaining two-month COBRA coverage period under the first employer’s plan. The insurer had not attempted to recoup any benefits, so the court concluded that the employee had suffered no damages.

The court also rejected the employee’s claim that she should have received a notice of termination of COBRA coverage from the first employer’s TPA, explaining that COBRA does not require that a TPA provide notice to a qualified beneficiary who voluntarily terminates coverage.

COBRA litigation may be costly, especially based on mistakes, which were abundant in McKenna’s case. However, clear, accurate communication about an individual’s rights to elect COBRA is fundamental in any situation, even where there are no damages.

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