Blue Cross was not obliged to send COBRA notice to insureds where Hostess Brands was plan administrator

A federal district court in Pennsylvania (DC PA) has ruled that an insurer could not be sued for failing to send notice to a terminated employee of the right to continuing health insurance coverage because the employee’s former employer, not the insurer, was the plan administrator. The court granted the insurer’s motion for summary judgment. The case is Corrigan v. Local 6, Bakery, Confectionary and Tobacco Workers (No. 14-1073).

Background. While Terrence Henry Corrigan, III (Corrigan) worked as a mechanic for a Hostess Brands plant, he was a member of a bargaining unit represented by the Bakery, Confectionary, and Tobacco Workers union (the union) under a collective bargaining agreement (CBA). Hostess provided employer-sponsored health coverage under the CBA through Independence Blue Cross (Blue Cross).

After Hostess filed for bankruptcy in 2012, its workers went on strike when negotiations for a modified CBA stalled. Consistent with prior warnings from Hostess, employees’ health benefits were immediately terminated as of the day of the strike.

Two or three days later, Corrigan was hospitalized until the beginning of December, and he incurred uncovered medical expenses of $245,375.54. During his hospitalization, Hostess mailed a notice of continuing coverage to his home address. The notice, which Corrigan claimed he never received, advised him that he could continue his health benefits if he paid for coverage by January 14, 2013.

He never paid for the benefits, however, but he received a letter in February 2013 informing him of a March 31st deadline for monetary claims against Hostess. Although the letter made no mention of any claims for medical bills that the union would file, Corrigan was apparently under the impression, based on a conversation with the union president, that the union was handling his medical claims, and so, he never filed a bankruptcy claim for his medical costs.

Corrigan filed suit against Hostess, the union, and Blue Cross, and the case was removed to district court. Corrigan’s state law claims included ones for breach of contract and negligence against Blue Cross. Both Blue Cross and Corrigan filed motions for summary judgment.

Claim preempted by ERISA. Corrigan claimed that, under the contract between Hostess and Blue Cross, Blue Cross was required to send him a continuation of coverage notice. Blue Cross argued that Corrigan’s claim was preempted by ERISA.

The court agreed with Blue Cross, and pointed to the notification provisions of ERISA Sec. 601 and ERISA Sec. 606, adding that Corrigan’s claims were governed by COBRA, thus limiting him to ERISA’s civil enforcement mechanism at ERISA Sec. 502.

Blue Cross had no duty to send notice. The court added that Corrigan’s claims failed in another way, and referenced the plan documentation, which specifically provided that the employer, Hostess, not Blue Cross, was the plan administrator. Therefore, it was incumbent upon Hostess, not Blue Cross, to notify Corrigan of his COBRA rights, which it apparently did.

The court noted that COBRA has no particular requirements with regard to the manner in which notice must be given, and added that the record, which included a Certificate of Mailing, was clear that Hostess sent a notice by mail. Whether or not Corrigan ever actually received the notice was irrelevant, and it was only necessary that Hostess made a good faith effort to notify him.

The court also stated that Blue Cross had no duty, either in contract or in tort, to notify Corrigan of his COBRA rights.

Corrigan’s negligence claim was further barred by Pennsylvania’s “gist of the action” doctrine, which precludes tort claims that replicate breach of contract claims. The union’s motion for summary judgment was also granted.

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