Equitable tolling of COBRA election applies only for period beneficiary is incapacitated

An employee who was in an accident and admitted to a hospital before the end of his 60 day election period under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), may qualify for equitable tolling of the election period for the time of incapacity. However, the tolling ends once the employee is no longer incapacitated and an employee or their representative can not retroactively elect to continue coverage once that election period has ended. Further, any claims related to the election period or equitable tolling of the election period under COBRA must be brought as a federal claim under Employee Retirement Income Security Act of 1974 (ERISA), as any state law claims are preempted by ERISA.
After voluntarily terminating employment at Stidham Trucking, Inc. (employer) on September 26, 2014, an employee received notice that he had 60 days to elect to continue his benefit under COBRA. Just before the 60 day election period ran out, employee was in an accident and was admitted to UC Davis Medical Center (Hospital), where he received treatment for 10 days. The hospital’s attorney contacted CobraHelp on July 11, 2016 and misrepresented to CobraHelp that both the employer and Anthem (insurance provider) agreed that since employee was incapacitated, and therefore unable to elect to continue or terminate coverage before the 60 day election period ended, that employee was entitled to a new election period. CobraHelp sent a new COBRA notice via email based on this representation and was to mail a hardcopy of the new notice via mail. A few hours later CobraHelp emailed the hospital’s attorney to inform her that the new notice sent via email should be disregarded and that a new notice would not be mailed. The hospital’s attorney completed the the election form anyway, and mailed payment when the first premium payment would have been due. CobraHelp returned the check uncashed. The hospital then filed suit. CobraHelp filed a motion to dismiss along with a motion for sanctions.

Equitable tolling.

As part of ERISA, COBRA requires terminated employees receive notice of the right to continued coverage along with a 60 day period to elect to continue coverage. The hospital argues that the employee was not provided adequate time to elect for continued coverage due to the employee’s 10-day incapacitation. While the court agreed that the employee’s incapacitation might trigger equitable tolling, the court did not agree with the hospital’s application of equitable tolling to this situation.
The hospital pointed to an 11th Circuit case where the court held that an insured’s obligations are tolled during the period of incapacitation until the insured is able to cure the deficiency or until the date that a legally appointed representative is empowered to cure the deficiency on the insured’s behalf. The hospital argued that it was acting on the employee’s behalf, but needed to be empowered to elect COBRA coverage through a new COBRA notice. The court rejected this argument based on the hospital’s previous assertion that the employee assigned all of his insurance benefits to the hospital upon admission. This would have empowered the hospital to make a COBRA election on the employee’s behalf at that time and would have eliminated the need for equitable tolling of the election period while the employee was incapacitated. The court instead looked to the Ninth Circuit’s definition of equitable tolling, which says that the “clock stops running when extraordinary circumstances first arise, but the clock resumes running once the extraordinary circumstances have ended or when the petitioner ceases to exercise reasonable diligence, which ever occurs earlier.” Luna v. Kernan, 784 F. 3d 640, 651 (9th Cir. 2015). If the court were to determine that equitable tolling of the 60-day election period was available, it would have tolled from the time the employee was incapacitated until the end of incapacitation which would have only added 10 days to the original election period. The hospital did not attempt to elect to continue the employee’s coverage under COBRA until almost two years later on August 18, 2016.
The court concluded that if equitable tolling applied, it would have extended the election period by 10 days and the employee could have elected to continue coverage once he left the hospital and was no longer incapacitated. The court did not agree with the hospital that the election period must be extended until someone could be empowered to make the election on the employee’s behalf during incapacitation, but determined that by the hospital’s own assertions it had that power from the moment the employee was admitted to the hospital. So both arguments for equitable tolling failed as a matter of law and the court dismissed this claim with prejudice.


Participants or beneficiaries of an ERISA plan who wish to recover benefits due to them or to enforce their rights under the terms of the plan or to clarify their rights to future benefits, have the ability to bring a civil action as a federal claim under ERISA. However, the claims can not be brought under state law actions. It has been established by the Supreme Court that § 502(a) of ERISA was intended to pre-empt any civil complaints raising any of the specified claims. Additionally, § 514(a) precludes state law claims that relate to an ERISA cause of action because they conflict with ERISA, even if their effect on ERISA is only indirect.
The hospital brought four state law claims, including breach of contract, equitable estoppel, unjust enrichment, and violation of California’s Unfair Competition Law (UCL). The hospital argues that these claims should be viewed as if it has already been determined that it is not a participant, beneficiary, or fiduciary of an ERISA plan, and these are alternative arguments that are not preempted by ERISA. However, the court is unable to separate the state law claims from the ERISA claims. The hospital’s breach of contract claim alleges that a contract was formed when CobraHelp issued the new COBRA notice via email. This is not separate from the ERISA claims because if the court found that a new contract was created, that contract would be for COBRA rights. Additionally, a new contract could not have been created because CobraHelp did not have the power to create a contract, and CobraHelp informed the hospital’s attorney that it held no such power. As for the other claims, the hospital did not identify an injury it suffered for the equitable estoppel claim, a benefit the Defendants received for the unjust enrichment claim, or any unlawful, unfair or fraudulent business act or practice for the UCL claim.
The court held that the breach of contract, equitable estoppel, unjust enrichment, and UCL claims were all based on COBRA rights and therefore preempted. If these claims had no been preempted, the court still found that each of these claims failed as a matter of law and the court dismissed these claims with prejudice.
The court dismissed with prejudice all claims by the hospital and employee. The court also granted CobraHelp’s motion for sanctions.

SOURCE: Regents of the University of California v. Stidham Trucking Inc.,(DC CA) No. 2:16-cv-02835-MCE-CKD, September 1, 2017.
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