Not finding bad faith or prejudice, court declines to award COBRA penalties

No statutory damages were imposed on an employer whose terminated employee went without medical insurance for a year after his job ended, based on his employer’s failure to notify him of his COBRA rights. The U.S. District Court for the District of Puerto Rico (D.P.R.) explained that it had broad discretion with regard to whether or not to award statutory penalties.

Background. Angel Vásquez Rivera (Vásquez Rivera) and his wife were beneficiaries of the group health plan through Vásquez Rivera’s employer, Unión de Tronquistas de Puerto Rico Local 901 (the union), until the union terminated his employment in January 2013. For at least a year, Vásquez Rivera did not visit or receive treatment from any doctor. Vásquez Rivera and his wife, who later obtained her own health insurance, filed suit in district court against the union in December 2013 for its failure to notify them of their right to COBRA coverage. The union filed a motion for summary judgment, which the court granted. Vásquez Rivera then moved for reconsideration of the judgment.

Adverse effects. The court denied Vásquez Rivera’s motion to reconsider. The court first conceded that employers that fail to notify beneficiaries of their COBRA rights can incur penalties of up to $110 per day, but added that courts also have broad discretion in deciding whether or not to award those statutory penalties. The court then explained that it had previously been reluctant to impose statutory penalties for COBRA notice violations in the absence of bad faith on the part of the employer or prejudice on the part of the employee. Furthermore, the court cited to a decision by the First Circuit Court of Appeals (Kerkhof v. MCI WorldCom, Inc., 282 F.3d 44, 55-56 (CA-1), 2002), in which the court stated that, for COBRA penalties, courts could give dispositive weight to considerations of bad faith and prejudice and that former employees should show that they had been adversely affected in some way.

Bare assertions not enough. The court then found that Vásquez Rivera’s bare assertions he was without medical coverage for an extended period of time did not demonstrate the required adverse effects. The court further found that Vásquez Rivera’s statements that his access to medical services was impaired and that he and his wife “took medicines after June 2014” were too vague and conclusory to support a finding that they had experienced harm. The court found a similar lack of specificity in statements by Vásquez Rivera’s wife that she had “medical conditions that could not be treated medically” and added that it was declining to engage in speculation with regard to what Vásquez Rivera’s and his wife’s medical issues might have been.

No demonstrable harm. Vásquez Rivera then pointed to a previous opinion by the district court (Rodríguez v. Int’l Coll. Of Bus. & Tech., Inc., 364 F.Supp.2d 40 (D.P.R. 2005) in which penalties had been awarded where there were fewer damages than in Vásquez Rivera’s situation. The court pointed out, however, that in the Rodríguez opinion, the individuals involved had not only gone without health insurance, they had eventually enrolled in a health plan with higher premiums, and it was those higher premiums that amounted to demonstrable harm.

Finally, Vásquez Rivera asked that statutory penalties be imposed as a deterrent, but the court said that, although it had the option of imposing statutory penalties for that reason, it did not commit an error when it simply opted not to. Therefore, Vásquez Rivera’s motion for reconsideration was denied.

SOURCE: Angel Vázquez Rivera v. Unión de Tronquistas de Puerto Rico Local 901, (DC-P.R.), No. 13-1949 (MEL), July 1, 2016.

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