Court finds that COBRA notice was late even though coverage was continued

The 3rd Circuit Court of Appeals recently held that an employer was liable for failing to timely provide a former employee with the notice of the ability to elect continuation coverage (a “COBRA notice”). In Fama v. Design Assistance Corporation, the court found that the participant was entitled to a COBRA notice even though it had continued her coverage under the medical plan.

The court noted that the Treasury Regulations provide that the COBRA coverage period is measured from the date of the qualifying event (e.g., termination of employment) even if the event does not result in a loss of coverage until a later date. In this case, the court applied a penalty of $10 per day instead of the maximum of $110 per day.

As a result, plans will want to make sure that COBRA notices are provided based on the date of the qualifying event even if there is no loss of coverage until a later date.

A copy of the case is available here.