Federal Court Refuses to Set Aside Ruling for Stop Loss Carrier in Eligibility Case, Citing ‘Late COBRA’ Exclusion in Stop Loss Policy
MyHealthGuide Source: MyHealthGuide Source: Thomas Croft, Esq., King & Croft LLP, 9/15/2011, www.StopLossLaw.com
Case: Clarcor, Inc. v. Madison National Life Insurance Co., No. 3:10-189, in the United States District Court for the Middle District of Tennessee, 9/2/2011. Court’s Opinion.
In ruling on a motion filed by the group, Clarcor, to alter or amend (in essence to reconsider and set aside) the Court’s earlier judgment in this case, the Court faced the issue whether the Madison National stop loss policy’s exclusion for untimely offers of COBRA barred Clarcor’s claims regardless of the eligibility issues dissected and discussed in the Court’s first opinion. In a September 2, 2011 opinion, the Court recognized the effectiveness of the exclusion:
- “[T]he Court has determined that the termination of the FMLA leave was a COBRA “qualifying event” because it resulted in the end of coverage under the terms of the Plan. As COBRA coverage was not offered for five months after that event, the Court concludes that, even if “eligibility” were not an issue, the offering of COBRA coverage was not “timely,” and [the "late COBRA" exclusion] would apply to relieve Madison of its COBRA coverage obligations.”
In more general terms, then, the two Clarcor opinions jointly stand for the proposition that a COBRA qualifying event occurs when a Plan participant loses his or her eligibility. Coverage is nevertheless continued to be provided by means of some employer policy existing outside the four corners of the Plan document.
If COBRA is later offered to the participant and it is accepted, a valid “late COBRA” exclusion will operate to exclude the claim from coverage on the ground that the offer of COBRA was untimely. This is also the lesson of The Majestic Star Casino v. Trustmark Ins. Co.
In other words, even though the employee could have been covered under COBRA had it been timely offered and the employer had not relied on some outside-the-plan continuation policy, the stop loss carrier has no liability for any such claims.
About Tom Croft, Esq. and King & Croft LLP
Tom Croft is an attorney with the firm of King & Croft LLP, Atlanta, Georgia. He has a national practice, consulting with and representing stop-loss carriers, MGUs, and other entities in matters arising in the self-funded employee benefit plan industry. Tom is a magna cum laude graduate of Duke University (1976) and an honors graduate of Duke University School of Law (Order of the Coif, 1979), where he served as Associate Dean and Senior Lecturer. He is a regular contributor to The Self-Insurer Magazine’s “From The Bench” column. Tom is licensed in Missouri (1979), Texas (1985) and Georgia (1992); he associates with local counsel in other jurisdictions when appropriate. Contact Tom at 404-577-8400, tac@king-croft.com and visit www.StopLossLaw.com and www.king-croft.com.
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