DiSabatino v. DiSabatino Bros.
(United States District Court for the District of Delaware, LEXIS
11117)
Alfred DiSabatino was one of four brothers who owned Family Companies,
which operated three construction companies. Alfred DiSabatino was fired, but Family
Companies continued to pay for Alfred’s health insurance. Although Alfred believed
his health insurance had already been terminated, he presented his insurance card to
the hospital approximately one year after being fired when his wife suffered a stroke.
The comptroller of Family Companies, Ralph Patrone, was instructed to stop paying for
Alfred’s insurance and to notify Alfred of this change.
On May 26, 1994, while Alfred was in the offices of Family Companies,
he was hand delivered a notice from Patrone. The notice asked Alfred to reimburse Family
Companies for coverage provided from July 1993 to May 1994 ($8,739.62). Alfred filed
a complaint with the U.S. District Court on July 20, 1994. On August 29, 1994, Alfred
received a more thorough COBRA notice. This second notice stated that his continuation
coverage would last for 18 months from the date of that notice. Alfred filed suit, arguing
that Family Companies should provide him with permanent health insurance. He also sought
the statutory penalty provided by ERISA of $100 per day for each day of non-compliance.
DISTRICT COURT RULING
Generosity and good intentions do not preclude the necessity of COBRA
notifications. The court discussed very briefly the continuation coverage time frame
outlined in the second letter sent to Alfred. The court, referring to Phillips v. Riverside
(also in the Case Law
REFERENCES), stated that the continuation coverage
period begins with the Qualifying Event, not with a proper notice. Therefore, the court
found that Alfred’s coverage would end 18 months after his termination.
The court awarded Alfred reasonable attorney fees and imposed the
ERISA fine in the amount of $10 per day for 384 days (from 44 days after Alfred’s
termination to the date of the second letter). Employers must remember to end coverage
after a Qualifying Event, according to the terms of the plan. Employers who wish to
provide coverage to employees after a Qualifying Event would have the option to do so
by paying the COBRA premium for the beneficiary for a fixed amount of time.