Court allows COBRA claim against employer with fewer than 20 employees

COBRA requires an employer with more than 19 employees to provide health insurance to its former employees.  So if a plaintiff asserting a COBRA claim admits her employer has fewer than 20 employees, the court should dismiss the claim, right?  A case issued last week by the Sixth Circuit shows that life (or at least employee benefits law) is never that simple.

In Thomas v. Miller, a former employee admitted that her employer had fewer than 20 employees, but nonetheless sued for COBRA benefits.  The Sixth Circuit allowed the lawsuit to proceed because the employee claimed the employer used “conduct or language amounting to a representation” that employees were entitled to COBRA benefits.  A legal doctrine called estoppel prevents a party from asserting a defense at the expense of another person who was entitled to rely on the party's conduct.  The Sixth Circuit held that if the employee could prove the employer made such a representation, estoppel prevented the employer from asserting the statutory threshold defense.

The message to employers is that if provide employee handbooks or communications that refer to COBRA, you  may be liable for COBRA benefits. Small employers should carefully review the material provided by their insurers and all other employee benefit communications to ensure that they do not include COBRA references.  Otherwise, the employer could be stuck with an employee's medical bills without an insurance company to turn to for reimbursement.