ORDER
(Def.’s Motion for Summary Judgment— dkt. no. 85; Plf.’s Motion for Summary Judgment — dkt. no. 87)
I. SUMMARY
This dispute involves the notification provisions of the Consolidated Omnibus Budget Reconciliation Act (“COBRA”). Plaintiffs Regina C. Honey, Addison M. Honey, Lucas R. Honey, and Adam D. Honey (collectively, “Plaintiffs”) allege that Defendant Dignity Health (“Dignity”) failed to provide timely and adequate notice regarding Plaintiffs’ right to continue participation in Dignity’s group health plan following Dignity’s termination of Regina’s employment. Plaintiffs allege they suffered various harms due to the delayed notice, and request the maximum statutory damages detailed in section 502(c) of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1132(c).
Before the Court are the parties’ cross motions for summary judgment (dkt.nos.85, 88), and Plaintiffs’ Motion for Leave to File a Sur-Reply (dkt. no. 103). For the reasons discussed below, the Motion for Leave to File Sur-Reply is granted, and the parties’ cross motions for summary judgment are granted in part and denied in part.
II. BACKGROUND
The following facts are undisputed. Dignity provides health, vision, and dental insurance coverage to its employees through an “employee welfare benefit plan” (the “Plan”), as that term is used in 29 U.S.C. § 1002(1). (Dkt. no. 85-1, Ex. A.) Dignity is both the “sponsor” and the “administrator” of the Plan, as those terms are used in 29 U.S.C. § 1002(16). (Dkt. no. 85.) Until December 31, 2010, Dignity contracted with Defendant Conexis, LLC (“Conexis”) to administer Dignity’s compliance with COBRA’S notification provisions for the Plan. (Dkt. no. 86, Ex. B.) After December 31, 2010, Dignity contracted with Defendant Payflex Systems, USA, Inc. (“Payflex”) for the same services. (Dkt. no. 86, Ex. C.)
Dignity hired Regina on April 8, 2008, to work as a registered nurse. (Dkt. no. 88-1 ¶ 2.) Regina participated in Dignity’s group health, vision, and dental plans with Addison as a covered beneficiary. (Id.) Adam was also a covered beneficiary for the dental portion of the Plan only. (Id.) Because Regina and Adam were not married until December 31, 2010, Adam was covered under the Plan as a Legal Domiciled Adult. (Id.)
A. Regina’s First Termination
In March, 2010, Regina began experiencing signs of pre-term labor and her doctor ordered bed rest. (Id. ¶ 4.) Regina requested leave between March 26 and
B. Regina’s Second Termination
After filing a successful grievance against Dignity over the First Termination, Dignity reinstated Regina, and Regina returned to work on June 10, 2010. (Id. ¶ 6.) However, on June 14, 2010, Regina again experienced symptoms of preterm labor and her doctor again ordered bed rest for the remainder of her pregnancy and for a six-week postpartum period. (Id. ¶¶ 7, 9.) Regina remained on bed rest until her son, Lucas, was born on July 27, 2010. (Id.)
At the end of her postpartum period, Regina informed her employer that she was medically cleared to begin working again on September 7, 2010, but she was never scheduled to return to work. (Dkt. no. 88-4.) In the following days, Regina attempted several times to reach a representative in Dignity’s Human Resources (“HR”) Department regarding her return to work, but she was unable to do so. (Dkt. no. '88-1 ¶¶ 11-14.) Regina also attempted to add Lucas to the Plan, but she could not access her self-service benefits account. (Id. ¶ 12; Dkt. no. 85-2, Ex. D, 45:1-47:21.) On September 22, 2010, Regina was finally able to speak to someone in HR, who informed her that Dignity had retroactively terminated both her employment and her benefits, with effective dates of June 22, 2010, and June 30, 2010, respectively. (Dkt. no. 88-1 ¶ 15.) On September 28, 2010, Regina received correspondence from Dignity dated September 15, 2010, formally notifying her of her termination. (Id. ¶ 16; Dkt. no. 88-6.)
C. Regina’s Attempts to Procure COBRA Notice
During her September 22, 2010, conversation with Dignity’s HR representative, Regina stated that she had yet to receive a notification or information regarding her continued benefits under COBRA; she ex-' pressly requested the notification, conveying the urgency she felt as a result of medical bills related to her high-risk pregnancy. (Dkt. no. 88-1 ¶ 15.) The September 28, 2010, termination letter included an attachment explaining the availability of COBRA coverage. (Dkt. no. 85-2, Ex. E.) However, the letter did not provide a form for Plaintiffs to elect COBRA coverage. (Id.) Rather, the letter simply stated that enrollment information would be sent separately. (Id.) On September 30, 2010, Regina again called and left a message for Dignity’s HR representative, informing her that no COBRA notification had arrived. (Dkt. no. 88-1 ¶ 17.) Regina received no response. (Id.)
On November 2, 2010, Regina and Adam attended a union meeting to discuss the issues surrounding her termination. (Id. ¶ 18.) At that meeting, Regina informed Dignity’s representatives that she still had not received a COBRA notice. (Id. ¶ 19.) One of those representatives, Ms. Spencer, promised to look into the matter. (Id.) On November 8, 2010, Regina followed up with Ms. Spencer by email regarding her inquiry. (Id. at ¶ 21.) The following week, on November 15, 2010, Ms. Spencer wrote back and informed Regina that “[a]f-ter researching the COBRA issue, you were contacted based on the records. Unfortunately, there is really nothing else I can do.” (Dkt. no. 88-8.) Regina made
D. The COBRA Notices
Conexis issued the required COBRA notification in connection with Regina’s Second Termination in a correspondence dated December 7, 2010. (Dkt. no. 85-2, Ex. F.) Although the correspondence was addressed “[t]o Participant and/or any Covered Dependents,” the correspondence listed only Regina and Addison as participants and/or beneficiaries. (Id.) Additionally, the coverage premiums were set out only for Regina and Addison. (Id.) The notice did make a request to “[pjlease verify our records are accurate and make changes as necessary;” however, the notice was silent about Adam and Lucas. (Id.)
On January 18, 2011, Regina, contacted ■Conexis to elect benefits for herself and Addison. (Dkt. no. 88-1 ¶ 27.) However, Regina was informed that Conexis was no longer Dignity’s co-administrator and that she needed to contact Payflex. (Id.) Regina did so, and was told that she was not in Payflex’s system. (Id.) Payflex then issued a separate COBRA notice on January 24, 2011. (Id. ¶ 28.) Like the Conexis notice, the Payflex notice only described coverage options for Regina and Addison. (Id.; dkt. no. 88-16.)
E. Regina’s Reinstatement
On May 1, 2011, Regina, her union, and Dignity entered into a settlement agreement, resolving Regina’s grievance regarding her Second Termination. (Dkt. no. 85-2, Ex. H.) Under the Agreement, Dignity reinstated Regina’s employment, paid Regina $600.00 to cover out-of-pocket medical expenses, and paid or wrote off all Plaintiffs’ outstanding medical bills for the period between Regina’s Second Termination and her reinstatement. (Id.; Dkt. no. 85-2 at 173.)
F.This Lawsuit
Plaintiffs filed their First Amended Complaint (the “FAC”) on March 22, 2013, claiming violations of COBRA’S notice provisions and breach of fiduciary duties. (Dkt. no. 45.) The Court dismissed the breach of fiduciary duty claim pursuant to the parties’ stipulation. (Dkt. no. 91.) The parties also stipulated to dismiss with prejudice Defendants Conexis and Payflex. (Dkt.nos.102, 105.) Plaintiffs and Dignity now both move for summary judgment on the remaining claim for failure to provide the required COBRA notification. (Dkt.nos.85, 88.) Plaintiffs have also filed a motion seeking the Court’s permission to file a Sur-Reply to Dignity’s Motion for Summary Judgment. (Dkt. no. 103.)
III. MOTION FOR LEAVE TO FILE SUR-REPLY
Plaintiffs request permission to file a Sur-Reply in response to an alleged attack on Regina’s credibility in Dignity’s Reply to its Motion for Summary Judgment. The disagreement involves whether Regina elected COBRA coverage after she obtained adequate notice, or whether she allowed the coverage to lapse.
In its various filings, Dignity has consistently argued that Plaintiffs could not have suffered prejudice because, even after they received COBRA notice, they did not elect coverage. Dignity offers as support Regina’s deposition testimony that she let the coverage lapse and began negotiating a reinstatement in February 2011. (Dkt. no. 85.) In response, Plaintiffs offered Regina’s affidavit, attesting to the fact that she had elected COBRA coverage on the last
Although a Sur-Reply should not have been necessary, the Court will allow its submission and consider the evidence attached. There is no doubt that the email chain could have been included with Plaintiffs’ Opposition or Reply. Dignity had argued in its Motion for Summary Judgment and in its Opposition to Plaintiffs’ Motion for Summary Judgment that Plaintiffs had not elected COBRA coverage. (Doc. nos.85, 92.) Moreover, Regina’s deposition testimony was available to Plaintiffs, and Plaintiffs should have been aware of the contradictory testimony. The email chain, however, cannot come as a surprise to Dignity because it involves Dignity’s own agents and representatives discussing Regina’s COBRA election. Indeed, Dignity itself produced the email chain in discovery. In short, Dignity argued that Plaintiffs never elected coverage while possessing contradictory information in which its own agents confirmed that Plaintiffs had elected coverage. Thus, the Court does not see how considering this evidence would prejudice Dignity. The Court will allow the Sur-Reply and consider Plaintiffs’ proffered evidence.
IV. CROSS MOTIONS FOR SUMMARY JUDGMENT
A. Legal Standard
The purpose of summary judgment is to avoid unnecessary trials when there is no dispute as to the facts before the court. Nw. Motorcycle Ass’n v. U.S. Dep’t of Agric.,
The moving party bears the burden of informing the court of the basis for its motion, together with evidence demonstrating the absence of any genuine issue of material fact. Celotex,
B. Analysis
The sole claim remaining from Plaintiffs’ FAC is for violations of COBRA’S notice provisions. As the material facts are generally undisputed and the statutory penalty for any violation is left solely in the discretion of the district court, disposition of the case on summary judgment is appropriate. The two issues presented in the parties’ competing motions for summary judgment are (1) whether Dignity’s actions violated COBRA’S provisions, and (2) if so, what statutory penalty, if any, should be levied.
Plaintiffs assert that summary judgment is warranted because Regina and Addison were not provided adequate COBRA notice until at least December 7, 2010, and Lucas and Adam were never provided with the required notice. Contrarily, Dignity argues that there was no statutory violation because the December 7, 2010, notice was legally sufficient for all members of the Honey household. Dignity also argues that summary judgment should be granted in its favor because its actions were not taken in bad faith and Plaintiffs suffered no prejudice. Because of the extent of Dignity’s delay, the Court determines that Dignity did not comply with COBRA’S notification requirements and is liable for statutory violations. However, the statute does not provide for all of the remedies Plaintiffs seek.
1. Violation of COBRA’s notice requirements
COBRA requires that employers give former employees the opportunity to elect the continuation of the employer’s group health plan at the employee’s own cost for a maximum of eighteen (18) months following the occurrence of “qualifying events.” 29 U.S.C. §§ 1161, 1162(2)(A)(i); see Gaskell v. Harvard Coop. Soc’y,
COBRA additionally requires that employees and “qualified beneficiaries” receive notice of their right to continue their health coverage under an employer’s plan both when coverage commences under the plan^ — -not in dispute here — and after a “qualifying event,” such as termination of employment for a reason other than an employee’s gross misconduct. 29 U.S.C. §§ 1163(2), 1166(a)(1), (a)(4). After a qualifying event, an employer has thirty (30) days to notify a plan administrator, who then has fourteen (14) days to notify a terminated employee and qualified beneficiaries of their right to continue coverage under the plan. Although the case law is divided regarding the deadlines applicable to employers who are also plan administrators, recent decisions have relied on a letter from the Department of Labor expressing its opinion that such employers should have forty-four (44) days to notify a
COBRA does not specify what constitutes adequate notice to plan participants, see 29 U.S.C. §§ 1162, 1165, and courts hold that “a good faith attempt to comply with a reasonable interpretation of the statute is sufficient.” Smith v. Rogers Galvanizing Co.,
The date of Regina’s “qualifying event” was June 22, 20ÍQ — the date her termination was made effective. Dignity was therefore compelled to provide the requisite COBRA notice by August 5, 2010.
Further, Dignity’s argument that summary judgment should be granted in its favor based on the lack of bad faith and Plaintiffs’ prejudice is misplaced. Nothing in the statute requires a showing of prejudice or bad faith to establish a violation of § 1132(c)(1). Rather, courts have examined bad faith and prejudice as mitigating factors in exercising their discretion to impose varying amounts of penalties. See, e.g., Paris v. F. Korbel & Bros., Inc.,
2. Statutory Penalties
Dignity’s violation, however, does not entitle Plaintiffs to the full penalties they seek. The Court must address (1) whether Plaintiffs may claim penalties under § 1132(c)(1)(B); (2) whether plaintiffs other than Regina may assert independent claims; and (3) what penalties to assess with respect to each plaintiff who may assert independent claims.
a. Penalties under § 1132(c)(1)(B)
Plaintiffs claim entitlement to separate penalties under both 29 U.S.C. § 1132(c)(1)(A) and (B) for Regina, Addison, Lucas, and Adam, respectively. The statute providing remedies for a failed COBRA notice states:
Any administrator (A) who fails to meet the requirements of paragraph (1) or (4) of section 1166 of this title ... withrespect to a participant or beneficiary, or' (B) who fails or refuses to comply with a request for any information which such administrator is required by this subchapter to furnish to a participant or beneficiary (unless such failure or refusal results from matters reasonably beyond the control of the administrator) by mailing the material requested to the last known address of the requesting participant or beneficiary within 30 days after such request may in the court’s discretion be personally liable to such participant or beneficiary in the amount of up to $100 2 a day from the date of such failure or refusal, and the court may in its discretion order such other relief as it deems proper. For purposes of this paragraph, each violation described in subparagraph (A) with respect to any single participant, and each violation described in subparagraph (B) with respect to any single participant or beneficiary, shall be treated as a separate violation.
29 U.S.C. § 1132(c)(1).
Dignity argues that § 1132(e)(1)(B) only pertains to an administrator’s failure, after written request, to provide a participant a copy of the summary 'plan description as mandated by 29 U.S;C. § 1024(b)(4). Dignity further argues that simultaneous claims under § 1132(c)(1)(A) and (B) are not permitted by the statute because § 1132(a)(1)(A) specifically covers a failed COBRA notice, so any additional claim under § 1132(a)(1)(B) would be redundant. Dignity’s arguments are unsupported by any authority and directly contravene the plain language of the statute, which would permit recovery under both § 1132(c)(1)(A) and (B) for the acts alleged here.
Plaintiffs, however, did not properly request relief under § 1132(e)(1)(B) before their Motion for Summary Judgment, even though the allegations in Plaintiffs’ FAC are broad enough to state a claim under § 1132(c)(1)(B). Indeed, both the FAC and Plaintiffs’ computation of damages only reference $110 per day as the total penalty sought. The calculation for § 1132(c)(1)(B) damages — which entails an additional $110 per day and an entirely separate analysis for applicable dates and durations — first appears in Plaintiffs’ Motion for Summary Judgment. The Court finds that as Plaintiffs failed to previously assert a claim to relief under § 1132(c)(1)(B), Plaintiffs have now waived this claim and may not supplement their FAC through a motion for summary judgment. See Wasco Prod., Inc. v. Southwall Techs., Inc.,
b. Beneficiaries’ Claims
The parties dispute whether COBRA provides a .claim only for Regina as the employee and participant under the Plan, or whether beneficiaries may maintain actions as well. Dignity argues that § 1132(c)(1)(A) limits recovery to the plan participant. Dignity relies on Wright v. Hanna Steel Corp.,
Although the, above-cited cases are not binding on this' Court, the Court finds the latter approach — allowing claims from beneficiaries — -to be more persuasive. The plain language of the statute’s main clause states that “[a]ny Administrator ... may ... be personally liable to [a] participant or beneficiary.” 29 U.S.C. § 1132(c)(1). Further, the secondary clause, on which the Wright court focused, simply prescribes the treatment of subsection (B) violations in relation to subsection (A), as the same action giving rise to a violation of subsection (B) (refusal to provide information after a request) could very well entail a violation of subsection (A) (failing to provide notice generally). In other words, failing to provide notice to participants or beneficiaries after a qualifying event— which only happens “with respect to any single participant” — is deemed a separate violation than refusing to provide statutorily mandated information after a request, which either a participant or beneficiary may make, even though both claims may be based on identical facts. Interpreting the statute to provide remedies to qualified beneficiaries aligns with the statute’s imposition of duties on employers to provide notice to those beneficiaries upon a qualifying event. The Court therefore finds that Addison and Lucas may maintain independent claims against Dignity.
Dignity, however, had no statutory obligation to provide notice to Adam. Under COBRA, only qualified beneficiaries must receive notice after a qualifying event. 29 U.S.C. § 1166(a)(4). The statute defines “qualified beneficiary” as any individual receiving benefits under the plan as of the day before the date of the qualifying event, and who is either a spouse or dependent child of the employee. 29 U.S.C. § 1167(3)(A).
c. Penalty Assessment
Because the parties dispute the applicable dates for calculating delay, the Court will first determine the length of Dignity’s delay. Although Plaintiffs argue that January 24, 2011, should be the applicable date for determining the end of the delay, the Court finds that the December 7, 2010, notice was a “good faith attempt to comply with a reasonable interpretation of the statute.” See Smith v. Rogers Galvanizing,
The district court has discretion to impose a penalty and to set its amount, subject only to a $110 per day statutorily set maximum. 29 U.S.C. § 1132(c)(1)(A); 29 C.F.R. § 2575.502c-3. In deciding the penalty to assess, courts consider “bad faith or intentional misconduct on the part of the administrator, the number of requests for compliance made, and the existence of prejudice to the plan participant.” Lloynd v. Hanover Foods Corp.,
Dignity’s continuous failure to provide the required notice, despite Regina’s repeated requests, over the course of almost three (3) months, coupled with the circumstances relating to the termination of her health coverage, amounts to bad faith. See Brown v. Aventis Pharm., Inc.,
Dignity argues that its failure to provide the requisite COBRA notice was due to an oversight resulting from Regina’s two (2) terminations happening in such close succession and the transition between Conexis and Payflex. However, Dignity’s argument ignores the three (3) months between Regina’s termination and the December 7, 2010, notice, during which Regina repeatedly informed Dignity that she had not received a COBRA notice and requested that Dignity provide it. This argument also ignores Dignity’s decision to delay COBRA notice by making the termination of benefits retroactive to months earlier. Moreover, rather than responding to Regina’s requests for the information, Dignity repeatedly ignored her attempts to resolve the issue and, at one point, Dignity incorrectly informed Regina that the notice had been issued and that “there [was] really nothing else [it could] do.” (Dkt. no. 88-8.) The net result of Dignity’s actions was to exacerbate the delay in providing Plaintiffs with the information they needed to make a determination about their coverage. Further, although the transition to Payflex may have legitimately caused further delay, any such transitional delay happened after the December 7, 2010, notice and the already accrued delay.
As to the prejudice factor, the sole evidence supporting Regina’s claim of prejudice is her affidavit attached to the Opposition to Dignity’s Motion for Summary Judgment. In her affidavit, Regina declares that (1) she suffered damage to her credit, financial hardship from increased medical bills, harm resulting from untreated sinus issues and a postponed mammogram, and general stress resulting from worrying about finances and her and her children’s untreated medical conditions; (2) Addison suffered harm resulting from delayed treatment of infections; and (3) Lucas suffered harm resulting from delayed treatment of both a mass on his forehead and a severe diaper rash caused by undiagnosed food allergies.
Despite Dignity’s attempts to diminish Regina’s claim of financial hardship caused by the lack of health coverage during a critical time in her pregnancy and subsequent delivery, the undisputed evidence supports Regina’s claim. Dignity’s argm ment that it paid Regina’s medical bills after her reinstatement ignores the financial hardship encountered before her reinstatement. Dignity’s argument also ignores the time and effort that Regina spent to obtain the COBRA notice.
However, although foregoing medical treatment is an actionable prejudice, there must be evidence of some type of “physical impact.” See In re Interstate Bakeries Corp.,
Regina has offered sufficient support for her claim that she suffered financial hardship during the period when Plaintiffs did not have coverage, and the harm resulting from the time and inconvenience Regina was forced to endure to obtain the COBRA notice from Dignity. The Court finds that the maximum statutory penalty is appropriate given Dignity’s bad faith conduct and the harm to Regina.
The penalty assessment for Dignity’s COBRA violation with respect to Addison and Lucas is a closer call in light of the Court’s finding that they suffered no actual injury or prejudice. The purpose of ERISA’s statutory penalties is to induce compliance with the notice requirements and to punish non-compliance. See, e.g., DiSabatino v. DiSabatino Bros., Inc.,
In sum, the Court finds that Regina Honey should be awarded statutory damage in the amount of $110 per day for Dignity’s 168-day violation. The total amount is $18,480.00. Dignity should be assessed a $20 penalty per day for Addison and Lucas, respectively. The amount of penalty awarded to Addison and Lucas is $3,360.00 each.
y. CONCLUSION
It is therefore ordered that Plaintiffs’ Motion for Leave to File Sur-Reply (dkt. no. 103) is granted.
It is further ordered that Defendant Dignity Health’s Motion for Summary Judgment (dkt. no. 85) is denied as to Regina’s, Addison’s, and Lucas’s claims, but granted as to Adam’s claim.
It is further ordered that Plaintiffs’ Motion for Summary Judgment (dkt. no. 88) is granted as to Regina’s, Addison’s, and Lucas’s § 1132(c)(1)(A) claims and denied as to Adam’s claim. The Clerk of the Court shall enter judgment in favor of (1) Regina Honey in the amount of $18,480.00; (2) Addison Honey in the amount of $3,360.00; and (3) Lucas Honey in the amount of $3,360.00.
The Clerk is instructed to close the case.
Notes
. The Court notes that this date most likely precedes the date when Dignity decided to terminate Regina’s employment. Thus, even if Dignity provided the COBRA notice to Regina immediately after it decided to terminate her employment, the notice would still be delayed under the statutory deadline.
. This amount has been adjusted to $110. 29 C.F.R. § 2575.502c-3.
. Dignity additionally argues that it was not required to send notice to Lucas. However, the statute also defines a qualified beneficiary as "a child who is born to ... the covered employee during the period of continuation coverage.” 29 U.S.C. § 1167(3)(A). Lucas is therefore a qualified beneficiary entitled to notice.
. Plaintiffs argue that because Lucas was not listed on either the December 7, 2010, notice or the January 24, 2011, notice, the penalty applicable to Lucas should extend until May 1, 2011, the day his benefits were reinstated. However, the Court finds that the December 7, 2010, notice was sufficient to constitute a good faith attempt to comply. Lucas was never listed as a beneficiary because his birth was after the termination of Regina’s employment and benefits.
. Federal Rule of Evidence 803(4)'s medical diagnosis exception to hearsay does not extend to statements made to patients by their doctors. Bulthuis v. Rexall Corp.,