Coker v. Trans World Airlines, Inc.
1999 U.S. App. LEXIS 492 (7^th Cir. Jan. 15, 1999)

Facts Of The Case:

TWA’s collective bargaining agreement with one of its unions provided that furloughed union employees would receive continued health coverage until the earlier of the date 12 months after their furlough date or the date they obtained new employment. 

Because any COBRA coverage elected by these same individuals would run for up to 18 months from the furlough date, TWA in essence was agreeing to would pay for the first 12 months of COBRA coverage and the Qualified Beneficiaries, if they elected COBRA, would pay for the remaining 6 months of COBRA coverage.

Mr. Coker and his family qualified for the 12 months of TWA-provided continuation coverage.  When the 12 months expired, the Cokers did not exercise their COBRA rights to enjoy the 6 remaining months of COBRA coverage, but TWA nevertheless continued to carry them on the TWA health plan and continued to send them annual re-enrollment materials and insurance cards.  A series of medical expense claims by the Cokers alerted TWA to its administrative error in continuing the Cokers on the plan after the 12 months of TWA-provided continuation coverage.

TWA paid the Coker’s health claims incurred during the erroneously extended six month period, but refused to pay health claims incurred after the 18 month period expired.

Question Presented:

The question presented to the court was whether TWA was prevented from denying coverage to the Cokers after the COBRA period expired because TWA sent annual re-enrollment information and cards to the Cokers as if they had actually qualified for coverage.

Court's Decision:

The court held that the Cokers’ claim failed due to a lack of “reasonable reliance” by the Cokers on the inadvertent administrative error of TWA.  The court noted that the Cokers had access to the collective bargaining agreement, the plan’s Summary Plan Description and other Plan materials which indicated the true extent of the post-furlough and COBRA health coverage.  The court added that, even in the absence of these clear written materials, it was unreasonable for the Coker’s to expect that their TWA-provided health coverage would continue indefinitely.

Implications For Employers:

Inevitably, employers make inadvertent errors in the administration of their health plans. The Coker decision affirms that the terms of the health plans -- and not the facts of the inadvertent errors -- generally determine a particular individual’s rights to plan coverage.  However, the Coker decision also suggests that, in appropriate cases, if individuals “reasonably rely” on an employer’s administrative error, the error may create rights in the individuals beyond those set forth in the plan’s governing documents.

Therefore, employers should take all possible steps to meet their COBRA compliance obligations and to communicate carefully, and in detail, the terms of their active employee and post-employment health coverages.

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