Leo v. Laidlaw, Inc.
1999 U.S. Dist. LEXIS 2630 (N.D. Ill. 1999)

Facts Of The Case:

Mr. Leo worked for Laidlaw, Inc.  On Mr. Leo’s termination of employment, Laidlaw sent Mr. Leo a COBRA Qualifying Event Notice that incorrectly informed him that he would be eligible for COBRA coverage under an HMO.  Mr. Leo elected COBRA and paid his first COBRA premium on a timely basis.

Mr. Leo then was sent a coverage card for dental coverage but not medical coverage.  When he inquired about this situation, Mr. Leo first was informed that he had no medical coverage at all, but then was informed that he was eligible only for COBRA coverage under an indemnity plan and not under the HMO.  Mr. Leo sued Laidlaw for COBRA compliance penalties due to alleged Qualifying Event Notice rule violations.

Question Presented:

The question presented to the court was whether Mr. Leo had standing to bring claims against Laidlaw.

Court's Decision:

The court began its analysis by stating that, under ERISA generally, only a health plan “participant or beneficiary” can sue for COBRA violations.  The court then noted that a participant is “any employee or former employee... who is or may become eligible to receive a benefit of any type from an employee benefit plan.”

The court then concluded that Mr. Leo could only qualify as a participant if he had a claim to benefits which the employer had promised to provide based on the employment relationship. The court concluded that Mr. Leo was not seeking plan benefits as a participant, but rather that he was suing after he was no longer eligible for plan benefits. The Court implied that Mr. Leo could re-file his suit and allege that he was a participant when filing suit, and thereby cure this problem.

Implications For Employers:

The holding in the Laidlaw case serves as a reminder that procedural defenses, such as lack of jurisdiction or venue, statutes of limitations, lack of standing, and the like should always been considered by employers facing lawsuits under COBRA.  However, as evidenced by the Laidlaw case, although these types of procedural defenses sometimes effect total victory for employers, they just as often merely delay the inevitable.

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