Small Claims Suit

[Trikdagain]

Jurisdiction

Oklahoma

A former employee has filed suit in small claims court alleging "the defendant owes the plaintiff $xxx.xx for medical bills".

We cancelled our coverage with BCBS effective 3/1/16. Our coverage with CC went into effect on 4/1/16. The former employee walked off the job on 3/26/16.

We have absolutely no idea exactly which "medical bills" she is referring to and therefore, have no idea how to defend this suit.

Can one file a pre trial motion in small claims court? If not, how do we determine what she is talking about?

Our court date is May 12, 2017.

 

[hrforme]

what notification(s) were the employees given that they were going to lose health insurance coverage? What prior promises did you put into place (especially at open enrollment/communication time)? Why the did employer cancel the coverage without having other coverage in place? Why did the employer allow a 1 month gap? Does the employer have a Section 125 program/benefit in place? Did the employer take health insurance deductions out of the employee's paycheck for the payrolls in March 16?

I suspect she had medical bills between 3/1/16 and 4/1/16 when the employer coverage was no longer available. And depending on how your benefits were setup and what was communicated to employees, you might be liable if the insurance company doesn't pay (and it sounds like the employer allowed a break in coverage). Do you have EPLI or E&O for your employer for professional mistakes? Check under your umbrella liability policy also --- sometimes there is coverage there too.

 

[army judge]

A former employee has filed suit in small claims court alleging "the defendant owes the plaintiff $xxx.xx for medical bills".

We cancelled our coverage with BCBS effective 3/1/16. Our coverage with CC went into effect on 4/1/16. The former employee walked off the job on 3/26/16.

We have absolutely no idea exactly which "medical bills" she is referring to and therefore, have no idea how to defend this suit.

Can one file a pre trial motion in small claims court? If not, how do we determine what she is talking about?

Our court date is May 12, 2017.

If anything places your business in jeopardy, especially things of a legal nature, its always best to consult a licensed attorney near you.

 

[hrforme]

agree and it is possible that if you lose this one, there may be other employees without coverage for the month that have claims and will want to be reimbursed.

 

[army judge]

agree and it is possible that if you lose this one, there may be other employees without coverage for the month that have claims and will want to be reimbursed.

Successful lawsuits against you, and/or settlements offered by you, often encourage others to try the same tactics against you.

 

[adjusterjack]

Can one file a pre trial motion in small claims court?

I don't think so. Small claims court is simplified with no discovery or pre-trial activities. Here's a brief guide:

Welcome to Legal Aid Services of Oklahoma's guide to free legal help in Oklahoma.

If not, how do we determine what she is talking about?

You go to court on your appointed day and she will tell the judge what she is talking about.

You obviously know from the complaint how much she is suing for. I suggest you bring your checkbook in case you lose, which is quite possible if you left your employee without coverage.

 

[mightymoose]

Typical in small claims is for parties to exchange evidence/documents before being called up. Mediation is typically offered too.

 

[Trikdagain]

what notification(s) were the employees given that they were going to lose health insurance coverage? What prior promises did you put into place (especially at open enrollment/communication time)? Why the did employer cancel the coverage without having other coverage in place? Why did the employer allow a 1 month gap? Does the employer have a Section 125 program/benefit in place? Did the employer take health insurance deductions out of the employee's paycheck for the payrolls in March 16?

I suspect she had medical bills between 3/1/16 and 4/1/16 when the employer coverage was no longer available. And depending on how your benefits were setup and what was communicated to employees, you might be liable if the insurance company doesn't pay (and it sounds like the employer allowed a break in coverage). Do you have EPLI or E&O for your employer for professional mistakes? Check under your umbrella liability policy also --- sometimes there is coverage there too.

Thank you for your response. With respect to your first 3 questions:

1. What notification(s) were the employees given that they were going to lose health insurance coverage?

2. What prior promises did you put into place (especially at open enrollment/commun ication time)? Why did employer cancel the coverage without having other coverage in place?

3. Why did employer allow a 1 month gap?

let me give you some background information:

The Plaintiff ("Plaintiff") in question was my predecessor (office manager).

She was employed by XYZ, Inc. ("INC") beginning 4/20/15.

in December, 2015. the man who is now my boss formed an LLC and purchased substantially all of INC's assets and the rights to their trade name. Thus the company became XYZ, LLC ("LLC")

LLC retained the services of Plaintiff after purchasing INC. We have no idea what prior promises were put into place (especially at open enrollment/commun ication time) by INC.

On 2/18/16 Plaintiff and owner of LLC met with representative of a new insurance carrier ("New Carrier") because the health insurance coverage, which was in effect for INC. when LLC bought the company was scheduled to come up for renewal on 3/1/16.

Open enrollment for New Carrier was set for 4/1/16. On 3/8/16 New Carrier provided LLC with memos which were distributed to all employees. Each memo contained an "acknowledgment of offer of coverage" whereby each employee could "opt in" or decline, together with an application for coverage. Each memo stated that New Carrier would become our new insurance provider as of 4/1/16.

On 3/8/16 Plaintiff indicated she would, in fact, be enrolling with New Carrier by completing and signing her acknowledgement memo .

3/16/16 Plaintiff quit without notice

SIDE NOTE: On the calendar used by Plaintiff at work and in her own handwriting on 3/17/16 there is a notation "Doctors appointment 3:45". (Because Plaintiff refuses to give me any information on which doctor bills she is suing for, I have no idea if she is referring to the appointment on 3/17/16 or not)

QUESTION 4. Does Employer have a Section 125 program/benefit in place?

ANSWER: I am not sure.


QUESTION 5. Did employer take health insurance deductions out of the employee's paycheck for the payroll in March 16?

ANSWER: No, employer paid the full cost of employee's monthly insurance premiums.

 

[hrforme]

I am reading that they became employees of the LLC on 1/1/16? Did they actually rehire the employees or just basically transfer their employment along with assumed pay and benefits?

Did the employees know that the renewal date was 3/1? Why did the employer wait until 4/1 to do open enrollment? Why did they not renew on 3/1 with the new carrier and do a very short OE window to get coverage into place on 3/1?

Honestly it sounds like the employer(s) dropped the ball unless you can prove that the employees were directly told they would be losing coverage during that time in between especially if there was earlier new hire paperwork that stated that they had that benefit OR they were told verbally (all ee meetings, for example) or in written form that benefits would continue through the new employer.

You have an even weaker defense if the employer usually paid 100% since the employee couldn't have noticed a missing deduction on a paycheck and questioned it early in the month. With no communication of the one month of lost coverage, how was the employee supposed to know she didn't have coverage?

Again how exactly did you (or the plaintiff or the employer) communicate to the employees that they had no coverage during that month? When did you tell them that the prior coverage ended? How exactly were they supposed to know?

 

[adjusterjack]

Trikdagain, originally you wrote:

We cancelled our coverage with BCBS effective 3/1/16.

Later on you wrote:

On 2/18/16 Plaintiff and owner of LLC met with representative of a new insurance carrier ("New Carrier") because the health insurance coverage, which was in effect for INC. when LLC bought the company was scheduled to come up for renewal on 3/1/16.

That tells me that the insurance wasn't "cancelled" by the employer, it was due to expire on 3/1 and the employer chose to replace it effective 4/1.

What bothers me about the Plaintiff's case is that the Plaintiff, in her capacity as office manager, was privy to the expiration date of the former coverage, the negotiations for the new coverage, and the effective date of the new coverage, then allowed it to happen knowing full well that she wouldn't have coverage after 3/1.

That, folks, is what I think is called a defense.

Whether other employees where not notified of a lapse of coverage is not relevant to the Plaintiff's case. The employer can address that issue if other employees' medical claims come to light.

 

[hrforme]

I will disagree. I don't think it is a slam dunk just because she was in at least one of the meetings (response by OP only mentions 1 on 2/18 unless I am missing something else). It could be that she didn't fully understand that it wasn't going to be backdated if communications were bad or nonexistent or it could be she truly didn't know the expiration date and thought it was picking up from the last expiration date. Especially if she received a memo on 3/8 where she thought she was enrolling into the continuing coverage.

Part of my viewpoint also comes from the expectation that there was previous coverage, there was going to be new coverage, etc. I'd love to know how many years insurance coverage has been in place with the employer paying 100%? The longer it was there, the more I think employees, including her, would be allowed to rely on it if there were no communications that they were going to be without coverage for a month. I still think it is going to rest on the communications that the employer used from 1/1/16 when they became employees through open enrollment.

I have honestly not heard of any employer having a break in coverage of a month even when switching carriers/plans at plan year end. I'd be curious what the plan document/SPD state about eligibility and coverage and whether there is an expiration date on it. Someone at the employer dropped the ball. May have been the office manager, but someone else should have been following up since in the end it is the employer who is ultimately responsible.

It truly sounds like this employer (regardless of whether they win or not) needs some HR/benefits consulting and advice. An employer shouldn't wait 10 days before plan year end to be discussing changing carriers! We are a very small business and get our renewals from our insurance broker at least 6 weeks before plan year end and our broker works very hard to get us other quotes quickly so a decision can be made for open enrollment which is usually about 3 weeks before plan year end.

 

[txls]

I also wonder if COBRA should have been offered for the one month gap.

 

[adjusterjack]

I also wonder if COBRA should have been offered for the one month gap.

No.

The qualifying events for COBRA for an employee are:

Termination of the employee's employment for any reason other than gross misconduct; or
Reduction in the number of hours of employment.

https://www.dol.gov/sites/default/f...a-continuation-health-coverage-consumer_0.pdf

 

[Trikdagain]

I am reading that they became employees of the LLC on 1/1/16? Did they actually rehire the employees or just basically transfer their employment along with assumed pay and benefits?

Did the employees know that the renewal date was 3/1? Why did the employer wait until 4/1 to do open enrollment? Why did they not renew on 3/1 with the new carrier and do a very short OE window to get coverage into place on 3/1?

Honestly it sounds like the employer(s) dropped the ball unless you can prove that the employees were directly told they would be losing coverage during that time in between especially if there was earlier new hire paperwork that stated that they had that benefit OR they were told verbally (all ee meetings, for example) or in written form that benefits would continue through the new employer.

You have an even weaker defense if the employer usually paid 100% since the employee couldn't have noticed a missing deduction on a paycheck and questioned it early in the month. With no communication of the one month of lost coverage, how was the employee supposed to know she didn't have coverage?

Again how exactly did you (or the plaintiff or the employer) communicate to the employees that they had no coverage during that month? When did you tell them that the prior coverage ended? How exactly were they supposed to know?

The Plaintiff ("Plaintiff") in question was my predecessor (office manager).

She was employed by XYZ, Inc. ("INC") beginning 4/20/15.

in December, 2015. the man who is now my boss formed an LLC and purchased substantially all of INC's assets and the rights to their trade name. Thus the company became XYZ, LLC ("LLC")

LLC retained the services of Plaintiff after purchasing INC. We have no idea what prior promises were put into place (especially at open enrollment/commun ication time) by INC.

On 2/18/16 Plaintiff and owner of LLC met with representative of a new insurance carrier ("New Carrier") because the health insurance coverage, which was in effect for INC. when LLC bought the company was scheduled to come up for renewal on 3/1/16.

Open enrollment for New Carrier was set for 4/1/16. On 3/8/16 New Carrier provided LLC with memos which were distributed to all employees. Each memo contained an "acknowledgment of offer of coverage" whereby each employee could "opt in" or decline, together with an application for coverage. Each memo stated that New Carrier would become our new insurance provider as of 4/1/16.

On 3/8/16 Plaintiff indicated she would, in fact, be enrolling with New Carrier by completing and signing her acknowledgement memo .

3/16/16 Plaintiff quit without notice

 

[Trikdagain]

Trikdagain, originally you wrote:



Later on you wrote:



That tells me that the insurance wasn't "cancelled" by the employer, it was due to expire on 3/1 and the employer chose to replace it effective 4/1.

What bothers me about the Plaintiff's case is that the Plaintiff, in her capacity as office manager, was privy to the expiration date of the former coverage, the negotiations for the new coverage, and the effective date of the new coverage, then allowed it to happen knowing full well that she wouldn't have coverage after 3/1.

That, folks, is what I think is called a defense.

Whether other employees where not notified of a lapse of coverage is not relevant to the Plaintiff's case. The employer can address that issue if other employees' medical claims come to light.

 

[Trikdagain]

Thank you so much for your help!!! Yes, I am sorry, originally I stated that the policy was cancelled effective 3/1/16 when, in actuality I should have termed it "due to expire". I called Plaintiff and asked that she submit the medical bills in question to me via email on 4/21. She stated she had no problem emailing the bills to me. However, as of this writing, I have received nothing from her. So I am assuming I should take to court as my defense, any and all correspondence, calendar notations, documents she signed, etc showing she was aware of and /or had advance knowledge that her coverage would lapse as of 3/1/16 and new coverage wouldn't begin until 4/1/16 and hope that this is the basis for her suit? What, God forbid, do I do if she is talking about some other issue that I am not prepared to defend when we get to court?

 

[hrforme]

I've been thinking some more and did some research into both ERISA (Health Plans & Benefits and Health Plans & Benefits: Plan Information and https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/benefitplandisclosures.aspx) and PPACA (New Rules Under PPACA Governing the Rescission of Health Care Coverage | Attorneys in Michigan: Foster Swift). I suggest reading through each of those links especially the last that states : " A group health plan or health insurance issuer must provide at least 30 days advance written notice to each participant who would be affected before coverage can be rescinded, regardless of whether the coverage is self-funded or fully-insured. These regulations apply to both grandfathered and non-grandfathered health plans."

I do not think that her "advanced knowledge" due to her position is enough proof of communication of the dropping of coverage. You truly might have an ERISA violation or a PPACA violation. I strongly recommend passing this issue by a local attorney who is familiar with the health care plans/laws/regulations. It may seem like I am making a mountain out of a molehill, but it honestly sounds like you have a plan disqualification (which could make all premiums paid taxable to the employee as wages for example) under ERISA and I would suspect that your only recourse is to make all employees "whole" which means to pay any claims incurred during that month. You need to realize if she loses the small claims court, she can go to the DOL and file a claim there, right? Do you really want the DOL up in your business? And I honestly have no clue as to what penalties under PPACA there would be....

There is a difference between a specific plan expiring and the employer ceasing to cover/rescinding the employee's health insurance (even for just one month). One more time -- did the employer specifically notify ALL employees of the cease in coverage for that one month at any point? And honestly with at least 30 days notice as required under PPACA? Or are they trying to sweep the lack of coverage under the table?

I am not so sure your best bet isn't just to settle and pay 100% of her bill. Yes, you might have other employees that also require that for claims during that time, but I truly see the employer as liable for failing to provide coverage without adequate notification to all employees. Because you have yet to provide any answer to how and when this was adequately communicated.

I also suggest that you look into EPLI insurance especially if you do not have a well-versed HR employee (whose only job is HR and NOT the "office manager")......because it sounds like everyone is way over their heads......

 

[Trikdagain]

+

Typical in small claims is for parties to exchange evidence/documents before being called up. Mediation is typically offered too.

Thanks for your help. Are you saying this exchange of evidence/documents typically takes place when both parties arrive at the courthouse on the day of the hearing? If so, how would we, the defendants be able to produce any documentary evidence of our own, as all our records would be back at the office?

 

[hrforme]

Unless again you have written notification/solid proof to all employees that there was no coverage for that month, I really don't see what documents will help your case. You might get lucky and have a judge that doesn't know ERISA/PPACA laws well enough who will side with you that this one employee should have known. But again your problem is much larger than small claims court, especially if she loses.

 

[Trikdagain]

If anything places your business in jeopardy, especially things of a legal nature, its always best to consult a licensed attorney near you.

Thanks for your help. What exactly do you mean by "places your business in jeopardy" ? The amount of the suit is under $2,000.00. I'm sure I am missing something here so forgive my ignorance and please elaborate...