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Rosenberg v. Lincoln Financial Group

April 12, 2010


The opinion of the court was delivered by: Hillman, District Judge



This matter comes before the Court on the motion of Plaintiff, Scott Rosenberg, for partial summary judgment [36], the cross-motion of Defendant Aetna Life Insurance Company ("Aetna") for summary judgment [44], the motion of Defendant Ceridian Benefits Services, Inc. ("Ceridian") for summary judgment [61], and the motion of Defendant Lincoln National Corp. ("Lincoln") for summary judgment [62]. For the reasons set forth below, Plaintiff's motion will be denied, and Defendants' motions will be granted.


Plaintiff, a registered financial services representative with licenses to sell life, health, and variable life insurance, was employed by Lincoln. On August 15, 2007, Lincoln terminated Plaintiff's employment. Thereafter, on September 6, 2007, Plaintiff received notice from Ceridian, Lincoln's third-party COBRA administrator through December, 2007, of his right to elect continued health insurance through COBRA.

Based upon his training as a licensed insurance salesman and prior experience obtaining COBRA coverage administered by Ceridian after a prior job, Plaintiff was aware of the requirements of COBRA. Further, shortly after receiving the notice of his right to elect coverage, Plaintiff received a form from Ceridian entitled "Frequently Asked Questions Regarding Your Health Coverage," which he read and understood. This form made clear that should Plaintiff elect continued coverage his premium payments would be due on the 16th of every month, after which he would be given a 30-day grace period. It also made clear that delaying payment until the end of the grace period could result in the temporary suspension of coverage, due to an insufficient amount of time to correct any errors or delays in processing the payment. Although, as the notice made clear, coverage would be retroactively reinstated once payment was received and processed. Plaintiff also understood that any failure to comply with payment obligations would result in the termination of his COBRA rights.

On November 1, 2007, Plaintiff elected to continue his group health coverage through COBRA. Thereafter, on November 13, 2007, Plaintiff received a "Welcome to Ceridian" letter, which contained a page entitled "Important Information Regarding COBRA Coverage and Payments," as well as his first "COBRA Continuation Coverage Invoice" from Ceridian. The invoice set the due dates for Plaintiff's premium payments as August 16, September 16, October 16, and November 16, with a grace period deadline for all four initial payments of December 17, 2007. Plaintiff understood that his coverage would be cancelled if his premium payments were not made by December 17, 2007 at the latest.

On Friday, December 14, 2007, Plaintiff wrote a check from his account at Commerce Bank to Ceridian in the amount of $1,380.20, the full amount of the four premiums due to continue his benefits through December 17, 2007. However, Plaintiff waited to mail this check until Monday, December 17, 2007 at 12:59 p.m., 11 hours before the expiration of his grace period.

Upon receipt by Ceridian, premium payments are routed from its mailroom to its Check Processing Department, where the payment is processed by an automated system that verifies that the payment was received before the grace period deadline. This process generally takes between one and three days, from the time the payment is received to the time it is credited to the account. Where the check is received after the grace period expires, as was the case here, it is rejected by the automated system and sent for a manual review to determine whether the payment was postmarked on or before the deadline. This manual review can take anywhere from several days to more than one week, from the time the payment is received to the time it is credited to the account, or returned if determined to be untimely.

Plaintiff's premium payment arrived at Ceridian's facility on Thursday, December 20, 2007, three days after his grace period deadline. The payment was thus rejected by Ceridian's automated system and sent for manual review to verify whether it had been postmarked by the deadline. On Monday, December 24, 2007, Plaintiff called Ceridian's Human Resources Outsourcing business unit to check on the status of his account and was told that his account did not yet reflect that his check had been received for processing. Later that day, Ceridian sent Plaintiff a computer-generated form letter because one week had elapsed since the expiration of his grace period and his payment had not been processed yet. This letter provided: "This is to advise you that you are no longer eligible for COBRA Continuation due to: Failure to comply with premium payment requirement."

On Friday, December 28, 2007, Ceridian's manual review confirmed that Plaintiff's premium payment had been postmarked on December 17, 2007. As a result, Plaintiff's premium payment was processed and applied to his account. His coverage, therefore, remained in force as of that date. The following day, on Saturday, December 29, 2007, Plaintiff received the form letter from Ceridian advising him that he was no longer eligible for coverage. Plaintiff was unable to contact Ceridian about the letter right away, as Ceridian's hours of operation were 8:00 a.m. to 8:00 p.m. EST, Monday through Friday. Upon receipt of the letter, on December 29, 2007, Plaintiff accessed his account at Commerce Bank on-line and placed a stop payment on his check to Ceridian. He was aware at that time that his check had not yet been cashed by Ceridian.

On Monday, December 31, 2007, Plaintiff called Ceridian "[t]o see if there was an honest mistake that Ceridian was willing to correct." During that call, which was recorded by Ceridian in its entirety, Plaintiff had the following exchange with Tamika Flowers, a representative of Ceridian:

Mr. Rosenberg: I received a letter in the mail on Saturday saying eligibility was no longer available due to failure to ...

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