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Rea v. Rail America

December 9, 2008


The opinion of the court was delivered by: Michael M. Mihm United States District Judge


This matter is now before the Court on Rail America, Inc.'s Motion for Summary Judgment. For the reasons set forth below, Rail America's Motion for Summary Judgment [#34] is DENIED.


Plaintiff Dale Rea ("Rea") began working for the Toledo, Peoria & Western Railway Company (the "Railroad") in 1979. He worked for the Railroad until he was injured in March 2001; his injury prevented him from returning to work. During the time that Rea worked for the Railroad, he and his spouse, Plaintiff Lisa Rea ("Mrs. Rea"), always had full health insurance coverage.

The Railroad continued to pay Rea's wages and health benefits through the end of 2001. Rea received a letter informing him of his right to purchase continuation of coverage under COBRA sometime in late September or October 2001. (Rea Dep. at 52) It is undisputed that Rea did not return the forms attached to this letter to Rail America. Rea asserts that he did not return the forms because he was advised by Harmon Cook ("Cook"), a private investigator and former Norfolk & Western Railway Company claims representative that Rea had retained to assist him with his state court litigation, that Rail America was continuing to pay his wages and health care benefits. Rea apparently assumed that these payments would continue indefinitely and relied on Cook to handle the continuation of his wages and health insurance.

Rea admits that he understood that COBRA was a continuation of insurance coverage that he had to pay for himself. Rea was subsequently presented with monthly receipts for cash advance forms from the Railroad that he signed and returned to Rail America. He knew that the amounts being advanced to him were to pay for his health insurance or to keep his coverage intact and that such amounts would be used as a setoff if he recovered in his state court litigation. (Rea Dep. at 43, 45-46) The total amount advanced to Rea to continue his health insurance coverage was $46,557.52. However, he insists that he never applied for COBRA coverage and denies understanding that his insurance was being provided pursuant to COBRA at the time.

The Reas received a COBRA continuation invoice dated September 13, 2002, showing their monthly premium as $1,004.70. They received a letter from Great West Insurance dated October 3, 2002, notifying them that they were within six months of the date that their COBRA coverage would expire. They then received a second letter dated December 9, 2002, indicating that their COBRA coverage had expired because no premium payment had been received. Thereafter, Cook and the Reas' attorney spoke to Rail America with regard to reinstating the Reas' insurance coverage, and as a result of the agreement reached, Rail America continued to pay the Reas' medical benefits through January 27, 2004. Rea has not obtained any replacement health insurance coverage since that time.

The Reas filed the present Complaint on January 26, 2007, alleging that Rail America's breach of its obligation to notify them of Rea's termination as an employee entitled them to receive benefits, continuation coverage under COBRA, and statutory penalties. Rail America has now moved for summary judgment, and this Order follows.


Summary judgment should be granted where "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party has the responsibility of informing the Court of portions of the record or affidavits that demonstrate the absence of a triable issue. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party may meet its burden of showing an absence of disputed material facts by demonstrating "that there is an absence of evidence to support the non-moving party's case." Id. at 325. Any doubt as to the existence of a genuine issue for trial is resolved against the moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Cain v. Lane, 857 F.2d 1139, 1142 (7th Cir. 1988).

If the moving party meets its burden, the non-moving party then has the burden of presenting specific facts to show that there is a genuine issue of material fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). Federal Rule of Civil Procedure 56(e) requires the non-moving party to go beyond the pleadings and produce evidence of a genuine issue for trial. Celotex, 477 U.S. at 324. Nevertheless, this Court must "view the record and all inferences drawn from it in the light most favorable to the [non-moving party]." Holland v. Jefferson Nat. Life Ins. Co., 883 F.2d 1307, 1312 (7th Cir. 1989). Summary judgment will be denied where a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Hedberg v. Indiana Bell Tel. Co., 47 F.3d 928, 931 (7th Cir. 1995).


The Consolidated Omnibus Budget Reconciliation Act ("COBRA") requires health insurance plan administrators "to provide continued health insurance coverage to covered employees and their qualified beneficiaries and to notify them of the right to elect such coverage upon the occurrence of a 'qualifying event.'" 29 U.S.C. § 1161. A "qualifying event" is further defined as:

[A]ny of the following events which, but for the continuation coverage required under this part, would result in the loss of coverage of a qualified beneficiary . . . (2) The termination (other than by reason of such employee's gross ...

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