Employment Law Questions? Ask an Employment Lawyer.
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They are supposed to give notice of the cancellation but the insurance company is going to claim they did give notice and will furnish "counts" from the mail room that show the number of letters that were supposed to go out and the number of letters that went out and allege that proves the notices were sent. I was involved in several cases with similar facts and that was always the defense they used.
At this point the best thing to do is contact a lawyer that does Consumer Law, you can find one at www.lawyers.com, and get them involved. It's not likely they're going to be able to get the insurance company to reverse their decision, although that is possible, but they may be able to get the coverage extended for the time required to re-issue the notice and allow your friend to find another insurer.
There is still supposed to be notice no matter who does it. The employer's responsibilities depend on a variety of laws and to determine the extent of their responsibility would require an examination of the pay history (to determine if the employee i spaying), their employee policy and handbook, their benefits policies, etc.
A lawyer is definitely needed although if the employer is the one responsible that means a consumer lawyer is probably not the right one to use long term. However, they could start with them and then refer the matter to an ERISA lawyer or employment lawyer if that need develops.