The Consolidated Omnibus Budget Reconciliation Act (COBRA) provides employees with the option to continue health insurance coverage after leaving their job. However, certain circumstances, such as gross misconduct, can affect the availability of this coverage. This blog post explores a unique case where an employee’s gross misconduct was discovered after retirement and the implications for COBRA coverage.

The Case

Three months ago, a bookkeeper retired from a company, electing COBRA coverage under the company’s medical plan. Recently, it was discovered that she had embezzled thousands of dollars during her tenure. The question arose: Could the company retroactively terminate her COBRA coverage due to this gross misconduct?

The Verdict

The short answer is probably not. While COBRA coverage need not be offered to employees terminated due to gross misconduct, in this case, the bookkeeper voluntarily retired and elected COBRA before her misconduct was discovered.

The Legal Perspective

If an employee is terminated for gross misconduct, there is no COBRA qualifying event for the employee or any covered dependents. However, employers should exercise caution when denying COBRA coverage due to gross misconduct. This is because COBRA does not clearly define “gross misconduct,” and courts have not agreed on a common standard. Therefore, denying COBRA coverage due to gross misconduct carries a higher-than-usual risk of litigation.

The After-Acquired Evidence

In this case, the company faces an additional obstacle. While embezzlement likely constitutes gross misconduct for COBRA purposes, the employee’s termination was due to voluntary retirement, not gross misconduct. Courts generally evaluate an employer’s decision to deny COBRA based on evidence available at the time of the employee’s discharge. The use of after-acquired evidence of gross misconduct to justify termination of employment has been rejected by the U.S. Supreme Court and several other courts in the COBRA context. Therefore, it is unlikely that a court would allow COBRA coverage to be terminated—retroactively or going forward—when gross misconduct is discovered after an employee has elected COBRA.


This case serves as a reminder for employers to consult with legal counsel and insurers when considering the denial of COBRA coverage due to gross misconduct. It also highlights the complexities involved in COBRA coverage termination, especially when evidence of misconduct is discovered post-employment. As always, each case is unique and should be evaluated on its own merits.

Source: Thomson Reuters

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