Estrangement Is Not COBRA Qualifying Event

June 25, 2004 (—A couple's estrangement is not a "legal separation" or qualifying event under COBRA, and therefore a company cannot provide an election notice upon such a situation, and then deny election when divorce is finalized.

A federal district court in Oklahoma ruled that the employer violated COBRA’s notice rules when the company learned that an employee and his wife were living apart, having filed for divorce, and then used this information to determine that the spouse was no longer covered under the group health plan.   The court said that the real qualifying event was the divorce granted years later, and that the COBRA notice should not have been delivered until then.

In the case Simpson v. T.D. Williamson, Inc., Zeda Simpson was covered as a spouse under the group health plan of T.D. Williamson, Inc. (TDW) when she and her husband began living apart and she filed for divorceJuly 12, 2000 .   The court issued temporary orders specifying that her husband was not to live in their residence and was not to contact Simpson.   Later that year, in October, a second temporary court order was issued, this prohibited Simpson and her husband from changing or terminating health and other insurance, and stipulated that the husband must keep insurance coverage during the divorce procedures.

However, TDW learned of the first temporary order at the time and sent Simpson a COBRA election notice and form, saying that a COBRA qualifying event of legal separation had occurred and that Simpson was no longer entitled to health coverage through the company.   Simpson argued that a qualifying event had not occurred, filled out the election notice in protest, but did not pay the premium, assuming her estranged husband would.   However, he did not, assuming that she would pay for her coverage, and so TDW ended the COBRA coverage as a result of non payment.

When the divorce was made final onSeptember 13, 2002 , Simpson asked TDW for COBRA coverage, and was told that she could not elect COBRA again because her coverage had expired because of non-payment of her premiums when she first made the election and, because COBRA does not allow for multiple qualifying events, Simpson was unable to elect it again.

TDW asked for summary judgment from the court, arguing that the separate living arrangements and court order constituted a legal separation and that therefore, it was entitled to provide an election notice.   The court however disagreed and said that the wording of the court order made clear it was not a qualifying event and that the purpose of COBRA is to enable workers and their families involved in changing circumstances the ability to continue their coverage.

In further court proceedings, the court found that Simpson’s original election was invalid because the separation had not been a qualifying event and that TDW should have provided Simpson with an election notice after the divorce was finalized.   Therefore, the court awarded Simpson:

  • A COBRA notice from TDW and 36 months of COBRA coverage at her expense, with certain limitations.
  • More than $7,150 in out-of-pocket medical expenses, including $3,558 in insurance premiums. The court did not deduct the premiums from Simpson’s medical expenses because her premium cost would not have occurred had the COBRA notice not been premature, since her husband would have continued to pay the family premium as required by the temporary order.
  • A COBRA notice penalty of $25 a day fromSept. 13, 2002 , until proper notice is given to Simpson, as well as attorney’s fees.