Employers may provide employees with the benefit of permanent health insurance (PHI) during periods of long-term sickness or incapacity, usually through an insurance policy with a third-party insurer. The terms of a PHI policy describe circumstances under which employees can claim benefits.
These vary from the employee being unable to perform their normal occupation or carry out any occupation. Alternatively employees may only be entitled to receive benefits if they are "unable to work", which case law has defined as "continuous remunerative full-time work of a type which the employee could realistically be expected to do
In this case the employee benefitted from a PHI policy with his employer and then transferred to another employer under a TUPE transfer. As he transferred on his existing terms and conditions he remained entitled to benefit from the policy.
What was in dispute, on the wording of the policy, was whether the employee should benefit from the PHI policy while he could not return to his old job with his employer, rather than other suitable employment.
Mr Visram's employment contract included participation in a long-term disability benefits plan funded by an insurance policy. It provided that benefits would commence 26 weeks after the start of sickness absence and continue until the earlier date of his return to work, death or retirement.
To benefit an employee had to be a Disabled Member defined as an insured member who "is incapacitated by an illness or injury which prevents him from performing his own occupation". This was defined as "the essential duties required of the Insured Member in his occupation immediately prior to the commencement of the Deferred Period…".
Mr Visram went on sick leave and two months later his employment transferred to ICTS (UK) Limited under TUPE. He attempted returning to work on a part time basis but this was unsuccessful and he then remained on sick leave until he was dismissed.
After 26 weeks, having not received PHI benefits to which he thought he was entitled, he brought a grievance. As a result ICTS and the insurer agreed to pay him one year's benefits. He was then dismissed for capability.
He brought successful claims for unfair dismissal and disability. The employment tribunal held that Mr Visram was contractually entitled to the PHI benefits until he returned to his old job at ICTS, death or retirement and awarded Mr Visram compensation on this basis.
The tribunal disagreed with ICTS that the benefit would cease when he could return to any full time suitable work, and appealed the decision on compensation.
The EAT dismissed the appeal. ICTS argued that "return to work" meant return to any suitable work Mr Visram could carry out, whether for ICTS or otherwise.
The EAT disagreed and agreed with the tribunal's interpretation of the PHI policy wording that the employee remained incapacitated why he was unable to carry out the duties of the job he had been carrying out when he became incapacitated
The PHI policy appeared quite clear on when the benefits would cease. However, practically, ICTS (as transferee) may have had difficulties negotiating the same terms with the PHI insurer as the transferor had agreed.
Impetus to defend the claims may have been driven by the potential cost of the claim due to the length of time over which Mr Visram could receive PHI payments. Employers should review the wording of PHI policies when they provide them to employees, and also on TUPE transfers.
They should clarify whether there are any actual or potential beneficiaries of such policies amongst transferring employees to ensure that they have a full picture before seeking to agree terms with the transferor's policy provider.