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Do You Have Clear Contractual Wording in Respect of PHI Benefits?

on Friday, 13 March 2020.

The Court of Appeal has confirmed that a reference to 'return to work' in a PHI scheme means return to the employee's actual job, not a return to work in some other capacity.

On the facts of the case reported below this left the employer liable for a potentially significant employment tribunal award.

We previously reported on the case when it was before the employment appeal tribunal.

PHI Benefits After 26 Weeks

Following a TUPE transfer from American Airlines Mr Visram was employed by ICTS (UK) Ltd (ICTS). His employment contract included a long-term disability benefit which was detailed in a separate policy booklet. Liability for payment of the benefit was insured under a policy. The policy stated that after 26 weeks of continuous absence through illness and disability, an employee would have the benefit of a PHI scheme until the earlier of their "return to work, death or retirement".  

Mr Visram took leave from his job due to work related stress and depression.  After 26 weeks of continuous absence, Mr Visram failed to receive payment under the policy - the two different insurers before and after the TUPE transfer did not consider themselves liable. Mr Visram raised a grievance with ICTS.

Negotiations ensued between ICTS and their insurer and the insurer agreed to make payments for one year.  After the expiry of that time, ICTS dismissed Mr Visram on the grounds of capability.  He brought a claim for unfair dismissal and disability discrimination.

Was Mr Visram's Case Successful?

Yes, both claims were successful.

The employment tribunal found ICTS liable for the payment of PHI benefits until such time that Mr Visram is able to return to his full-time job as an International Security Co-Ordinator, his death or retirement. 

ICTS's argument that they should not be liable for such payments because  Mr Visram was capable of returning to another job in another capacity, was rejected. The Court of Appeal held that if this was the intention of the insurance policy to cease payment in the event of Mr Visram returning to another job in another capacity the policy wording should have said so. 

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What Should Employers Take From This?

This decision highlights the importance of having clear contractual wording in respect of PHI benefits. That wording should ensure that the benefit is subject to the underlying insurance policy and that the employer is not liable in the event that an insurer fails to make payment.

The case also illustrates how careful companies must be if they are considering dismissing disabled employees who qualify, or might qualify, for benefits under a benefit from PHI scheme.  Liabilities for such dismissals can be very high.


For specialist legal advice, please contact Jessica Scott-Dye in our Employment Law team on 0117 314 5652 or complete the form below.

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