Permanent health insurance (PHI) provides employees with pay during long term sickness or incapacity. But different policies take different approaches to what is meant by ‘incapacity’. Some policies define it as an employee’s inability to return to their actual job, while others define it as an inability to return to any job. Sometimes the courts are required to resolve a dispute over the meaning of policy terms, as was the case in ICTS v Visram.
The employee worked at Heathrow Airport. Under his contractual PHI plan benefits would kick in 26 weeks after the beginning of a period of absence and continue until ‘the earlier date of [his] return to work, death or retirement’. The employee was entitled to benefits if he was absent due to ill health which prevented him from performing ‘his own occupation’. The employee went off sick and raised a grievance when benefits did not kick in after 26 weeks. He was eventually dismissed on ill health grounds. He won his claims for unfair dismissal and disability discrimination. The question was whether his compensation should include the value of any benefits he would have received under the PHI plan. The employer argued that his benefits stopped when he was able to return to any employment, not his actual job.
The employment tribunal disagreed. It held that the policy benefits stopped when the employee was able to return to his actual job. As he couldn’t return to his actual job, he was entitled compensation to reflect what he would have been paid in PHI until his death or retirement. The Employment Appeal Tribunal agreed. They said the tribunal had looked at the policy wording and decided that the word ‘return’ meant going back to his actual job with his original employer, not any job.
It’s worth checking the wording of any PHI policy carefully before dismissing an employee who is off sick long term. The cost of compensation associated with PHI payments can be very high. For help checking your PHI policy or for advice on dismissal, contact Andrew West on 01473 298102 or email email@example.com.