173: Employment Appeal Tribunal considers meaning of ‘return to work’ in Permanent Health Insurance policy

In ICTS (UK) Limited v Visram, the Employment Appeal Tribunal (the EAT) considered the wording of a Permanent Health Insurance (PHI) policy which provided that the employee would continue to receive benefits until the earlier of his return to work, death or retirement.

The EAT ruled that ‘return to work’ did not mean return to full-time work with any employer, but specifically the employer that he had worked for prior to going on sick leave, doing the same work.

Under the terms of his employment with American Airlines, Mr Visram was entitled to long-term disability benefits under a PHI policy which would commence 26 weeks after the start of absence and continue until the earlier of his ‘return to work, death or retirement’. The policy stated that employees would qualify for benefits under the policy if they were incapacitated by illness or injury which prevented them from performing their own occupation, which was defined as the duties of the employee immediately prior to becoming eligible for benefits. In October 2012, Mr Visram went off sick with work-related stress and depression. In December 2012, whilst he was absent from work, his employment transferred under TUPE to ICTS (UK) Limited on the same terms and conditions, including his entitlements under the PHI scheme.

In March 2013, Mr Visram tried unsuccessfully to return to work part-time, after which he was absent until his dismissal. Once he had been off work for 26 weeks, he expected to receive payment in respect of his PHI benefits. When he did not receive them, he raised a grievance. This prompted negotiations between ICTS and the insurer, and the insurer agreed to pay Mr Visram benefits for one year until the end of September 2014. Once that period expired, he was dismissed on grounds of capability.

Mr Visram then brought successful claims against ICTS for unfair dismissal and disability discrimination. At the remedy hearing, the Tribunal was satisfied that Mr Visram would never be fit to return to the same job he had carried out prior to his absence. ICTS was therefore ordered to pay compensation on the basis that the benefits he would have been entitled to under the PHI policy would have continued until either death or retirement.

ICTS appealed this decision, arguing that Mr Visram should only be entitled to receive compensation for PHI benefits until he was able to carry out any suitable work, whether for ICTS or otherwise. However, the EAT dismissed this argument, concluding that ‘return to work’ in the context of this PHI policy meant that Mr Visram would need to be fit to return to the same job he had previously held with ICTS. Since he would not be returning to that job, the Tribunal was correct to award him compensation in respect of the long-term disability benefits he would have otherwise received until his death or retirement.

It was fairly clear from the wording of the booklet and PHI policy in this case that the employee would have been entitled to receive benefits unless he could return to his old job. This highlights the importance of checking policy wording very carefully before dismissing an employee for incapacity. The circumstances in this case were complicated by the TUPE transfer, as ICTS was not a party to the original policy. This is a common practical difficulty on a TUPE transfer. Ideally, detailed due diligence will be conducted prior to a transfer in order to assess potential liabilities and make suitable arrangements to replicate benefits with another provider after the transfer.