Where an employer dismisses an employee who would otherwise benefit from a contractual permanent health insurance policy, what is extent of the damages they can recover? In the recent case of ICTS (UK) Limited v Visram, the EAT found that the employee would have been entitled to benefits until death or retirement had he not been dismissed. This was on the basis he could not return to the same work he had been doing with the employer when he went on sick leave.

Mr Visram started work at Heathrow Airport in 1992 and his contract included the benefit of a long-term disability plan (the Plan) which kicked in after 26 weeks’ absence and would continue until the “earlier date of your return to work, death or retirement”. He went on sick leave in October 2012 and was eventually dismissed towards the end of 2014.

He brought claims for unfair dismissal and disability discrimination which were successful. The issue was how extensive the damages should be, based on how long the Plan benefits would have continued.

ICTS sought to argue that Mr Visram’s entitlement ceased when he was able to return to any full time suitable work, but both the Tribunal and the EAT rejected this argument. The EAT found that “return to work” combined with the definition of a “disabled member” as someone incapacitated from carrying out the duties of the job he was carrying out when he became incapacitated, meant the payments would continue until death or retirement.

The scope of the definition of “incapacity” in any permanent health insurance (PHI) policy will be vital in determining whether an employee is able to recover any benefits under the policy. The key is whether incapacity is defined as an inability to follow any occupation, or the employee’s normal occupation. If, as was the case here, the definition is restricted to the occupation the individual carried out before going off sick, then an ability to work in a different role will not end the payments.

It is clearly essential that any employer considers the wording of the contract and any underlying documents before contemplating dismissing an employee on long term sick leave. Dismissing an employee before establishing whether they would be entitled to benefits under a PHI policy or whilst they are in receipt of benefits could entitle the employee to claim significant damages for breach of contract.