|Many employers offer benefits such as private medical cover and permanent health insurance to employees as a potentially valuable part of their reward package. As the recent case of Amdocs Systems Group Ltd v Langton demonstrates however, it is crucial for employers to think carefully about the wording used when insurance-backed benefits are offered to employees.
The claimant’s written terms of employment included an entitlement to an insurance-backed income protection scheme in the event of his long-term sickness absence, including an escalator of 5% per year after the first year of absence. When the claimant became ill, he received the expected payments under the scheme, however, when he came to claim the 5% increase, he was told that this element of the insurance had been discontinued so there was no longer an entitlement to the escalator payments.
The employment tribunal and the Employment Appeal Tribunal held that because details of the escalator payments had been set out in the claimant’s contractual terms, he was entitled to these payments whether or not they were still covered by the insurance policy. The fact that his contract stated the operation of the scheme was ‘governed by the terms of the Group policies’ did not mean the employer’s liability was limited by the terms of the insurance policy. Crucially, the claimant had not been given a copy of the insurance policy or provided with a summary of its terms. If the company had wanted to link the claimant’s entitlement to the terms of the insurance policy, that should have been spelled out in his contract.
The moral of the tale – if offering insurance-backed benefits, make sure the entitlement is expressly linked to the terms of the insurance policy and receipt of payment from the insurer.