According to the Scottish Court of Session in McMahon v AXA ICAS Ltd, yes, you can.
In McMahon an employee dismissed on grounds of ill-health incapacity sought to claim for PHI benefits that her employer had failed to put in place. At first instance her claim failed and again on appeal to the Employment Appeal Tribunal (EAT) but the highest court in Scotland overturned the lower decisions.
The obligation to pay income protection insurance – also known as permanent health insurance (PHI) or group income protection (GIP) to an employee who cannot work due to illness is a contractual entitlement in some contracts. PHI usually operates once an employee has been off sick for 26 weeks. This is known as the deferred period before the benefit can be provided. PHI is usually secured through an insurance policy. The most well-known providers include Canada Life, UNUM, Legal & General.
Ms McMahon became eligible for payments in May 2011. She was dismissed on incapacity grounds in September 2013 due to ill health but AXA had not enrolled her for PHI benefits. She brought an unlawful deduction from wages claim. She later sought to extend her claim by claiming for the benefits after her dismissal up to the current time.
Income protection payments are guarantee payments meaning that provided she continued to be eligible (on medical grounds) the payments would continue indefinitely as a substitute to wages earned from working. Some PHI policies are time-limited, most commonly for up to five years. Others extend to retirement.
The Inner House of the Court of Session in Scotland held that the obligation to provide PHI was collateral to the employment relations rather than dependent on it and unlike with wages it does not require the employee to provide services. Whilst a dismissal may end the employment relationship it does not necessarily extinguish contractual obligations that operate independently of it.
The Court of Session went on to say that if this analysis was not persuasive then in any event the dismissal had no legal effect on Ms McMahon’s right to enforce the benefit because it had been made in breach of the implied term to provide PHI which prevented them from being able to dismiss. An employer cannot dismiss on ill-health grounds an employee who is eligible for PHI unless the application for benefits has failed. In this case no application had been made at all.
Either way the PHI benefits fall within the extended definition of wages in section 27 of the Employment Rights Act 1996.
Provided Ms McMahon remained eligible for PHI then AXA remained liable for the payments.
The Financial Ombudsman Service has useful resources about how PHI works which you can find here. They can also assist you with appealing a decision by your employer not to pay you benefits.
Applications for PHI, challenges to employers who refuse to provide the benefit and appeals to decisions are a routine part of our work here at didlaw. You can find more information on our website by following this link.
This blog was written by Karen Jackson, CEO of didlaw.
