Health payouts may prove easier

Permanent health insurance payouts could be easier to claim after an insurance company was rebuked this week for refusing to pay a man with a serious back problem.

Michael Jowitt, a 54-year- old electronics engineer worked for Yorkshire-based electronics group Pioneer Technology. He suffered a slipped disc, the complications of which meant he could no longer do his job. His employment contract stated that he would be paid so long as he was "unable to work".

Unknown to Mr Jowitt, Pioneer's liability to pay was underwritten by Swiss Life.

After two years of payouts, the insurer obtained a report from an orthopaedic surgeon which said that he was not disabled from every "employment activity", only those that involved driving more than short distances, lifting or prolonged use of a keyboard.

On that basis it refused to carry on paying. As Mr Jowitt's contract was only with his employers he was forced to sue them rather than the insurers.

PHI, along with its cousin critical illness insurance, is popular with professionals and the self-employed who want to protect their income if they suffer an injury or illness that makes them unable to work. The insurance is often offered by small and medium-sized companies as part of a person's employment contract.

Companies take out a block policy with an insurer to cover all their staff with the result that if someone becomes seriously ill the employer can afford to keep on paying them. Needless to say insurers, and sometimes employers, are as keen to escape liability under these policies as they are under any others.

Swiss Life's attempts to do this have recently been considered by the Court of Appeal in a ruling which may make it a little easier to claim under these policies.

Surprisingly, the employment tribunal ruling on the case of Mr Jowitt accepted the employers argument that it should only have to pay out if the insurer would reimburse it. This was rejected on appeal.

The company's obligation was obviously the one set out in its contract. This part of the decision may result in some employment contracts being reworded but makes the position quite clear where there is no reference to the insurance policy in the contract.

Of even more importance though was the Court's view on what the phrase "unable to work" meant. It pointed to a 1997 decision involving a Welsh plasterer who had lost part of finger, playing football.

That meant he could not carry on with that sort of work he had previously done.

This enabled him to successfully claim he could not do "any work" and receive a substantial one off payment under an accident insurance policy.

However, in Mr Jowitt's case, it decided on a test that was rather narrower: was there any continuous full-time work which he could realistically be expected to do?

James Millar Craig, of London solicitors Royds RDW, who specialises in PHI claims, welcomes the decision. "We are constantly coming across insurers attempting to wheedle out of liability under group schemes and the guidance the Court of Appeal has given may make employees' claims easier to pursue".

Lord Justice Sedley pointed out that Swiss Life's consultant had failed to identify any job Mr Jowitt actually could do. As the Court of Appeal had no up-to-date information about his condition it could not finally decide that question and sent it back to a tribunal for consideration.

People who have claims refused by employers or insurers should not regard that as the last word on the matter. Often it is only the threat of legal action that results in what is actually quite a clear legal liability being honoured.