What happened?
In Rai v Legal & General Assurance Society [2015] EWHC 170, the English High Court decided that coverage was not available under an employee benefits insurance policy due to the operation of an exclusion in respect of employees who were not "ordinarily employed and resident in the United Kingdom".
The case concerned a Mr Rai, a senior IT application engineer who had been employed by the UK subsidiary of a US corporation. Mr Rai had worked in the UK for a number of years before, at his employer’s request, moving to India to provide technical and managerial support for a new office in Hyderabad. Unfortunately, approximately 6 months after re-locating to India, Mr Rai died in hospital in Hyderabad following a road traffic accident.
A claim was made under the death in service scheme maintained by his employer and the employee benefits insurance policy underlying the scheme, both of which had been arranged at UK level. No entitlements were payable under the scheme if insurers were not liable to make payments under the insurance policy. The insurance policy, which had been written by Legal & General, provided that an employee would no longer be covered under the policy from the point that either their employment ceased or the employee failed to meet the ‘Eligibility Provisions’, namely to be "ordinarily employed and resident in the United Kingdom". The insurance policy also provided that coverage would continue in respect of employees who were ‘temporarily absent’ from active employment.
The High Court decided that Mr Rai was not, at the time of his death, ordinarily resident in the UK and therefore there was no entitlement under the insurance policy or the scheme to any death in service benefits. Although there was evidence that Mr Rai intended to return to the UK with his family at some point in the future, the Court was satisfied that Mr Rai had become ordinarily resident in India. In doing so, the Court applied the test adopted in the case of R v Barnet LBC ex parte Shah [1983] that "ordinarily resident refers to a man’s [or woman's] abode in a particular place or country which he [or she] has adopted voluntarily and for settled purposes as part of the regular order of his [or her] life for the time being, whether of short or long duration…". It was also decided that Mr Rai was not ordinarily employed in the UK at the time of his death, the Court commenting that "the mere fact of being employed by a company based in the United Kingdom cannot suffice to establish that the assured was employed in this country". The ‘temporary absence’ provision also did not apply in this case. Mr Rai was actively working at the time of the accident. Rather, coverage under the insurance policy had already been terminated due to the non-UK location of his work.
What does this mean?
This case is an illustration of the territorial restrictions which often apply to employee benefits insurance policies obtained by employers in the UK. This type of restriction tends not to be limited to coverage for death in service benefits but is of broader application. For example, insurance policies offered by UK insurers in respect of private health treatment will often either completely exclude coverage for medical treatment outside the UK or offer limited coverage for overseas treatment, for example only in relation to employees who are ordinarily resident in the UK while temporarily travelling abroad. This can mean that there is no coverage available under standard UK policies in respect of employees who are seconded abroad for specific projects and/or for longer term expatriates.
What should we do?
Employers should consider the terms of insurance policies which have been arranged to provide benefits for employees to understand what territorial restrictions may apply and whether any additional coverage requirements arise in respect of expatriates or other employees who are working outside of the UK for an extended period. There are several options in securing additional coverage for employees working abroad where this is required such as: (i) an extension of coverage under UK policies for specific employees working overseas; (ii) obtaining coverage for such employees under insurance arranged by local offices to which they have been seconded; or (iii) arranging an ‘international’ policy which is specifically designed for those living in foreign countries. Such options should be explored with insurance brokers where a need for additional coverage in respect of employees working outside of the UK is identified.
