Scottish Court of Session Decisions

[1] This action appeared on procedure roll in respect of the pursuer's fourth and fifth pleas-in-law which sought that certain of the defenders' averments should not be remitted to probation. The defenders had a general plea to the relevancy of the pursuer's action and the pursuer a general plea to the relevancy of the defences. The defenders indicated that they would be content with a proof before answer on the whole pleadings.

[2] The action seeks declarator that the pursuer is and continues to be entitled to payment of benefits in terms of a long term disability scheme entered into between the defenders and Sun Life Assurance Company of Canada. She seeks payment of various sums representing the alleged entitlement from 11 August 1994 to date and thereafter until her death or normal retirement date.

[3] The long term disability scheme was part of a package of benefits provided by the defenders to their employees. There was a pension plan which provided various benefits in return for contributions by employer and employee. In addition to providing for a retirement pension there was a lump sum on death in service and long term sickness benefit at one-half of the pre-sickness income. Employees like the pursuer were provided with a brochure indicating in outline the benefits but which referred them to the policy between the Sun Life Assurance Company of Canada and the defenders for precise details. It was stated in that brochure at page 8 "entitlement to lump sum, death in service and long term disability protection ends on the day you leave the plan". At page 15 it was further stated that if the employee was absent from work through sickness or injury for a continuous period of 26 weeks, the employee became eligible to receive long term disability benefit from the 27^th week. It was also stated that pension contributions, national insurance and other deductions such as tax would continue to be deducted at the appropriate rates if long term disability benefit was paid. The benefit was paid by the insurer to the employer to enable the employee to receive the benefit.

[4] Although eligibility arose after absence from work for a continuous period of 26 weeks through sickness or injury, in terms of the policy, benefit required to be claimed from the insurers by written notice of a claim in respect of a member one calendar month prior to the expiry of the "deferred period".

[5] The pursuer avers that as a result of an accident on 10 February 1994 she became and is still permanently disabled from carrying out her job as an industrial nurse with the defenders. She had been offered the opportunity to join the Levi Strauss (UK) Limited employee pension plan and had done so, contributing a percentage of her earnings from 1 January 1990. She avers that the policy provided that once she had been absent from employment with the defenders for a continuous period of 26 weeks, she became entitled to receive long term disability benefit. She is, she says, totally disabled in terms of the definitions in the policy.

[6] The defenders aver that the pursuer was told on 1 September 1994, after a discussion about her state of health, about three options available to her, one of which was to make a claim for long term disability benefit and the others had to do with the defenders' ill-health severance scheme. It is admitted that the pursuer chose option 1 of the ill-health severance scheme and as a result of that her employment was terminated in February 1995. She no longer contributed to the scheme thereafter. She avers nonetheless that although her continuing cover under the policy ceased on termination of employment, her entitlement to benefit, which she said had crystallised prior to termination of her employment, did not also cease at termination. The defenders' averments are that the pursuer, having chosen option 1, thereby waived any entitlement she might have had to claim long term disability benefit from the defenders and that after the termination of her employment on 11 February 1995 she ceased to be a member of the scheme.

[7] The defenders' averments about ceasing to obtain protection and benefit in terms of the policy after she left the pension plan were those which were sought to be deleted by the pursuer's plea 4. The defenders' averments about ill health severance were also attacked as irrelevant and it was sought to have them excluded from probation.

[8] The terms of the policy provided that all members of the pension scheme were eligible for benefits. It provided, para.3 that the cover in respect of a member shall cease upon the happening of any of the following events, one of which was (a) the date on which the member leaves the service of the employer. By para. 6 it is provided that written notice of a claim in respect of a member must be given by the policyholder (the defenders) to the company at least one calendar month prior to the expiry of the deferred period. The company required to admit a claim in terms of the conditions and such a claim involved the member being totally disabled. "Totally disabled" is defined as the condition of a member who, due to injury or illness, is prevented from following his own employment with the employer and is not following any other occupation. "Member" is defined as an employee who complies with eligibility conditions specified in the schedule who has not ceased to be a member under any of the provisions of the policy. The eligibility conditions confine the benefits to all members with the pension scheme. "Employee" is defined as an individual, in the permanent full-time services of the employer, who is resident and employed in the United Kingdom for at least 30 hours a week.

[9] The pursuer sought to argue that there was a distinction between "cover" and "eligibility"; that the pursuer was eligible before her employment terminated on 11 February 1995 and was no longer subject to the provisions of paragraph 3. She sought to pray in aid the provisions in paragraph 6 which provided that the payment of benefit in respect of a member shall cease in the event of various contingencies, one of which is becoming permanently resident outside the United Kingdom and the provisions in paragraph 7 which provides for payments continuing in the event of an employer going into liquidation.

[10] However, paragraph 6 also provided that claims are payable monthly in arrears and paragraph 3 provides that cover terminates on the date on which the member takes up permanent residence outside the United Kingdom.

[11] Matters are not simplified by the definition of "member" being an employee who complies and "employee" being defined as an individual in the permanent full time service of the employer.

[12] I am not satisfied that it can be determined without inquiry whether the pursuer's argument about the way the policy applies to her can support the contention that she had a "crystallised" or vested right in benefit if no claim was made by her and no claim was made on the insurers. It is a necessary part of her argument that the defenders had an obligation to make such a claim whether she asked for benefit or not and that benefit was automatically payable after she had been absent from work for 26 weeks and also for all time after that. I cannot be persuaded on the documents alone that this must be her entitlement. It would, on the face of it, appear odd that the pursuer could, for example, be obliged to accept long term disability benefit without making a claim herself. That benefit involves payment of tax and pension contributions as well as national insurance contributions and it could be that that might not suit the pursuer, given that she had some other part-time employment.

[13] In any event the defenders aver that the pursuer deliberately declined long term disability benefit choosing instead ill-health severance. That is a perfectly comprehensible situation. The argument that such an averment was irrelevant would mean that, if successful, the pursuer could not elect to cease her participation in the scheme. She must in my view be entitled to do so and accordingly it cannot be held at this stage that the averments in that regard should not be remitted to probation.

[14] On the whole matter therefore I am not persuaded that it is appropriate to exclude without inquiry the averments referred to in the pursuer's fourth and fifth pleas-in-law. I shall accordingly repel those pleas and allow the averments to be remitted to probation, that proof being before answer. The pursuer is thus adequately protected. She is able to reiterate such arguments after proof as she feels entitled to present on the meaning and terms of the policy as further explained by evidence, provided she is not held on the facts to have waived her whole claim by her election, to follow the ill health severance method of terminating her employment.