UK: Death-In-Service Benefit Recoverable In Full By Former Employee’s Estate

In Fox v British Airways plc, the Court of Appeal has ruled that the dependants of a deceased former employee could recover the full value of his death-in-service benefit as part of a claim for compensation for unfair dismissal and disability discrimination being brought by his estate.

Mr Fox had been on long-term sickness absence when he was dismissed on capability grounds five days before having surgery which he hoped would allow him to return to work. However, he died unexpectedly three weeks after this surgery. His family brought an unfair dismissal and disability discrimination claim, arguing that they should be entitled to claim compensation for Mr Fox's death-in-service benefit worth £85,000. The Employment Tribunal agreed with the argument put forward by British Airways that a claimant can only recover compensation for a loss he has actually suffered. Since the loss of the death-in-service benefit in this case was suffered by a third party, Mr Fox's family, it was not recoverable.

However, the EAT and the Court of Appeal found that the death-in-service benefit could be recovered in full. Mr Fox's estate was entitled to be put in the position it would have been in had he not been dismissed. Since it was virtually certain that he would have been employed at the date of his death, his beneficiaries were entitled to compensation for the full amount of the benefit.

The facts of this case are very unusual, and liability for unfair dismissal and/or discrimination has yet to be established. Normally the loss recoverable in such cases would be the amount of securing replacement insurance, but the employee's untimely death meant that he was unable to obtain alternative cover. This is a reminder to employers to follow a proper procedure when considering dismissing an employee on grounds of ill-health, particularly where that employee could be entitled to death-in-service benefits.

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