Death benefit where suicide is suspected

Blog updated 12/7/21

Some contracts of employment entitle the employee to a death in service benefit of two to three times the annual salary if they die in service.

However, employers will often caveat the payment by drafting the clause in such a way that it allows them some discretion or say that the employee is bound by the insurers rules. 

In a case in 2009 a Chief Engineer on an oil tanker disappeared whilst the vessel was at sea. It was not clear what had happened but it was suspected he had gone overboard. The employer commissioned an inquiry which concluded that he had committed suicide.

The death in service benefit clause stated:

“compensation for death… shall not be payable, if in the opinion of the company… the death… resulted from… the officer’s wilful act or default his conduct”.

The Chief Engineers widow was denied the death in service benefit but the High Court judge ruled that the death in service benefit should be paid because in his opinion the inquiry conclusion that the Chief Engineer had committed suicide was unreasonable, due to lack of cogent evidence. The Court of Appeal overturned that finding and the case was sent to the Supreme Court. 

The Supreme Court made a decision on a majority of 3 to 2 that the employer could not conclude – on the evidence available – that the Chief Engineer had committed suicide and, therefore, decided that the contractual death benefits were payable to his widow.  The Supreme Court said that the inquiry had been commissioned for the purposes of a safety investigation, it did not satisfy the degree of cogency required to show the probability of suicide. Therefore the decision not to pay the death in service benefit was unreasonable. 

The Supreme Court said that the factors in the report should have been set against the evidence of the Chief Engineers behaviour immediately before his disappearance, he was a devout Roman Catholic; he had also expressed concerns about the weather conditions at that time and these factors added to the unlikeliness of him having committed suicide.

This case widened the test that employers need to apply when making  decisions on exercising discretion.  The Supreme Court’s indicated that the “Wednesbury test” should be applied and that employers should come to a decision using methodology that is subjected to the same level of scrutiny that a court would apply to the decision-making of a public authority when it is engaged in a fact-finding exercise.  Although this case was unusual, it places an onerous responsibility on employers when exercising it “discretion” in the payment of a benefit.

The death of an employee does not mean that his/her potential claims cannot be brought in the Employment Tribunal.

Section 206 of the ERA 1996 allows another to bring certain claims, including unfair dismissal, on behalf of a deceased party. There is no equivalent of section 206 of the ERA 1996 in the Equality Act 2010, but Section 1 of the Law Reform (Miscellaneous Provisions) Act 1934 seems to permit discrimination claims to be brought on behalf of a deceased's estate.

In 2013 The Court of Appeal upheld an EAT decision that the loss of the death-in-service benefit could be recovered by his dependants on his behalf. The loss recoverable was equivalent to the full sum payable on death and not just the amount of securing replacement insurance.

In that case and employee suffered from a severe back condition and was on long term sick leave. He was dismissed on grounds of incapability five days before he was due to have remedial surgery but he died about three weeks after the surgery.

His father issued a claim for unfair dismissal an disability discrimination on the basis that he would have been able to return to work after surgery. S 206 (4) ERA stated the a deceased’s representative must be appointed by the Tribunal before the claim is issued. This had not been done but the Tribunal allowed the claim.

The employer argued that the employee could never have enjoyed the benefit himself so no compensation should be awarded. The Tribunal held that the loss of death-in service was not a loss of substance to the deceased. It held it was a loss to his dependants (not the employee) and only a nominal sum would be awarded of about £350.

The case went to the Court of Appeal who held that death-in-service benefits, like life insurance benefits, provide a lump sum payment to an employee's beneficiaries on the death of the employee. The employee is not a beneficiary and so has no claim to be paid out in their own right. However, death-in-service and life assurance form part of an employee's contractual remuneration and removal of these benefits results in a real pecuniary loss to an employee. The law would be "seriously defective" if an employee was not entitled to compensation for the loss of this benefit being payable to their dependants.

The Court of Appeal referred to the "accepted practice" in personal injury claims of allowing a claimant who has suffered a loss of earnings to recover damages for the consequent loss in the value of pension or equivalent benefits payable to their surviving spouse. It was also accepted practice to award compensation to claimants for any loss of life insurance cover, in both personal injury and employment cases. This practice was recognised in the employment tribunal guidelines on calculating pensions loss.

Both these cases illustrate that if an employee dies in service or dies shortly after being dismissed or discriminated against the may receive the benefit.

Julie Temple

01206 217318

[email protected]