Wade & Anor v Active Navigation Ltd

An employer may owe a duty to take reasonable care to obtain agreed insurance cover for an employee’s death-in-service benefit. Negligence may arise from failing to return an insurer’s acceptance document, monitor confirmation of cover, or identify that the required increased premium has not been collected. A contractual reference to death-in-service benefits does not, without more, guarantee payment calculated by reference to the employee’s full salary. Such a term will not be implied unless necessary to give the contract business efficacy or so obvious that it must have been intended, and it must also be equitable and reasonable.

The claim arose after Andrew Wade died while employed by Active Navigation Ltd. His employment offered participation in the company’s death-in-service scheme. The scheme ordinarily provided four times salary subject to a £65,000 free limit. The insurer offered full-salary cover for an additional premium, but the acceptance documentation was not effectively returned and the increased premium was not paid.

Mrs Wade claimed the shortfall in negligence, contract and breach of trust. The central issues were whether Active had acted negligently, whether the employment letter or scheme created a contractual entitlement to full-salary cover, and whether the scheme trustee had failed to pay premiums due.

1. Negligence. Active conceded that it owed a duty to use reasonable skill and care to obtain full-salary cover. The court found Mrs Andrews’ handling of the insurer’s letter negligent. She should have read it carefully, retained a copy, ensured its return, and monitored both confirmation of cover and the increased premium. If the letter had been returned, it was additionally negligent not to follow up when no increased premium was collected.
2. The allegation concerning the later renewal documents failed. The documents were dealt with promptly, and any increase in cover would have required disclosure of Mr Wade’s illness. Causation was therefore not established on that allegation. The alleged January reminder was not proved to have been received and did not found liability.
3. Active was vicariously liable for the negligence relating to the November letter, confirmation of cover and payment of the increased premium. Proper care would have resulted in cover for four times Mr Wade’s full salary. Damages were £116,932 plus interest.
4. Contract. The employment letter did not expressly guarantee a death-in-service benefit of four times actual salary. It more naturally entitled Mr Wade to participate in the benefits provided by the company. The alleged term could not be implied because full-salary cover was neither necessary nor obvious, and it would not be reasonable to require a small employer to underwrite the risk if the insurer refused cover.
5. Breach of trust. Rule 8 required payment of premiums due under the scheme. The premiums actually due were collected and paid by direct debit. No higher benefit had been agreed for scheme purposes, so this claim failed.

First-instance judgment. No prior appellate decision is stated in the judgment.