Rai v Legal & General Assurance Society Ltd

For an insurance policy requiring an employee to be ordinarily resident and ordinarily employed in the United Kingdom, the questions are factual and turn on the employee’s actual settled residence and the place where the work is ordinarily performed. Employment by a United Kingdom company does not, without more, establish employment in the United Kingdom. A temporary-absence clause preserves cover for an employee who remains employed but is inactive; it does not restore cover already lost because the employee works and resides abroad. Declaratory relief remains discretionary and may be available to a non-party to the underlying contract, but the court must consider practical utility, the interests of absent parties and whether all sides of the dispute can be fairly determined.

The claimant, the widow and personal representative of Gautam Rai, sought a declaration that the defendant insurer was liable under an employer-sponsored death-in-service policy. Mr Rai had been employed by Phase Forward Europe Ltd in the United Kingdom but moved with his family to Hyderabad in August 2007 to work for the group’s Indian operation. He died there in February 2008.

The insurer rejected the claim because Mr Rai was neither ordinarily resident nor ordinarily employed in the United Kingdom. The employer had subsequently been struck off the register, and the proceedings also raised issues concerning its possible restoration and joinder. The central questions were whether the policy responded on the assumed basis that the United Kingdom company remained Mr Rai’s employer, whether the temporary-absence provision preserved cover, and whether declaratory relief should be granted.

1. The claim was dismissed. The court assumed in the claimant’s favour, without finally deciding, that Phase Forward Europe Ltd remained Mr Rai’s employer.

2. “Ordinary residence” is not a legal term of art. Its meaning depends on the natural and ordinary meaning of the words in context. Applying the guidance of Lord Scarman in Reg v Barnet London Borough Council, ex parte Shah [1983] 2 AC 309, ordinary residence requires voluntary residence in a place adopted for a settled purpose as part of the regular order of life. The purpose may be limited in duration and need not involve an intention to remain indefinitely.

3. Mr Rai was ordinarily resident in India. He had voluntarily moved there to work in Hyderabad, had established a home there and had not retained an abode in the United Kingdom for any settled purpose. The possibility or intention of a future return did not alter that conclusion. The possibility of simultaneous residence in two countries, recognised in Ikiki v Ikimi [2002] Fam 72, did not assist on these materially different facts. The comparison with Re Norris, ex parte Reynolds (1888) 4 TLR 452 was likewise inapposite.

4. “Ordinarily employed in the United Kingdom” required a factual inquiry into where the employee ordinarily performed the acts constituting his work for the employer. Employment by a United Kingdom company was insufficient. All Mr Rai’s work for the assumed employer was performed in India. The court referred to the “base cases”, including Todd v British Midland Airways Ltd [1978] ICR 959, but found no comparable difficulty on the facts.

5. The temporary-absence provision applied where an employee remained employed but was not carrying out work under the contract, for example because of illness or another period of inactivity. It could not continue cover which had already terminated because the employee was no longer ordinarily resident or employed in the United Kingdom. Mr Rai was actively working in India at the date of the accident, and the provision did not affect the separate residence requirement.

6. The court also considered declaratory relief. Following the guidance summarised in Rolls-Royce plc v Unite the Union [2010] 1 WLR 318 at [120] and Milebush Properties Ltd v Tameside MBC [2011] PTSR 1654 at [87], a claimant’s lack of contractual or beneficial rights was not necessarily decisive. However, any declaration had to serve a practical purpose and fairly protect the interests of all affected parties. Had the substantive claim succeeded, restoration and joinder of the struck-off employer would probably have been required.