The High Court has set aside a Financial Services and Pensions Ombudsman decision that required Utmost PanEurope DAC to reinstate income protection payments to an anonymised former locomotive driver and consider compensation for possible tax losses.
Mr Justice Barry O’Donnell ruled that the Ombudsman’s decision of 14 January 2020 was vitiated by serious and significant errors. He remitted the matter to the Ombudsman for fresh consideration. The court did not decide whether the claimant was entitled to benefits after the policy’s initial 24-month period.
The complaint concerned Utmost’s decision to stop payments from the end of February 2017. The claimant had begun receiving benefits in December 2014 after making a claim related to mental health difficulties following a back injury. Under the policy, the disability test changed after 24 monthly payments: continued cover depended on whether the claimant’s illness or injury prevented him from performing the duties of any rail operative occupation within Iarnród Éireann.
An independent psychiatrist considered the claimant unlikely to be fit to return to locomotive driving at the time, but said there was no mental health reason he could not do other work as a railway operative. Iarnród Éireann’s chief medical officer had earlier reported that the claimant was unfit for any role in a railway setting. The Ombudsman’s decision found Utmost’s assessment unreasonable, in part because it had not assessed the duties of alternative rail operative roles. It directed reinstatement of benefits pending a further review, together with any payment needed to address a possible tax disadvantage.
On appeal, Utmost argued that the policy required the claimant to establish eligibility under the changed test and that the Ombudsman had not explained why Utmost’s conduct was unreasonable by reference to objective criteria. The High Court said the Ombudsman had not properly engaged with the policy terms or Utmost’s submissions about how the changed definition operated. It also found no clear explanation connecting the conduct to the statutory grounds relied on, and no reference to a code of conduct or other objective measure supporting the unreasonableness finding.
The court held that the remedies were disproportionate and illogical because the Ombudsman had not found that the claimant met the policy’s eligibility test. Reinstating benefits in effect required payment without that question being decided. The tax-related direction was also flawed: the decision had not addressed the scheme’s tax deductions, practical difficulties in assessing the claimant’s tax position, or evidence showing how a lump-sum payment would affect him.
The court made no final order on costs at this stage. It listed the matter for 11 September 2024 to address the form of final orders and costs, expressing a provisional view that Utmost should receive its costs.