The liability of an employer who did not insure an employee in a pension fund for loss of disability benefits
May 26, 2025
By: Itzik Simon, Sob
What are the steps to prove entitlement to compensation from an employer for the loss of disability benefits from the pension fund?
background
In judgment 1342-01-24, Meir Ben Shaton v. Rafael Turgeman, issued on October 10, 2024, the National Labor Court was required to discuss the question of whether an employee is entitled to compensation for the loss of a disability benefit from a pension fund due to his employer's failure to join the fund.
The appellant, a warehouseman who resigned following surgery to remove a tumor from his pancreas, was not included in a pension insurance arrangement by his employer as required by law. After the surgery, the appellant was recognized by the National Insurance Institute as disabled with a degree of disability of 100% and he receives a general disability pension. Since 2019, the appellant has been recognized as having a stable medical disability of 73% and a stable degree of disability of 100%.
The appellant filed a lawsuit against his employer for loss of disability pension, but the regional court dismissed the lawsuit, inter alia because the appellant did not prove his disability and his entitlement to insurance or a pension. It was also determined that in the absence of an actuarial opinion, the rate of damage was not quantified.
The parties' claims
The appellant claimed that the National Insurance Institute's decision to pay some disability indicates his entitlement to compensation. In the appeal, he requested that the proceedings be returned to the regional court in order to supplement his evidence with an expert opinion that would prove his loss of work capacity and the damages. The respondent opposed the return of the proceedings, arguing that in any case the appellant would not have been accepted for insurance and would not have been entitled to a disability pension due to his medical condition prior to the start of his work.
xistence of a substantive right: The mandatory pension expansion order requires employers to insure employees in a pension arrangement after six months of employment. Breach of this obligation requires the employer to compensate an employee who was recognized as "disabled" according to the pension fund regulations or the survivors of a deceased employee for the value of the pension loss incurred by them.
Pension or insurance: The court clarified that a distinction must be made between a claim for loss of rights in a pension fund and a claim for loss of rights in an insurance plan. Despite the existence of common points of contact, there are substantial differences between them:
- The definition of the event that qualifies for a disability pension - differs between pension fund regulations and insurance policies
- How the underwriting is conducted - An insurance plan is subject to the provisions of the Insurance Contract Law, 5741-1981, and underwriting therein is conducted in advance based on a health declaration, while in a pension fund, underwriting is generally not conducted in advance and in any case, underwriting is conducted retrospectively .
The court's decision
The regulations
The court explained that the rights of the insured are determined according to the regulations in effect at the relevant time. In our case, the question of whether the appellant's joining Hellman-Aldoubi required the conduct of a medical underwriting procedure will be examined according to the regulations in effect at the time the obligation to join the fund was violated. In contrast, the definition of the appellant as "disabled" and the examination of the events that may deny his entitlement to receive a disability pension will be examined according to the regulations at the time of the occurrence of the qualifying event. In the event that the employer selected a specific fund (such as Hellman-Aldoubi in the case at hand), the employee's rights will be examined according to the regulations of that fund. In circumstances where it is not possible to indicate a selected pension fund, the best course of action would be to use the regulations of the largest fund or the regulations of the pension fund whose name is specified in the industry collective agreement. The court emphasized that joining the fund within the framework of a default covenant does not require cooperation from the employee and does not require prior underwriting.
The basic burden – proving the disability, its duration and extent: The burden of proving the disability, its duration and extent lies with the employee claimant . The claimant must present an expert opinion detailing the disability, its duration or extent or alternatively petition the court to appoint an expert on behalf of the court. The medical disability presented in the opinion must meet the definition of disability in the relevant regulations of the pension fund.
Transfer of the burden – exceptions to eligibility: The fund regulations contain a number of exceptions to a disabled person’s eligibility to receive a disability pension, including disability resulting from a qualifying event that occurred during the qualifying period and disability that entitles them to compensation from another source (legal provisions; tort claim). The court ruled that, in addition to the basic burden on an insured to prove his disability, the burden of proving that an insured who met the conditions for receiving a disability pension is not entitled to a pension due to his failure to meet the qualifying period lies with the fund and not with the insured.
Filing the claim: An employee claiming compensation from an employer for loss of disability pension must state in his claim the normative source of his entitlement, the relevant regulations that would have applied to him had it not been for the employer's negligence, an opinion indicating that he is "disabled" within the meaning of the term in the regulations or a reasoned request for exemption from filing the opinion, as well as a waiver of medical confidentiality.
Remedy : The court noted that ruling on relief in claims of this type poses unique challenges. The difficulty in these claims is the need for the employee or his/her survivors to claim the amounts of the pension losses even before they have been formed, in circumstances where there is a real difficulty in filing a claim against the employer once in a while. In calculating pension losses, a distinction must be made between certain data, such as the salary that the employer was required to insure, the insurance track and the investment track according to which the employee's losses will be calculated, and an informed assessment of additional estimated data, including the period of disability and the degree of disability over time and the life expectancy of the insured. The claimant for compensation for the loss of future pensions must submit a medical opinion that relates not only to a given situation but also to his/her future situation and an actuarial opinion regarding the loss of disability and old age pensions. The court emphasized that although the calculation of the future loss is largely speculative, dealing with it is an integral part of claims for personal injury.
Summary and implications
The National Court decided to return the proceedings to the Regional Court to allow the appellant to prove his claim through an opinion. This was "after proportionately weighing the procedural default on the one hand and the interest in discovering the truth on the other, and in order to allow the appellant to exercise his right of access to the courts."
The ruling clarifies the procedural aspects of a compensation claim against an employer who failed to insure an employee in a pension fund. The court clarified that an employer may be exposed to a compensation claim for loss of disability benefits and that while the employee must prove his basic entitlement and the amount of compensation due to him, the employer has the burden of proving exceptions and limitations to entitlement.
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