The Lost Years and Contractor Work Insurance
Aug 28, 2018
What is the difference between contractor work insurance and the passage of lost years?
By: Itzick Simon
December 2000, winter, construction site in central Israel. A construction worker in his early 50s, experienced and skilled, married and father of three, was killed following the collapse of a 4-ton casting mold. The mold had been leaning dangerously and collapsed on the deceased when it was released from the crane. The unfortunate and tragic work accident led to compensation of over 7.3 million shekels. Approximately 5.8 million shekels were paid in pensions by the National Insurance Institute, and the remainder by a number of parties, who were also liable for compensation to the National Insurance Institute in the amount of approximately 3.4 million shekels. The high amount of compensation was determined in light of one of the important rules regarding tort law in Israel – the rule of lost years . In terms of the liability of the parties involved in the construction, this stemmed from proof of their negligence. The message from these things at the macro level is clear. Construction companies that find themselves obligated to pay compensation for fatal work accidents on sites under their responsibility may be required to bear significant amounts . Whether it is a work accident, as occurred here, or due to any case of death on site, not necessarily of an employee. That is, even following the death of a visitor who arrived at the site, whether or not he entered the site with permission.
Please note that companies engaged in the construction sector, most of which probably take care to purchase contractor insurance , must carefully examine the coverage clauses in the policy. In the absence of adequate amounts for coverage for bodily injury (employers' liability or third-party insurance), there may be no solution to the compensation that can be determined in these proceedings by virtue of the rule of lost years. The payment, which can reach millions of shekels, will be placed on the companies themselves.
What is the difference between contractor work insurance and the passage of lost years?
By: Itzick Simon
December 2000, winter, construction site in central Israel. A construction worker in his early 50s, experienced and skilled, married and father of three, was killed following the collapse of a 4-ton casting mold. The mold had been leaning dangerously and collapsed on the deceased when it was released from the crane.
The unfortunate and tragic work accident led to compensation of over 7.3 million shekels. Approximately 5.8 million shekels were paid in pensions by the National Insurance Institute, and the remainder by a number of parties, who were also liable for compensation to the National Insurance Institute in the amount of approximately 3.4 million shekels.
The high amount of compensation was determined in light of one of the important rules regarding tort law in Israel – the rule of lost years . In terms of the liability of the parties involved in the construction, this stemmed from proof of their negligence.
The message from these things at the macro level is clear. Construction companies that find themselves obligated to pay compensation for fatal work accidents on sites under their responsibility may be required to bear significant amounts . Whether it is a work accident, as occurred here, or due to any case of death on site, not necessarily of an employee. That is, even following the death of a visitor who arrived at the site, whether or not he entered the site with permission.
Please note that companies engaged in the construction sector, most of which probably take care to purchase contractor insurance , must carefully examine the coverage clauses in the policy. In the absence of adequate amounts for coverage for bodily injury (employers' liability or third-party insurance), there may be no solution to the compensation that can be determined in these proceedings by virtue of the rule of lost years. The payment, which can reach millions of shekels, will be placed on the companies themselves.
Get to know the rule of the lost years
As is well known, construction insurance includes three components – property insurance, third-party insurance and employers’ liability . With regard to its components dealing with bodily injury – that is, third-party insurance and employers’ liability – we have recently discovered that there are quite a few cases in which there is a significant gap between the coverage and a possible claim. Unfortunately, these are quite common situations in which the insurance amounts in the policy are not high enough, and do not correspond to the latest rulings in the field of torts in the event of the death of a person on a construction site. In order to understand what is involved, we must become familiar with the lost years rule. A rule that was established by the Supreme Court in March 2004, and which changed the law of compensation for tort claims beyond recognition. Including, of course, insurance claims.
In principle and in simple terms, the lost years rule states that when a person dies and their family files a claim for compensation on behalf of their estate, the claim can include a request for compensation for all the salary that the deceased could have earned up to retirement age (and even beyond). Note that in the case we described at the beginning of the article, this was not a young employee but a person who, given his seniority in the industry, had an average monthly salary of about 37,000 shekels. The compensation "climbed" to about 7.2 million shekels due to the loss of about 16 years of work "only" at this salary (until retirement age - 67).
The lost years rule has caused a dramatic change in the position of the case law and is now the dominant one. Not only in insurance claims for work accidents or accidents at a construction site (third party), but also in other tort proceedings such as medical malpractice, local authority negligence, traffic accidents, and the like.
Over the years, the Supreme Court has also issued a number of additional economic rulings that expanded the lost years rule. For example, in November 2008, it was determined that the lost years rule includes not only the loss of working years but also additional lost retirement rights such as old-age pension and pension receipts (Case C-9209/03).
As an insurance agency that has specialized for over 30 years specifically in providing professional and comprehensive service to construction professionals, and as a company that is on the ground and familiar with the changes that are occurring in the insurance industry in this field, we unfortunately encounter too many missing insurance policies. In particular, contractor work insurance that does not provide the necessary peace of mind in terms of compensation for bodily injury claims.
This is not a trivial matter. When it comes to employer insurance, it is important to understand that the National Insurance Institute, although it is the body responsible for paying dependent benefits to family members left behind, is not necessarily responsible for the full amount of the damage caused. Either because it does not pay family members according to the deceased's full salary, but only at a rate of about 75%, or because there are heads of damage that the National Insurance Institute does not take into account at all (such as pain and suffering, loss of a spouse's services, etc.).
Additionally, in a claim under the lost years rule, family members can argue that the deceased's salary should not be calculated at his current rate and they are entitled to argue that it is likely that his salary would have increased in the future. An issue that is not assessed by the National Insurance Institute.
Insofar as we are dealing with the death of a person who was not employed on site – such as a visitor or passerby who entered the premises – National Insurance is not part of the picture at all. The full amount of compensation can be claimed from the responsible companies.
These examples are just a few of the many, but the bottom line is clear. Civil proceedings following a fatal accident on a construction site can result in huge sums of money being paid to the companies and entities that were (jointly or severally) responsible for the unfortunate outcome. Only a contractor insurance policy that pays attention to this matter will (truly) provide a safety net in times of need.
Ensure a real safety net in terms of insurance coverage
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