Murphy's Law – The worker was seriously injured and a young couple was sued for 5 million shekels
Aug 27, 2018
By: Itzick Simon
Presented as a public service – Our office provides insurance services for contractors, developers, and construction companies, not for the private sector.
Think that purchasing Contractors’ All-Risk Insurance is only for contractors and developers? Think again. Even a private client needs insurance, and here is a real-life case.
A well-known and reputable contractor who has worked with us for many years came to my office a few months ago and demonstrated for me (and immediately for you) the point I keep repeating: in the construction industry, Murphy’s Law is a daily reality.
“About three years ago, my young nephew came to me for advice regarding renovations on an apartment that he and his wife had purchased with great effort,” the contractor said. “Of course I was happy to help, and naturally I offered guidance on the renovation. The first piece of advice I gave him was: you need to get insurance. You can easily purchase a renovation insurance policy, and it will cover you if something happens.”
“Insurance?” the young man asked. “I’m not a contractor, and this isn’t a construction project. It’s just a small residential apartment that needs a minor, short-term renovation.” The contractor tried in vain to convince the nephew—hereafter referred to as “the stubborn nephew”—but he remained firm in his decision.
You can probably already guess that the renovation did not go smoothly. On the contrary, the nephew did not hire a main contractor, who could have been legally defined as the “person performing the construction,” did not appoint a site manager as required by law, and instead worked with several different professionals. Among them was a company installing waste chutes—those familiar construction-site chutes made of connected buckets, designed to efficiently transport construction debris from the property to the dumpster.
By Itzick Simon
Provided as a service to the public – Our office is engaged in providing insurance services to contractors, developers and construction companies, not to the private sector.
Think that purchasing insurance for construction work is only for contractors and entrepreneurs? Think again. A private client also needs insurance, and here is a real-life case.
A well-known and respected contractor who has been working with us for quite a few years came to my office a few months ago and proved for me (and immediately for you) the thesis that I repeat time and time again - in the construction industry, Murphy's Laws are a daily matter.
"About three years ago, my young nephew approached me for advice regarding renovations to the apartment he and his wife had bought with great effort," the contractor said. "Of course I was happy and of course I offered to advise on the renovation. The first piece of advice, I told my nephew, is that you should take care of insurance. You can easily buy an insurance policy for renovations and it will cover you if something happens."
"Insurance?" the guy wondered, "I'm not a contractor and this is not a construction project. It's just a small apartment that needs a spotty renovation in a short time." The contractor tried in vain to convince the nephew, who will be called "the stubborn nephew," but it remained his.
You probably already understand that the renovation did not proceed smoothly. Quite the opposite. The nephew did not contract with a general contractor who could be defined as the " construction operator ", did not appoint a foreman as required by law, and worked with a number of different professionals. Among them was a company that installed waste removal sleeves. Those waste removal sleeves that we all know from construction sites, which are based on buckets that are connected to each other, and whose purpose is to assist in the efficient transport of construction waste from the property to the container.
Fall from fourth floor – claims totaling 5 million shekels
"While installing the waste sleeve," the contractor said, "the worker who was performing the work tripped and fell straight from the fourth floor to the ground. The poor guy crashed to the ground, was seriously injured, and was taken to the hospital suffering from multiple system injuries."
Three years later, the contractor's nephew opened the door to a messenger who handed him a box full of documents, including claims totaling about 5 million shekels. One claim was filed by the National Insurance Institute as a subrogation claim for the amount of about 3.5 million shekels, and another claim was filed by the sleeve company for the amount of about 1.5 million shekels and based on employer liability .
Why were the lawsuits filed against the nephew, who will henceforth be called "the negligent nephew"? For a simple reason. Too simple. Very simple. In the absence of a general contractor to carry out the construction work, the nephew was the one defined by law as the " construction operator ." In his aforementioned role, he was responsible for various issues related to the safety of workers and visitors to his premises during the construction work, as well as for compensation in the event of an incident.
What should the nephew have done? Listen to the advice of his uncle, the contractor, who had already built one or two projects in the construction industry in his life, and purchase renovation insurance (also called private builder insurance ). If the nephew had taken out a renovation insurance policy as mentioned above, and had he made sure that it suited his needs (important tips below), he would have had full coverage against the claims filed against him. An insurance company on his behalf would have handled the five million claim, and he could have continued with his life in peace and quiet.
Another option open to him was to appoint a general contractor to carry out the work. A professional, legally registered contractor, who would be considered the "performer of the work." However, even in this case, it is important to remember that the nephew would not have fulfilled his obligation solely by appointing the contractor. Israeli law and case law recognize his responsibility to select a suitable, legal, registered, legally insured contractor, and more (even a "contractor" who appoints a "performer of the work" is not exempt from all responsibility).
Not exactly Murphy's Law – renovations are a risky business
I mention Murphy's Law, but this is actually not a rare event. In fact, of the hundreds of deaths in the construction industry in recent years, about 18% of them worked on renovation sites . Not in private construction, not in skeleton construction, not in excavations, not in finishing. One in five deaths in Israel in work accidents in the construction industry is a renovation worker of one kind or another.
During the installation of the waste chute, the contractor said:
“The worker performing the task slipped and fell straight from the fourth floor to the ground. The unfortunate worker crashed onto the ground, suffered serious injuries, and was hospitalized with multiple system trauma.”
Three years later, the contractor’s nephew opened the door to a delivery person who handed him a box full of documents, primarily lawsuits totaling approximately ₪5 million. One claim was filed by the National Insurance Institute as a subrogation claim for about ₪3.5 million, and another claim was filed by the chute company for ₪1.5 million under employers’ liability.
Why were the claims filed against the nephew, henceforth called “the negligent nephew”? The reason is simple—almost too simple. In the absence of a main contractor for the construction work, the nephew was legally defined as the “person performing the construction” under the law. In that role, he was responsible for various safety matters regarding workers and visitors on the site during construction, as well as for compensation in case of an incident.
What should the nephew have done? He should have listened to his uncle, the contractor, who had already completed one or two construction projects in his life, and purchased renovation insurance (also called private builder insurance). Had the nephew obtained such an insurance policy, and ensured it was suitable for his needs (important tips follow later), he would have had full coverage against the claims filed. The insurance company would have handled the five-million-shekel claim, and he could have continued his life in peace.
Another option available to him was to appoint a main contractor to carry out the work—a professional contractor, legally registered, who would be considered the “person performing the work.” However, even in that case, it’s important to note that the nephew would not be relieved of responsibility solely by appointing a contractor. Israeli law and case law recognize the responsibility to choose a suitable, legal, registered contractor with proper insurance. Even a “work owner” who appoints a “person performing the work” is not exempt from all liability.
Not exactly Murphy’s Law – renovations are dangerous business
I mention Murphy’s Law, but in fact, this is not a rare event. Out of the hundreds of fatalities in the construction sector in recent years, approximately 18% occurred on renovation sites. Not in private construction, not in structural construction, not in excavations or finishing works. One in five construction-related deaths in Israel is a renovation worker.
In conclusion
As I promised, here are some important points for purchasing a policy for renovation or private construction:
✔ BIT terms – Make sure that the policy you purchase is prepared under BIT terms and nothing less. These are terms defined by a policy from the "Clal-Bituch" company, which is a contractor work policy with many extensions beyond the usual policies.
✔ Additional extensions beyond the Bit – In addition to the extensions of the Bit terms, it is recommended to purchase a policy with extensions against various exceptions, such as coverage for bodily injury caused by the use of heavy mechanical and engineering tools, coverage in the event of a subrogation claim filed by the National Insurance Institute (as was the case here), and more.
✔ Adequate coverage for bodily injury – Check that the policy includes coverage for bodily injury of at least five million shekels. This is because claims for bodily injury can amount to huge sums when it comes to death (in which case compensation is stopped according to the rule of lost years), or serious injuries that remove the employee from the employment circle and make him a broken vessel dependent on others (in which case compensation also includes medical expenses, help from others, loss of future earnings, etc.).
✔ Contractors' insurance is essential for any construction project. Whether it is a "small" project of spot renovation carried out by an individual, or whether we are dealing with "professional" construction by a contracting or entrepreneurial company. Only a policy purchased according to the client's needs will be able to protect you on the day of the accident.
As promised, here are some important points for purchasing a renovation or private construction insurance policy:
✔ “Tenu’im Bit” (Standard Construction Conditions) – Make sure the policy you purchase is drafted according to Tenu’im Bit or better. These are conditions defined by the Clal Insurance policy, which is a contractors’ all-risks policy with extensive extensions beyond standard policies.
✔ Additional Extensions Beyond Basic Coverage – Beyond the standard Tenu’im Bit coverage, it is recommended to purchase a policy with extensions against various exclusions, such as coverage for bodily injuries caused by heavy mechanical or engineering tools, coverage in case of a subrogation claim filed by the National Insurance Institute (as happened in the case above), and more.
✔ Adequate Coverage for Bodily Injuries – Ensure the policy includes coverage for bodily injuries of at least ₪5 million. Claims for bodily injuries can reach astronomical amounts in cases of death (where compensation is calculated according to the “lost years” principle), or severe injuries that remove a worker from the labor force and render them dependent on others (in which case compensation includes medical expenses, personal assistance, future loss of earnings, and more).
✔ Contractors’ All-Risk Insurance is Essential for Every Project – Whether it’s a “small” project, like a minor renovation carried out by a private individual, or a “professional” construction project by a contracting or development company, only a policy purchased according to the client’s specific needs can truly protect you when an incident occurs.
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