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.
Fall from fourth floor – claims totaling 5 million shekels
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 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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