Unbelievable! A subcontractor's employee was injured - and you will be required to pay the compensation to the National Insurance Institute
Jul 23, 2017
Article by Itzick Simon
The recent publications in the State Comptroller’s report and the State Audit Committee regarding the conduct of the National Insurance Institute (NII) toward insurance companies in relation to the enforcement of the NII’s subrogation rights bring an important issue to the forefront of managing risk and insurance arrangements required for construction projects.
For our purposes, under the law, the NII may sue a third party responsible for an accident to recover compensation for benefits already paid—or that will be paid—to an injured employee.
It should be clarified that the third party/defendant may include: the “construction executor”—the party commissioning the work, the main contractor, anyone legally responsible for site safety, as well as the injuring party itself (but not the direct employer who paid and insured their employee through the NII).
In such claims, the degree of responsibility of each party involved in the accident will be examined, and the NII’s compensation will be apportioned accordingly, if at all.
Typically, the NII’s claim is directed toward all parties who may be held responsible for the alleged accident. Its right to recover from the liable parties is based on Section 328 of the National Insurance Law [Consolidated Version], 1995 (hereinafter: the “National Insurance Law”) and/or pursuant to the law amending civil tort law (bodily injury benefits), 1964.
Article by Itzick Simon
The recent publications in the report of the State Comptroller and the State Audit Committee regarding the conduct of the National Insurance Institute towards insurance companies in all matters relating to the exercise of the National Insurance Institute's subrogation rights, raise the agenda and require a spotlight on an important issue on the agenda of managing the risk and insurance system required for a construction project.
In our case, according to the law, the National Insurance Institute may claim from a third party, who is responsible for the accident, compensation for the benefit that the payer paid... or that he intends to pay to the injured employee.
It is clarified that the third party/defendant may be: "Construction operator" - the person ordering the work, the main contractor, the person legally responsible for the safety of the site, and the harmer himself. (But not the direct employer who paid and insured his employee with the Public Liability Insurance...).
In claims of this type, the degree of responsibility of each of the parties involved in the accident will be examined and, accordingly, their share of the NSL compensation will be determined, if any.
The National Insurance Company's claim is usually directed against all parties who may be responsible for the accident, and its right to be reimbursed by those responsible is based on Section 328 of the National Insurance Law [Consolidated Version], 5755-1995 (hereinafter: the "National Insurance Law") and/or by virtue of the Law to Amend the Law of Civil Torts (Bodily Injury Benefits), 5724-1964.
So who will pay?
I will not elaborate here on the significant implications of proper contractual and substantive conduct in all matters concerning the transfer of the "construction operation" baton from the client to the main contractor, throughout the construction period, although this in itself is a problematic issue that may in many cases complicate many involved parties: from innocent private individuals in self-construction or joint construction to entrepreneurs who dismiss the main contractor and "continue construction themselves."
So back to our subject: who will pay?
The insurance policy for contracting work excludes coverage for NSC subrogation claims.
Expanding coverage for such claims requires professional knowledge and understanding, and on the other hand, ensuring that the insurance amount for the expansion will be at the full limit of third-party liability (and this is also assuming that the amount of third-party insurance purchased for the project in general is sufficient).
Due to the failure to purchase the extension to cover subrogation claims of the National Insurance Company, claims from developers and/or main contractors or "construction operators" of various kinds are rejected from time to time - by insurance companies - leaving the defendants without insurance coverage for this issue.
Notification from a main contractor to the National Insurance Institute regarding the employment of subcontractors
And while we're on the subject of National Insurance Institute claims, there is also an almost complete lack of understanding and knowledge regarding the issue of the main contractor's reporting on the employment of subcontractors - using Form 648.
In principle, according to National Insurance regulations, subcontractor employees are considered employees of the main contractor.
All workers on the construction site are considered employees of the main contractor, who is required to pay national insurance contributions for all workers, including subcontractors' employees.
What do we do?
The main contractor will be exempt from payment for subcontractors' employees if he reports the subcontractors' details to the National Insurance Institute using Form 648 .
The significance here is enormous - and does not only involve a financial debt due to non-payment of National Insurance contributions, but also a claim against the main contractor for the full reimbursement of disability and/or survivor's pension payments for an employee who was injured on the project and for whom it turns out that National Insurance contributions were not paid by the subcontractor (who often turns out in retrospect to be an unknown person).
Regards
Itzik Simon
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