Introduction
Facts
Decision
Introduction
The 1975 Road Accident Victims Law imposes a duty on the driver of a motor vehicle to compensate the victim for bodily injury sustained as a result of a road accident, regardless as to who was at fault for causing the accident. The law further provides for full and total liability even if no blame can be attributed to the driver. Hence, victims of road accidents are ensured compensation payment.
However, with reference to the scope of compensation due to each victim, the law provides various limitations. Clause 4(a)(1) states that:
"In calculating the compensation in respect of loss of earnings and loss of earning capacity, no income shall be taken into account which is in excess of three times the national wage average, according to the data of the Central Bureau of Statistics, immediately before determination of the compensation...
Where the said compensation exempt from Income Tax, the losses of the injured for the purpose of the compensation will be calculated according to the income of the injured upon the deduction of the Income Tex applied to it at the time of the determining of the compensation, provided that the reduction for the purpose of said deduction will not exceed 25 percent of the income according to which the said compensations be calculated."
Facts
On 20 April 1998 a fatal road accident occurred in which a couple lost their lives. The couple's children, who were the beneficiaries of the deceased and who were dependent on them for their livelihood, sued the insurer of the motor vehicle involved in the accident for their damages.
The deceased had worked until his death as an independent architect and operated a business together with a partner. The parties agreed that the deceased's salary exceeded three times the average national wage. A dispute arose as to the interpretation of the abovementioned clause, which was eventually determined within the framework of an appeal and a counterappeal which were filed to the Supreme Court.(1)
The couple's children alleged that the compensation calculation should be based on net earnings - that is, the income tax should be deducted from the salary which was actually paid to the deceased and only afterwards should the treble average salary ceiling be applied. The insurer alleged that the calculation should be made on gross salary and, therefore, tax should be deducted from said ceiling.
Decision
The Supreme Court justified the insurer's position and determined that, from a legal perspective, a salary which exceeds treble the average salary does not exist. Therefore, the tax which is prescribed by the law in the region of 25% would be deductible from the treble the average salary ceiling. In other words, since the law sets a limit as to the amount of compensation, any part of the salary above the ceiling should be ignored and tax should be deducted from the ceiling.
The court added that adopting the children's position would increase the inequality of the compensation, since the tax would be deducted from the relative lower income amounts and not from income which was higher than treble the average salary.
For further information on this topic please contact Aviv Klepner at Levitan, Sharon & Co by telephone (+972 3 688 6768) or by fax (+972 3 688 6769) or by email ([email protected]). The Levitan, Sharon & Co website may be accessed at www.levitansharon.co.il.
Endnotes
(1) CA 8632/07 Elad Raveh v Inheritance of the deceased Doron Raveh.