Employees in Israel are automatically insured for work accidents by the National Insurance Institute (NII). This type of insurance is compulsory and the premium is paid by employers. If the tortfeasor responsible for an accident is a third party, the NII has a right of subrogation against said third party for the benefits that it has paid to the insured.
If the losses incurred are higher than the amount paid by the NII, the insured can sue the tortfeasor for the difference.
Until recently, if an insured filed a claim against a third party and the claim was settled, such a settlement was perceived as an admission of liability with regard to the NII's subrogation. (The NII's share in the compensation is the lion's share.) A recent Tel Aviv District Court judgment has changed this perception.
The plaintiff submitted a claim for an accident which occurred while she was on her way to work. According to the statement of claim, the plaintiff had tripped on an uneven pavement in Tel Aviv, fallen down and broken her leg. As a result, the plaintiff had been unable to work for several weeks and received insurance benefits from the NII. For her losses over and above the benefits paid by the NII, the plaintiff submitted a claim against the Tel Aviv municipality and its insurer.
The NII submitted a separate subrogation claim to the municipality for the amount that it had paid to the employee (NIS470,000). Both claims were adjoined.
During the legal proceedings, the defendants (ie, the municipality and its insurer) agreed to settle the claim with the plaintiff outside court without acknowledging liability.
The parties filed the settlement agreement with the court, according to which the plaintiff and the defendants agreed to settle the claim and the NII claim would continue to be heard in court. The court approved the settlement.
During the hearing of the NII claim, the municipality alleged that the mere fact that it had agreed to settle did not indicate that it was liable for the accident. It was argued that the agreement to settle was made by the municipality's insurer, which had preferred to buy the risk rather than continue the court case. As a result, the hearing of evidence regarding the municipality's liability continued.
After the hearing of evidence, the magistrates' court determined that:
- the plaintiff and the defendants' settlement had been reached without acknowledging liability and for the purpose of settlement only. Therefore, it could not lead to the conclusion that the municipality was liable; and
- as neither negligence nor causal connection on the part of the municipality had been proven by the NII, its claim should be declined.
The NII filed an appeal with the Tel Aviv District Court, which agreed with the magistrates' court's decision.(1) The district court ruled that there were no grounds for interfering with the factual decisions in respect of the accident and the lack of liability.
In respect of the estoppel allegation that the NII had raised (ie, that once the municipality had agreed to settle for a substantial amount it had acknowledged liability and was estopped from contending otherwise), the court ruled that the settlement between the parties was reached outside the court for economic reasons. Such a settlement reflected buying a risk and could not be considered an estoppel.
Where liability is in doubt (ie, has not been proven in court), NII subrogation claims should continue to be fought to prove third-party liability.
The fact that the defendants in the above case agreed to settle a claim with the plaintiff outside court did not necessarily expose them to an immediate payment of the NII's subrogation claims.
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