Israel has established a “No Fault System” in road accidents compensation following the enactment of Israel Road Accident Victims Compensation Law 1975 (hereinafter: The Law). According to the Law, a person injured in a motor vehicle road accident is entitled to compensation regardless the question of fault i.e. there is no need to prove liability of the person who caused the accident.
Compulsory Insurance Policy:
According to the Law, a driver of a motor vehicle is not allowed to drive unless he has a valid insurance policy, covering all bodily injuries including that of the driver.
Violation of the Law amounts to a criminal offence.
This mandatory insurance system ensures that not only does the person who drives the motor vehicle receive compensation when injured in a road accident, but also the passengers in the vehicle who were injured, as well as any other 3rd party who was involved in the accident.
This mandatory insurance also provides compensation to pedestrians who may have been hit and injured by the insured motor vehicle.
The compulsory insurance does not apply in cases, when the accident was caused deliberately, when the injured driver stole the vehicle, when the vehicle was used for perpetrating a criminal offence or when no valid insurance policy was in force.
The remedy to the “Innocent Injured” in such cases is answered by way of a special fund, Karnit.
Limited Compensation under the Law:
The law limits the amount of compensation due to an injured in a road accident as follows:
– Capping the compensation at triple the average wage in Israel when calculating the loss of earnings caused as a result of the accident.
– Limits the compensation in respect of non-monetary compensation (such as pain and suffering).
– The said limitation represents the other side of the coin of the “No Fault System”. On the one hand every injured person is entitled to compensation, on the other hand the compensation is limited.
Exclusive Cause of Action:
The law has a unique stipulation whereby it limits claims for compensation as a result of road accidents only to claims under the Law, and prohibits the injured person from filing a claim under the General Tort Law.
Policy Wording – dictated by the Regulator:
- In order to ensure that the entire exposure created by the Law is fully covered by an insurance policy, the Regulator dictates the wording of this policy.
Subject to stringent limitations provided by the Law the injureds are entitled to receive full compensation based on the principles of the Tort Law but capped as specified above in the Law. Consequently, the compensation according to the Road Accident Compensation Law is lower as compared to the compensation the injured might have received in a claim under the Tort Law.
The Comptroller of the Financial Market Authority (Insurance) (hereinafter: the Comptroller):
The Legislator authorized the Comptroller to supervise the insurance tariffs and the terms and conditions of the insurance according to the dictated policy wording:
In addition, the legislator prohibited the insurance companies from limiting the insurance coverage of the compulsory insurance based on age, driving experience, mental or physical conditions, the condition of the motor vehicle, the number of passengers.
In order to enable insurance coverage in respect of Insureds who are not “profitable” and the insurance companies have no interest in insuring them – the Legislator set up the POOL which is obliged to insure each and every motor vehicle driver who did not succeed in obtaining a compulsory insurance policy with another insurance company, for example, motor-cycles.
Motor Vehicle Reform – 2006:
In 2006 the motorized vehicle insurance market was reformed based on the risk exposure of the different motor vehicles. As a result high premiums were imposed on owners of two-wheeled vehicles. Strong objections were raised throughout the country and inter alia people refused to purchase insurance coverage. The legislator was forced to intervene and to determine that in accidents involving a two-wheel vehicle with a motor vehicle, the motor vehicle insurers will pay the two-wheel insurers 75% of the compensation to which the two-wheel driver was entitled to. Such a solution created a balance between insurance companies which insure “profitable vehicles” and those companies who do not. The outcome was a reduction in premium to the drivers of the two wheel vehicles.
In order to find a solution for the “Innocent” parties who were injured as a result of an uninsured accident, the Law established a special fund – Karnit.
Karnit compensates injured persons following a hit-and-run accident, persons injured by a stolen vehicle, or injured by a vehicle which was not insured under the compulsory insurance, as well as persons injured by a vehicle which was insured by an insurance company which is in liquidation.
In order to fund Karnit, the Law stipulates that a certain percentage of the premiums collected by the commercial Insurers which provide compulsory vehicle insurance should be transferred to Karnit according to the percentage of the share of that Insurer in the motor vehicle compulsory insurance market.
Development of the precedent throughout the years:
Several questions arose as to the interpretation of the Law. What constitutes a road accident, who is entitled to secondary damages and more, all these questions are analyzed and answered in various Court precedents.