C.A. 27688/11/14 National Insurance Institute v the City of Tel Aviv, Jaffa et al.
Liat Rotman .Adv
An employee in Israel is automatically insured for work accidents by the National Insurance Institute (hereinafter: the NII) which is a government institution.
The said insurance is a compulsory insurance. The premium is paid by the employer. If the tortfeasor which is responsible for the accident is a third party, the NII has a right of subrogation against the third party for the benefits it paid to the employee.
If the losses occurred are higher than the amount paid by the NII, the employee can sue the tortfeasor for the difference.
Until now it was understood that if an employee filed a claim against a tortfeasor which is a third party and the claim was settled, such settlement is perceived as an admission of liability with regard to the NII subrogation. (The NII’s share in the compensation is the lion’s share). A new judgement handed down by the District Court changes this perception and creates revolution in this aspect.
The circumstances of the claim:
Plaintiff submitted a claim concerning a work accident which occurred while on her way to work. According to the Statement of Claim she allegedly tripped on an uneven pavement in the area of the city of Tel Aviv, fell down and broke her leg. As a result she could not work for several weeks. She received insurance benefits from the NII. For her losses over and above the benefits paid by the NII, she submitted a claim against the Tel Aviv Municipality (hereinafter: the Municipality) and against its Insurer.
The NII submitted a separate subrogation claim for the amount it paid to the employee in the amount of NIS 470,000 against the Municipality. Both claims were adjoined.
During the legal proceedings the defendants (the Municipality and its Insurer) agreed to settle the claim with Plaintiff (the employee) outside the Court without acknowledging liability.
The parties filed the settlement agreement with the Court, according to which Plaintiff and the defendants agreed to settle the claim, and the NII claim will continue to be heard in Court. The Court approved the settlement.
During the continuing hearing of the NII claim, it was alleged by the Municipality that the mere fact that it agreed to settle does not necessarily indicate that it is liable for the accident. It was contended that the agreement to settle was that of the Municipality’s Insurer who preferred to “buy the risk” rather than continue the Court case. As a result the hearing of evidences regarding the Municipality’s liability continued.
After the hearing of the evidence, the Magistrates Court determined the following:
- Plaintiff’s and the defendant’s settlement was reached without acknowledging liability and for the purpose of settlement only. Therefore, it cannot lead to the conclusion that the Municipality is liable.
- As neither negligence nor causal connection on the part of the Municipality was proven by the NII, the claim of the NII was declined by the Court.
The NII filed an appeal with the Tel Aviv District Court which approved the Magistrate’s Court’s decision.
The District Court ruled that there are no grounds for interfering with the factual decisions in respect of the occurrence and the lack of liability.
In respect of the estoppel allegation raised by the NII i.e. that once the Municipality agreed to settle for a substantial amount it in fact acknowledged liability and is estopped for contending otherwise. The Court ruled that the settlement between the parties was reached outside the Court apparently for economical purposes. Such settlement reflects “buying” a risk and cannot be considered as estoppel.
As long as the liability question is in doubt (i.e., was not proven by Court), the NII subrogation claim should continue to be fought in order to prove the liability of the third party.
The fact that the defendants (the third party) agreed, for their own reasons, to settle a claim with Plaintiff outside of Court, does not necessarily expose them to an immediate payment of the NII’s subrogation claims.