No-fault system and compensation for road accidents

21 May 2019 – On International Law Office

Israel has a no-fault system for road accident compensation established by the Road Accident Victims Compensation Law 1975. According to the law, a person injured in a road accident is entitled to compensation regardless of the question of fault and there is no need to prove the liability of the person who caused the accident.

Compulsory insurance policy

According to the Road Accident Victims Compensation Law, drivers must have a valid insurance policy that covers all bodily injuries, including to the drivers themselves. Violation of this requirement is a criminal offence.

This mandatory insurance system ensures that drivers, passengers and any third parties receive compensation when injured in a road accident. Further, mandatory insurance also provides compensation to pedestrians who may have been hit and injured by an insured motor vehicle.

Compulsory insurance does not apply if:

  • the accident was caused deliberately;
  • the injured driver stole the vehicle;
  • the vehicle was used for perpetrating a criminal offence; or
  • no valid insurance policy was in force.

The remedy to the so-called ‘innocent injured’ in such cases is met by a special fund called the Karnit.

Limited compensation

The Road Accident Victims Compensation Law limits the amount of compensation provided to injured parties in road accidents as follows:

  • Compensation is capped at triple the average wage in Israel when calculating the loss of earnings caused as a result of the accident.
  • Compensation is limited for non-monetary compensation (eg, pain and suffering).
  • The limitation represents the other side of the no-fault system. On the one hand, injured parties are entitled to compensation, on the other, compensation is limited.

Exclusive cause of action

Claims for compensation as a result of road accidents are limited to claims under the Road Accident Victims Compensation Law and injured parties are prohibited from filing a claim under the General Tort Law.

Policy wording

To ensure that the potential exposure created by the Road Accident Victims Compensation Law is fully covered, the insurance regulator dictates the wording of the corresponding insurance policies.

Subject to stringent limitations provided by the law, injured parties are entitled to receive full compensation based on the principles of the General Tort Law, but it is capped as specified above. Consequently, compensation under the Road Accident Compensation Law is lower than what injured parties might have received in a claim under the General Tort Law.

Financial Market Authority (Insurance) comptroller

The legislature has authorised the Financial Market Authority (Insurance) comptroller to check insurance tariffs and the terms and conditions of insurance according to the dictated policy wording.

In addition, the legislature has prohibited insurers from limiting compulsory insurance coverage based on:

  • age;
  • driving experience;
  • mental or physical conditions;
  • the condition of a motor vehicle; or
  • the number of passengers.

Insurance pool

In order to provide coverage to parties that insurers do not want to insure, the legislature established an insurance pool which must insure drivers who have failed to obtain a compulsory insurance policy with another insurer (eg, motorbike riders).

Motor vehicle reform 2006

In 2006 the motor vehicle insurance market was reformed based on the risk exposure of different vehicles. As a result, higher premiums were imposed on owners of two-wheeled vehicles. Strong objections were raised and people refused to purchase insurance coverage. The legislature was forced to intervene and determine that in accidents involving two-wheeled vehicles and motor vehicles, motor vehicle insurers must pay insurers of two-wheeled vehicles 75% of the compensation to which a driver was entitled. This solution created a balance between insurers which insure profitable vehicles and those that do not. The outcome was a reduction in premiums for drivers of two-wheeled vehicles.

Karnit

In order to provide coverage for innocent parties injured as a result of accidents involving uninsured parties, the Road Accident Victims Compensation Law established a special fund called the Karnit.

The Karnit compensates persons injured:

  • following hit-and-run accidents;
  • by stolen vehicles;
  • by a vehicle that was not insured under the compulsory insurance system; or
  • by a vehicle insured by an insurer which is in liquidation.

In order to fund the Karnit, the Road Accident Victims Compensation Law stipulates that a certain percentage of premiums collected by commercial insurers which provide compulsory vehicle insurance should be transferred to the Karnit according to the percentage of shares that the insurer has in the compulsory insurance market.

Development of precedent

Several questions have arisen regarding the interpretation of the Road Accident Victims Compensation Law. In particular, the question of what constitutes a road accident and who is entitled to secondary damages have been examined and answered in various court precedents.