Insurance Payout Error Forces Son to Return Over $100,000

A dramatic labor court ruling has clarified a key principle in inheritance and pension insurance law following an insurance company's costly error. The case involved Avraham Yosef Leizerzon, who passed away in 2020 while employed. Migdal Insurance mistakenly distributed his accrued pension compensation funds among his heirs according to a standard inheritance order.

As a result of this incorrect distribution, his son, Simcha Binyamin Leizerzon, received NIS 382,143. However, Israeli law dictates that compensation funds for a deceased employee are designated solely for dependents, specifically the surviving spouse, not all heirs. Upon realizing the mistake, Migdal Insurance paid the full amount owed to the widow and demanded the son return the funds he had received.

The son refused, arguing that since his father had passed retirement age during his lifetime, the right to compensation had already vested as a property right and become part of the estate. The court completely rejected this claim, ruling that because the deceased chose to continue working, "the deceased's passing gave rise to the right." The court emphasized that the Severance Pay Law is intended to benefit dependents, and therefore the estate has "no part or inheritance" in these funds.

The court also dismissed the son's argument of good faith, noting that Migdal contacted him within 21 days of the payment. It was determined that the son had expected to receive this inheritance portion and did not rely on it for his livelihood. Ultimately, the son was ordered to return the full amount to Migdal, plus shekel-linked interest and NIS 10,000 in legal costs.