Loss of Earnings Insurance for Illness in Switzerland
Loss of earnings insurance for illness (LOS-illness) aims to compensate for the loss of income linked to incapacity for work due to illness. In Switzerland, there is no mandatory and uniform daily sickness benefit insurance as in other countries. The situation is fragmented across several distinct legal regimes. PBM Avocats assists insured persons and employers in Geneva and Lausanne in disputes related to these insurances.
The Different Loss of Earnings Insurance Regimes in Switzerland
| Regime | Legal Basis | Mandatory? | Competent Court |
|---|---|---|---|
| LAMal daily allowances | Art. 67-77 LAMal | No (optional) | Social insurance court |
| Collective ICA insurance (employer) | ICA (private law) | No (except CLA) | Civil court |
| CO salary obligation | Art. 324a-b CO | Yes (limited duration) | Employment tribunal |
| Individual ICA insurance | ICA (private law) | No | Civil court |
The Employer's Salary Obligation (art. 324a CO)
In the absence of collective loss of earnings insurance, the employer is obliged to pay salary for a limited period in case of incapacity for work due to illness (art. 324a CO). The durations vary according to length of service:
- 1st year of service: minimum 3 weeks' salary
- From the 2nd year: progressively longer duration according to cantonal scales
The main scales applied in Switzerland are:
- Zurich scale: 3 weeks (1st year), 2 months (2nd-4th year), 3 months (5th-9th year), etc.
- Berne scale: slightly different durations, often more favourable to the employee
If the employer has taken out collective loss of earnings insurance covering at least 80% of salary for 720 days, they are released from the obligation under art. 324a CO.
Collective Loss of Earnings Insurance (ICA)
Collective loss of earnings insurance taken out by the employer for the benefit of its employees is governed by the Insurance Contract Act (ICA). The main characteristics:
- Standard coverage rate: 80% of the insured salary
- Waiting period: generally 30 days (may vary according to the contract)
- Maximum benefit duration: generally 720 days over a reference period of 900 days
- Definition of incapacity: according to the contract; often based on incapacity to perform the usual profession or any profession
- Reservations for pre-existing illnesses: possible upon admission to the collective scheme
Main Disputes Regarding Loss of Earnings Insurance for Illness
- Challenging the incapacity for work rate: the insurer may mandate its own medical adviser to assess the capacity for work
- Pre-existing illness: abusive application of reservations or refusal to cover a new illness related to a previous one
- Waiting period and deductible: challenging the start date of incapacity for work
- Contract termination during illness: rights of the insured maintained according to the accrual principle
- Calculation of the insured salary: inclusion of bonuses, commissions, allowances in the calculation basis
Coordination with AI/IV and Other Insurance
Loss of earnings insurance for illness is often the first benefit received during a prolonged illness. It frequently precedes the AI/IV. Coordination between these insurances is complex:
- It is imperative to file an AI/IV application before the end of the loss of earnings insurance benefits, generally after 6 months of incapacity for work
- The loss of earnings insurer may have a subrogation right of recourse against the AI/IV or SUVA if they grant retrospective benefits
- Anti-over-insurance rules apply: the total benefits received cannot exceed 90% of the salary
What is the difference between an ICA-illness LCA policy and a ATSG/LPGA-illness policy?
The illness loss of earnings insurance subject to the ICA (Insurance Contract Act) is a private insurance contract governed by contract law. The insurer has greater contractual freedom, particularly to define coverage conditions, waiting periods and benefits. The ATSG/LPGA applies to mandatory social insurance (LAMal, AI, LAA) and offers stricter protections. In case of an ICA dispute, it is the civil court that has jurisdiction; for ATSG/LPGA, it is the social insurance court.
Is my employer required to take out collective loss of earnings insurance for illness?
No, collective loss of earnings insurance for illness is not mandatory under Swiss law. In the absence of such insurance, the employer remains obliged to pay salary for a limited period in case of illness, according to the Zurich or Berne scales (art. 324a CO). Certain collective labour agreements (CLA) make insurance mandatory in certain sectors.
What is the maximum duration of benefits under a loss of earnings insurance policy for illness?
The duration depends on the insurance contract. Standard contracts generally provide benefits for 720 days (2 years) over a reference period of 900 days. Some contracts provide 730 days over 900, or even more. Beyond this duration, if the incapacity for work persists, the insured must turn to the AI/IV. It is therefore crucial to file the AI/IV application sufficiently early.
Can the loss of earnings insurer refuse to pay by invoking a pre-existing illness?
Yes, if the insurance contract provides a reservation for a pre-existing illness (Vorbehalt). This reservation must be explicitly mentioned in the policy. In case of an abusive or ill-founded reservation, the insured may challenge it before the civil court. ICA insurers have pre-contractual disclosure obligations which, if not respected, may invalidate the reservation.
What happens if the loss of earnings insurer terminates the contract during my sick leave?
The termination of a loss of earnings insurance contract during sick leave is subject to strict rules. In principle, if you are receiving ongoing benefits, the insurer cannot terminate the contract with immediate effect for that claim. The contractual conditions and the Insurance Contract Act (ICA) must be analysed on a case-by-case basis. A specialist lawyer can assess your rights.