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30 June 2020
Has the COVID-19 pandemic led to the filing of insurance class actions which are typical of such crises? This article discusses class actions relating to motor, business and apartment insurance based on the allegation that the insureds paid monies (eg, premiums) for a period during which they did not enjoy any or full consideration for these payments.
Insurers have been sued for collecting premiums in full, despite the fact that the insured risks have been significantly reduced due to the COVID-19 pandemic.
In April 2020 several claims were filed against motor insurers (which offer mandatory insurance for bodily injury and voluntary car insurance (property)).
In these claims it was argued that the risk was reduced dramatically due to the lockdown and the decrease in car mileage. Therefore, the plaintiffs argued that the motor insurers should decrease the premium. The plaintiffs presented examples from US and other foreign motor insurers, as well as an example of insurers that had made refunds on their own initiative.
On 23 March 2020 the Israel regulator published a directive, pursuant to which insureds could freeze their car insurance (ie, property damage) due to the non-use of their car; however, the mandatory insurance (ie, bodily injury in road accidents) could not be frozen. The abovementioned claims relate to various types of insurance and demand a refund of a portion of the premium by insurers.
On 26 April 2020 the regulator approached the insurers enquiring:
Notably, on 3 May 2020 digital insurer WeSure gave its insureds a fuel coupon worth NIS100 due to the impact of COVID-19 on its existing insureds.
A similar claim was filed against seven insurers for a refund of a premium regarding policies that insured businesses. The plaintiff argued that the dramatic reduction of business activities during the pandemic should result in a reduction of the premium in order to match the insured's payment to the insurer's exposure to risk. The plaintiff submitted an actuary's expert opinion and referred to Article 20 of the Insurance Contract Law, which provides that in certain circumstances the insured is entitled to a reduction of the premium after the risk insured changes.
Article 20 applies to circumstances whereby the risk was aggravated and the premium increased accordingly, and where the insured notified the insurer afterwards that as the said circumstances ceased to exist, they are entitled to reduce the premium to what would have been paid in the absence of those circumstances.
This provision does not set a general entitlement to a reduction for non-use of a car post factum and requires a specific notification of the insured to the insurer which might have led to an agreed limitation of the cover to a part of the covered risks.
In one of the class actions, the plaintiff claimed against insurers that issued apartment policies. The plaintiff argued that the decreased risk of theft and breaking into dwelling houses should lead to a premium reduction.
It seems that the COVID-19 crisis will lead to a wave of class actions, which are a popular tool in Israel; however, they are mostly settled at an early stage of the litigation. The above examples suggest that insurers should expect more claims in future – some of which will be filed directly against them and in others they might be involved from behind the scenes, subject to the terms of their policies, where their insureds would be sued.
For further information on this topic please contact Peggy Sharon or Moshe Stern at Levitan, Sharon & Co by telephone (+972 3 688 6768) or email (firstname.lastname@example.org or email@example.com). The Levitan, Sharon & Co website can be accessed at www.israelinsurancelaw.com.
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