Facts
Decision
Commissioner of insurance
Comment
The Tel Aviv Magistrates Court recently handed down an alarming judgment in Travelers v Y Peper.(1)
The case dealt with a subrogation claim filed by Travelers (a foreign insurer) against a tortfeasor who was allegedly responsible for a fire that broke out in Traveler's insured's premises. The defendant, who was represented by Naschitz, Brandes & Co, alleged that a foreign insurer is not an 'insurer' under the Insurance Contract Law 1981 and therefore cannot avail of the independent right of subrogation as provided by Clause 62 of the law. He further argued that Travelers could not sue him based on the principle of unlawful enrichment, as this would circumvent the right of subrogation as defined in the Insurance Contract Law.
The judge accepted the defendant's contentions and ruled that Travelers, as a foreign insurer, could not avail of the legal tools reserved for admitted insurers. Allowing the claimant to base his claim on the cause of action of unlawful enrichment would circumvent the Insurance Contract Law and the Control Law, and contradict the purpose of licensing insurers. Further, a proper interpretation of Clause 62 of the Insurance Contract Law (which deals with subrogation) in accordance with public policy is that it provides a complete and specific arrangement which negates any other causes in the context of subrogation rights. Therefore, the claimant has no cause of action based on unlawful enrichment.
In VIG-Vienna Insurance Group v The Sharon Drainage Authority the district court (a higher instance than the court which heard Travelers) requested that the commissioner of insurance state his position regarding the rights of foreign insurers that wish to subrogate against Israeli tortfeasors based on Clause 62 of the Insurance Contract Law.
The commissioner stated as follows in July 2015:
"The Insurance Contract Law imposes duties on Israeli licensed insurers towards their insureds. The same law also confers rights upon such insurers. Only licensed insurers are obligated to act in accordance with the Insurance Contract Law and are also entitled to enjoy the rights which the said law provides, i.e. the independent right of subrogation in accordance with clause 62 of the Insurance Contract Law."
This case is in its preliminary stages. Notably, the commissioner referred to the Unlawful Enrichment Act in his opinion.
The decision of the lower court regarding the right of a foreign insurer to avail of the principle of unlawful enrichment is questionable. In several high court judgments it was stated that this principle is an essential cornerstone of Israeli jurisprudence: it ensures the just distribution of rights and implies that a tortfeasor cannot benefit from his or her wrongdoing.
The Insurance Contract Law provides for a subrogation claim for an insurer without defining the term; hence, it is reasonable to use the definition set out in the Control Law, which requires a licence for this purpose. However, the substantive right to sue a tortfeasor, in order to make him or her accountable for damage caused, is a significant right, and the law should encourage proceedings designed to recover damages from the tortfeasor and make him or her liable for acts or omissions. In balancing the public interest that entities dealing with insurance be licensed and controlled and the that any wrongdoer not be released from liability just because the injured party was insured by a foreign insurer, the latter should prevail - that is, the tortfeasor should rectify the damage caused.
For further information on this topic please contact Rachel Levitan at Levitan, Sharon & Co by telephone (+972 3 688 6768) or email ([email protected]). The Levitan, Sharon & Co website may be accessed at www.levitansharon.co.il.
Endnote
(1) Travelers Prop Casualty Co of America v Y Peper, TA 52146-20-15.
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