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R.C.A. 3948/97, 5449/97 Migdal Insurance Company Ltd. v. Menorah Insurance Co. Ltd. and Migdal Insurance Company v. Cigna Insurance Co. Ltd.
On 4th April, 2001 the Israeli Supreme Court handed down a judgement on the question of whether an insurer who paid insurance benefits to his insured under a Property insurance policy, is entitled to contribution from another insurer who covered the same property under a policy issued to another insured.
Prior to this determination, contradictory judgements were given by the lower instances. Some Judges held that the right of contribution between insurers applies only where the same insured purchased several policies in respect of the same property, and not where such property was insured, for example, by both, the owner of the property and, separately, by the bailee who held that property for safe custody or for work to be done, etc. Other judgments held that it is not a prerequisite of the law that the insured under the various policies be the same insured, and that Double Insurance exists whenever the property is covered against the same risk by different insurers for the same period of insurance.
The Supreme Court overturned the judgements of the lower instances and accepted Migdal's allagations determining that also in cases where different insureds purchase different policies, it is possible that two (or more) policies will cover the same interest in the property against the same risk.
In such cases if, in fact, both policies covered the owner's interest in the property, it will make no difference whether one policy was issued to the owner and the other to the bailee, or to the carrier etc.
The Supreme Court reviewed the fundamental principles which the Double Insurance concept is based upon such as equity, and equality between several debtors, and determined that where the payment of indemnification for a certain damage by one insurer, releases the other insurer of liability under the latter's policy, it is appropriate that the released insurer will bear a proportionate share of the amount by virtue of the principles of unjust enrichment.
In addition, there is no justification that the bearing of the burden would be subject to the arbitrary actions of the creditor i.e. the choice of the insured as to who should be approached first - such a result enhances the potential for collusions between the creditor and one of the debtors so that the full burden will be imposed on only one of them. Moreover, each of the insurers received premium for its policy, and the release of such an insurer of liability is conceived as unjust.
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