Until recently Israeli insurers used the doctrine of contributory negligence in order to reduce insurance benefits to insurds who contributed to the occurrence by their negligence or breach of precaution terms in the policy. Recently the commissioner of Insurance published its position paper regarding the use of the legal theory of contributory negligence in insurance claims. The following article will deal with this development.
Background:
In C.A. 1307/05 (Haifa) Migdal Insurance Company vs. PV Adhesives Ltd. a truck full of merchandise made its way to Jenin (in the Palestinian territories). To reach there, the truck driver detoured the army roadblocks which prevent Israelis from entering the territories. On its way, the truck driver was threatened by gunmen and the truck with its contents was taken away. The truck driver testified that he encountered the same experience in the same place in the past.
In the claim filed against the insurers of the truck, the Haifa District Court determined:
"The truck driver and the insured company were aware of the risk in these circumstances, and nevertheless took the risk each time again and therefore, it will not be just to discharge them from any responsibility."
The Court ordered Migdal to pay 65% of the insurance benefits, deducting 35% as contributory negligence on the part of the insured.
The insured company asked for leave to appeal on this decision to the Supreme Court and in the scope of the proceedings, the Attorney General gave an opinion according to which the doctrine of Contributory Negligence should not apply to insurance claims, mainly because an insurance policy is aimed also to protect the insured against his own negligence. After submitting his opinion, Migdal decided the pay the insured the entire amount of the benefits and therefore, the insured company withdrew its appeal and no judgement was given by the Supreme Court.
This opinion of the Attorney General was adopted by the Commissioner of Insurance who distributed it to all insurance companies with broad coverage in the media.
The gist of the opinion is that the Court should not award partial benefits due to negligence of the insured, but rather award full amounts, except where the policy includes a condition which obliges the insured to take reasonable care and it was breached by the insured in gross negligence with carelessness to the results, in which case the insurer should be totally exempt from the liability.
Comments:
1. The Commissioner's view - not a Supreme Court judgement:
Orders and decisions of the Commissioner of Insurance may be appealed to the District Court, therefore the status of the Commissioner's view in this case is not higher in the hierarchy than the District Court decision of the Migdal case, which decided that the doctrine of Contributory Negligence applies to insurance claims.
Therefore, and until a binding judgement is given by the Supreme Court, the law on this issue is still as applied by the lower courts - in numerous insurance claims this doctrine was applied and insurance benefits were awarded proportionately.
2. The view expressed by the commissioner of insurance is very extreme - all or nothing - which means that in various cases where the insured received partial benefits, he would face the risk of losing it all. This view ignores considerations of justice and legal policy which directed the Courts in various cases to give weight to the negligent behaviour of the insured, especially when a precautionary term was breached thereby.
3. According to the Commissioner's view, the insurer will be exempt from liability only where the policy contained a condition for duty of care and not where the insured was grossly negligent and reckless and such term is absent. This view gives too much weight to general duty of care terms in the policy, which as a matter of fact do not add anything to the general duty of care imposed by law on everybody.
4. The Commissioner thinks that even where a specific duty is imposed on the insured, its breach should not give rise to proportionate award and the rule should be all or nothing. Full discharge of the insurer is subject to proof of gross negligence and recklessness. By this view, the Commissioner of Insurance ignores the nature of the insurance policy as being a contract which includes undertakings on both sides. A breach of a specific term by the insured, if carried out by mere negligence, will have no effect according to the Commissioner's view. This result is not acceptable when dealing with contracts.
Recommendations
Instead of the result of "All or Nothing", the doctrine of contributory negligence in insurance claims achieves just and reasonable results and also encourages reaching of settlements instead of litigation. From analyzing the various court cases which dealt with the issue of contributory negligence, we will draw the following distinctions:
(a) Where the policy includes a specific term for a specific action by the insured, a breach thereof, even with mere negligence, will lead to a proportionate award according to the extent in which the omission of the insured contributed to the occurrence.
(b) In the absence of a specific and expressed term or where the policy only contains a general term for reasonable care, gross negligence and carelessness of the insured will be required in order to apply a proportionate award.
Currently, and until a Supreme Court judgment is handed down, the contributory negligence doctrine may be argued in Court by insurers. Some lower courts have declined the doctrine and in numerous claims it was upheld.
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