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By Adv. Peggy Sharon and Adv. Sharon Shefer
Contributory Negligence of the Assured - Will the Assured Bear a Portion of the Loss Due to his Fault?
Insurers are often faced with cases in which part of the fault for the loss or damage lies with the assured or someone on its behalf, nevertheless, they are obliged to pay insurance benefits regardless of the assured's acts.
In these cases, during the past few years, the Israeli courts have begun to adopt the contributory fault doctrine also in insurance cases.
The doctrine, applicable in the tort law, was introduced to contractual disputes when the defence attempted to allocate the damage caused. The leading precedent for contributory fault in a contractual relationship is C.A. (Supreme Court) 3912/90 Eximin S.A. v. Eital Style Ferrari Ltd., 47(4) PDI, 64. The District Court ruling which later adopted the doctrine for insurance contracts is C.A. (District Court of Haifa) Migdal Insurance Co. v. P.V.B. Taping Ltd.
According to this doctrine and its application, in cases where insurance coverage is acknowledged but the assured's negligent behavior substantially increased the risk or contributed to the insured event, the court may attribute to the assured a significant portion of the liability for the loss.
This occurs mainly in cases where the law or the leading court precedents oblige the court to acknowledge coverage, however, the Judge's sense of justice does not allow the assured to benefit from full indemnification for the damage.
The contributory fault defence produces just results, promotes caution by Insureds and enables the court to reach solutions which may be more than just the "all or nothing" solution. However, this defence is not inclusive and is disputable according to the circumstances of the case at hand.
We must note that this doctrine was accepted to date only in rulings of the lower courts (District and Magistrate) which do not have a binding force on other courts. However, we anticipate that sooner or later the Supreme Court will deal with this issue and expect that the applicability of this doctrine on insurance contracts will be determined.
In one of the recent judgments handed down in the Tel Aviv Magistrates Court, the Court dealt for the first time with the applicability of the above doctrine to Jewellers Block policies.
In the matter C.F. 025253/03 Beta Diamonds Ltd. v Phoenix Assurance Co., a salesman carrying pouches full of diamonds took a late night flight from Tel Aviv to New York, and later, after spending a half day in New York flew to Houston. His journey from Tel Aviv to Houston took 24 hours. During his journey, the goods were transferred from his body to a bag and vice versa at least 4 times, thereby breaching the body warranty, according to which the goods should be carried on the assured's body at all times. In Houston after a night in his hotel, he realized that one of the pouches was missing. Thus the questions of insurance coverage and contributory negligence were raised.
The court ruled that insurance coverage should apply as after September 11 it was impossible to undergo security checks at the airport with 4 pouches being carried on the salesman's body. However, as the assured did not fully comply with the policy warranty (in locations other than the airport), 20% of the amount of the loss was deducted for "contributory fault".
We would note that although the JB Policies are adapted to the specific, unique diamond industry and are All Risk policies which provide broad coverage, consideration should be given to the question whether the assured's behavior substantially increased the risk or contributed to the occurrence as it may have an influence on the amount awarded in court as insurance benefits for the insured event.
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