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A. General - Limitation Period for Insurance Claims in Israel
Section 31 of the Israeli Insurance Contract Law - 1981 (hereinafter: the Insurance Law) provides that the limitation period for filing a claim for insurance benefits is three (3) years from the date of the insured event.
According to Section 72 of the Insurance Law, this law does not apply to Reinsurance, Marine and Aviation Insurance. By a special order, the law also does not apply to diamonds and precious metals. Therefore, claims for insurance benefits in the above mentioned categories of insurance are subject to the regular seven (7) years timebar period.
B. Limitation Period in Liability Insurance
According to Section 70 of the Insurance Law, in Liability Insurance the insured’s claim shall not be time barred until the claim of the third party against the insured has prescribed. Since this section is drafted in the negative, a question has arisen: when will an insurance claim against the liability insurer be time-barred? In the judgement handed down in A.C.A. 5916/02 Hamishmar v. Eliahu Insurance Co. and Others the Supreme Court ruled that the claim against the liability insurer is time-barred after the expiry of seven years from date of filing the claim by the third party against the insured.
The Court declined the insured’s allegation that the limitation period of seven years should start on the date on which a judgement is given against the insured.
A question which was not dealt with in the above judgement, is what happens in case the insured was aware of the circumstances which led to the claim against him, prior to submission of that claim in Court? Should the limitation period begin on the date of such awareness?
C. The Limitation Period for Contribution Claim Between Insurers in Case of Double Insurance
Until recently, no discussions have taken place in respect of the limitation period in claims filed by one insurer against another, based on the provisions of the Insurance Law regarding Double Insurance. Two Court decisions (both in the Magistrates Courts), recently gave different rulings - each judge reaching another conclusion based on a different perspective on the subject of Double Insurance.
In both cases the insurance policies were effected by two insurers for the same insured interest, and the insured gave notice to only one insurer. The insurer which indemnified the insured, filed a claim against the second insurer, after expiry of three years from the date of the occurrence and of the insured event.
First Judgement
C.C. 6336/01 Hamagen v. Lloyd’s Underwriters and Aryeh Insurance Co.
A claim between double insurers for contribution is a claim for insurance benefits and therefore is timebarred 3 years after the insured event, regardless of when the first insurer paid the insured. This was determined by Judge I. Shiloh.
Judge Shiloh discussed the rationale behind Section 31 of the Law - Insurance companies need a reasonable time bar in order not to keep their reserves for long periods. This rationale also applies in contribution claims of one insurer against the other.
Judge Shilon concludes from Sections 70 of the Insurance Law (see above), that where the legislator wished to exclude certain insurance claims from the realm of Section 31, it was done in express terms. By not doing so in double insurance, the legislator implied that Section 31 should apply to double insurance as well.
Section 59 (a) of the Law requires the insured to inform the insurer immediately if he has double insurance. This should prevent situations in which the first insurer is time barred from filing a claim against the other insurer.
Second Judgement
C.C. 92208/00 Hamagen v. Harel Insurance Co. and Goni Transporters
In this case Judge Judith Shevach determined that Section 31 of the Insurance Law applies only to the relationship between the insured and the insurer, and not to that between one insurer and another. Judge Shevach ruled that application of Section 31 to a contribution claim, would result in the insured deciding which insurer would pay him, thus barring that insurer from suing the other insurer, due to the very short limitation period.
For example, in case the insured notifies his insurer of an insured event, three years less one day after the occurrence, by that he prevents the insurer from filing a claim against the second insurer. Therefore, the limitation period in double insurance claims is the regular seven years period.
It is interesting to note that Judge Shevach did not specify the date from which the period of seven years should be counted - whether from the date of the insured event or the date of payment of insurance benefits by the first insurer.
Appeals to the Tel Aviv District Court were filed in respect of the above judgements, and are currently pending. It is probable that due to the importance of this question, any ruling of the District Court would also be appealed to the Supreme Court, which has a binding force on all lower instances.
D. Limitation Period in Personal Accident Insurance Claims
The limitation period for personal accident insurance claims is three years, however, there are three possible dates from which the limitation period should begin: (a) the event of the accident, (b) the date of crystallisation of permanent disability, or (c) the date of the determination of the permanent disability by a medical expert or other authority such as the National Insurance Institute (hereinafter: NII).
The above question is crucial since most PA policies contain a clause providing that, if the NII determines the rate of the insured’s disability resulting from an accident, such determination will also apply in respect of the PA policy.
Section 53 of the Insurance Law provides:
“The event insured against in accident insurance is an accident which occurs to the insured or to another....”
Based on the above section, the Supreme Court in L.C.A. 1395/00 Zafrir v. Ararat Insurance Co. Ltd. ruled that the date on which a medical expert determines the disability is a random date, having nothing to do with the insured event and its limitation period. The limitation period, therefore, starts from the date of the accident.
Recently two lower Courts dealt with this principle in judgements according to which the limitation period will begin from the date of the crystallisation of the permanent disability which is, in fact, the date of the insured event.
According to this Court ruling, the “insured event” in PA policies includes both the accident and the crystallisation of disability - one without the other is only part of the insured event and only after the occurrence of both, one may say that the
insured event took place.
The Courts ruled that this decision is not in contrast to the Supreme Court decision in Zafrir, since the Court in Zafrir declined the reliance on the determination of the permanent disability by the NII and not the date of crystallization of the disability which may not be the same date of the accident.
See: C.C. 120330/01 Rozenberg v. Migdal Insurance Co. Ltd. and C.C.1677/02 Shimon v. Sahar Israel Insurance Co. Ltd.
E. Limitation Period in Subrogation Claims
From which date does the 7 year limitation in subrogation claims commence? Is it the date of the insured event or the date of payment by the insurer?
The question was crucial in cases where the insurer disputed his obligation to pay the insured, and was forced to do so after prolonged litigation which lasted more than 7 years. At the end of the day, upon payment of the insurance benefits, the insurer might not be able to file a subrogation claim if the limitation period is counted from the day of the insured event.
In R.C.A. 9444/00 Bellina Maritime S.A. Monrovia and Others v. Menorah Insurance Co. the Supreme Court ruled that in subrogation claims the insurer “stands in the shoes” of its insured, and therefore, the limitation period starts from the date of the occurrence. The Court also determined that if the insured and the alleged tortfeasor agreed on a shorter limitation period (for example, within the framework of a bill of lading), the insurer is also bound by such an agreement and its subrogation claim will proscribe after the expiry of such shorter period - here - one year period.
F. Limitation Period in Other Insurance Disputes
(1) Claim by insurer for recovery of insurance benefits
In a recent case (L.C.A. 543/03 (Beer Sheva) Menorah Insurance Co. Ltd. v. Levy), the District Court addresses the issue of limitation period in disputes between insurer and insured, other than claims for insurance benefits.
In this case the insurer agreed to pay the insured insurance benefits following the theft of a car, but due to suspicions regarding the circumstances of the case, reserved its rights to demand a refund.
The insured gave a bank guarantee to the insurer. About a year after the theft, the insurer realised the guarantee after the police began investigating the insured as a potential suspect involved in the theft. The insured submitted a claim against the
insurer three years after realisation of the guarantee. The insurer contended that the limitation period of 3 years from the date of the theft applies in accordance with Section 31 of the Law, and therefore, the insured’s claim should be struck out.
The Court held that the agreement between the insurer and the insured in the scope of which the guarantee was given is a different agreement, separated from the insurance policy, and while the limitation period for claims for insurance benefits under the policy is three years according to Section 31 of the Law, separate agreements, though originating from the policy, are not part thereof and the limitation period in respect of claims resulting therefrom is seven years.
The Court held that the rationale for the three years limitation period - the need for insurance companies to keep their reserves for only three years - does not apply in this case, since the insurer had already paid the insured.
(2) Claim by insurer against the insured for collection of the deductible amount
The Magistrates Court of Tel Aviv ruled that the limitation period for submission of a claim by an insurer against an insured for collection of the deductible amount is three years.
An insurer indemnified a third party under a Third Party Liability Policy for damage caused to his car in an accident. Four years later, the insurer sued his insured for recoueyr of the amount of the deductible as agreed in the policy.
Judge Dr. Stoller determined that the amount of the deductible reflects a portion of insurance benefits which is borne by the Insured, therefore, the claim to recover it should be subject to the same limitation period as an insured’s claim for insurance benefits, i.e. 3 years from the insured event, as per Section 31 of the Insurance Law.
Therefore, the insurer’s claim was struck out due to the expiry of the limitation period.
Respectfully, we do not agree with the conclusion reached by Judge Dr. Stoller. The object of Section 31 of the Insurance Law was to shorten the period during which insurance companies should maintain their reserves, an object which is irrelevant to the duty of the insured to fulfil his obligation under the contract towards his insurer.
C.C. 714198/03 Shimshon Insurance Co. v. Nitzan Helena (Tel Aviv Magistrates Court 29.10.03)
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