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Insurance Broker
The Insurance Business Control Law - 1981 ('the Control Law'), provides that the insurance broker is the one who acts as the intermediary between the insured and the insurer. The Control Law does not distinguish between types of brokers in the insurance market, as it is customary in Europe and U.S.A. (e.g. insurance broker/insurance agent/insurance consultant).
Upon enactment of the Control Law, the members of the Israeli Parliament as well as other experts involved in this legislation, became aware of the difference between the types of insurance brokers but they decided to ignore this complex matter.
Articles 33 to 35 to the Insurance Contract Law -1981 ('the Contract Law') specifies the various circumstances in which the insurance broker implements the services of an agent - either of the insurer or of the insured. The Agency Law -5725 -1965 applies to such agency.
Thus, for the purposes of negotiations towards the conclusion of the insurance contract and in respect of the conclusion of an insurance contract, the insurance broker shall be regarded as the insurer's agent unless he acts as the insured's representative upon his specific written request, but only regarding the negotiations. For the purpose of duty of disclosure at the conclusion of an insurance contract, the insurance broker's knowledge of the true facts concerning a material point, shall be regarded as the insurer's knowledge thereof.
Recently the Tel Aviv District Court in CC 2668/99 Menorah Insurance Co. Ltd. v. Daniel Borovsky ruled that even if the insured appointed his insurance broker in writing to represent him during the negotiations towards the drawing up of an insurance contract, during the preamble stage of the negotiations, he will be regarded differently. i.e. during the stage when such broker presents the different possibilities of the insurance programmes, he will be regarded as the insurers' agent.
Only in the second stage, after the insured has given his written consent that the broker will represent him (usually this consent is inserted in the proposal form), the broker, becomes the insured's agent. All previous acts on the part of the broker which related to the preamble stage are regarded as the acts of the insurer.
As far as concerns receipt of the insurance premium and the insured's notice, the broker shall be regarded as the insurer's agent unless the insurer has notified the insured in writing that the premium shall not be paid to such broker and the notice shall be sent to another address.
In accordance with the stipulations of the Insurance Contract Law, the provisions in Articles 33 up to 35 cannot be stipulated against.
According to the Contract Law, the Israeli broker's status is different from the broker's status in Europe and the USA. In those countries the insurance broker is, in most cases, the insured's agent even if he receives the commission from the insurer. This creates a situation of anomaly, i.e. on one hand, the UK broker, who acts as an intermediary between an Israeli insured and a UK insurer, is according to the English Law the insured's agent, while the Israeli broker who appointed the UK broker is considered in Israel as the agent of the Insurer. Such insurer on his part, will regard the Israeli broker as the agent of the Insured.
The Status of an Insurance Consultant
The question of what is the legal status of the insurance consultant has gained importance in Israel. During the last few years, medium and large insureds prefer to engage the services of an insurance consultant, whose loyalty is to the Insured's side, instead of an insurance broker. The Insurance Contract Law does not apply to the insurance consultant since his role is different in most cases from that of an insurance broker.
However, due to the Court's tendency to analyse the substance of each transaction and its background, regardless of the definitions used by the parties, in certain cases the insurance consultant may be regarded as a broker. Thus, if the insurance consultant caused the parties to conclude the insurance transaction or taking an active involvement in the negotiations, the Court may decide that he is an insurance broker and the insurance laws shall apply to him accordingly.
To sum up, the unique legal status of the insurance broker imposes more obligations upon the Israeli insurers, compared with the foreign insurers, whereby a situation may result in interesting legal issues in the event of a conflict of laws involving all the parties to international insurance transaction.
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