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It often happens that two or more insurance policies apply to the same interest in diamonds which are conveyed from one diamonteer to another. When these diamonds are lost in a hold-up or due to other insured events, an issue of double insurance may arise.
In respect of Double Insurance, the Israeli Insurance Contract Law- 1981 provides as follows:
Section 59:
(1) Where any property is insured against the same risk with more than one insurer for overlapping periods, the insured shall notify the fact to the insurers in writing, immediately after the double insurance is effected or after he becomes aware of it.
(2) [Not relevant]
(3) In double insurance, insurers are jointly and severally liable towards the insured, in respect of the overlapping amount of insurance.
(4) The insurers will bear the burden of obligation in accordance with the ratio of the amounts of insurance.
Since this Law does not apply to insurance of diamonds, Section 59 does not apply directly when insurance claims on diamonds are involved. However the Courts may apply the principles set out in the said clause also to double insurance situations in relation to diamonds, since it is based upon fundamental principles such as equity, equality between several debtors, justice, and avoidance of unjust enrichment.
By applying these principles the Court shall divide liability, in any case of double insurance, between the various insurers in accordance with the ratio of the insurance amounts in the various policies, and in case one insurer indemnifies the insured for the full loss, this insurer is entitled to contribution from the other insurer for the relative amount.
In a relatively new Supreme Court judgment: R.C.A 3948/97, 5449/97 Migdal Insurance Co. Ltd. v. Menorah Insurance Co. Ltd. 55(3) PDI,769 the Supreme Court held that double insurance exists whenever the same property is covered against the same risk by different insurers during overlapping periods of insurance, and not only in cases where the
insurance was purchased by the same insured, from the various insurers.
This precedent did not deal with Jewellers' Block policy or insurance of diamonds, but rather with other property (textile yarns), which was insured by the owner thereof as well as by the contractor (a dyeing plant where the yarns had been given for processing).
However, the Supreme Court based its decision on the general principles of unjust enrichment and equality, and therefore, it may be expected that these basic principles would be applied by the Court also in insurance claims relating to Jewellers Block Policies.
In another recent case, C.C. (Tel Aviv) 127152/00 Hadar Insurance Co. Inc. v. Ellen Or Jewellers Inc. & Lloyd's Underwriters, the Court decided that double insurance exists where a trustee held jewellery, which was insured by the insurers of both the owner and the trustee. The Court ruled that according to the Insurance Contract Law, the insurers will be liable toward the insured, jointly and severally, in respect of the coincident insurance amount, even though the policies were purchased separately by the owner of the jewellery and by the trustee.
We should note that the Ellen Or case related to insurance of jewellery (and not diamonds) and therefore the Insurance Contract Law does apply.
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