The question which was recently raised in the Haifa Magistrates Court in the case of CC 6365-08-15 Harel Insurance Co. v. Magid  was:  Whether the Insured is obliged to pay the deductible according to the Policy, even if the claim filed against him was declined?

 

Background

The Defendant (hereinafter: the Insured), was insured by Plaintiff – Harel Insurance Co. Ltd., (hereinafter: the Plaintiff  and/or Harel), under a Public Liability Insurance Policy (hereinafter: the Policy).

A certain Third Party filed a claim against the Insured and Harel. Harel bore its own legal expenses and those of the Insured, for handling the defence on behalf of both of them.

Eventually the claim against the Insured and Harel was declined.  Plaintiff in the Third Party claim was obligated to pay the Insured’s and Harel’s expenses in the amount of NIS 2,300 (which is a fraction of the realistic expenses borne by Harel for handling the defence). Harel demanded that the Insured will pay the difference between the deductible amount to NIS 2,300. The Insured refused and Harel filed a claim against him in the Haifa Magistrates Court.

 

The Parties’ Arguments

Harel’s allegation

Harel alleged that according to the relevant stipulation in the Public Liability Policy, the deductible applies also in respect of expenses incurred by the insurer in the defence of the Insured. Therefore, Harel is entitled to the Insured’s participation in the legal expenses borne by it.

 

The Insured’s allegation

The Insured alleged that the deductible does not apply since in order to collect the deductible as a condition for its collection, the Insurer must pay insurance benefits. Once a third party claim is declined, the Insured has no duty to pay the deductible.

In addition, the Insured alleged that Harel did not act in good faith by not demanding from the court to reimburse it for the full expenses borne by it.

 

The Court’s Decision

According to the Policy wording, the Insured must bear the deductible, even if the amount paid by the Insurer related solely to defence costs.

It is the insured’s obligation to minimize his damage including the obligation to defend a claim filed against him. Such obligation includes the requirement to bear the legal expenses (according to the acceptable practice). Once the Insured approached the Insurer and requested that it will take upon itself the defence i.e. he triggered the policy, the Insured has the duty to pay its deductible.

The Court determined that the fact that at the end of the day Harel was not obliged to compensate the claimant has no relevance: the legal position in this respect is the same – if the claim is accepted or declined.

The policy’s conditions are clear: the deductible applies also in respect of expenses incurred by the insurer for handling the defence (including expert’s expenses, loss adjuster’s fees, lawyer’s fees, etc.).

In addition, the Court determined that the Insured’s allegation of lack of good faith on the part of the Insurer is general and vague. The court did not accept the said allegations especially as the Insured admitted that the defence handled on his behalf, ended to his satisfaction.

At the date of writing this article, no appeal has yet been filed in respect of the above mentioned decision.