The Israeli non-life Insurance Market uses an additional document to the Insurance Policy issued to the Insured. This document is called Insurance Policy Confirmation (hereinafter: I.P.C.) which is issued at the request of the Insured. The I.P.C. is usually requested by Third Parties which enter into commercial contract with the Insured. For instance: a landowner requires an I.P.C. from its tenant. The entrepreneur of a project requires an I.P.C. from the various contractors and subcontractors.
The question of the correlation between I.P.C. and the Policy issued to the Insured was hardly tested in Court.
In a recent precedent, the Supreme Court determines that such I.P.C. should be examined as an inherent part of the Policy extending the coverage afforded by a separate document.
In the case of C.A. 7436/13 Menora Insurance Co. Ltd. v. John Doe & Others, Insurer’s alleged arguments as follows:
- The I.P.C. was issued on behalf of the owner of the property and not on behalf of the lessee. Only the lessee was found liable for the occurrence and for the damage, therefore the I.P.C. does not apply.
- The I.P.C. was added to the Third Party liability Policy in the former insurance period. When issued it intended to cover the liability of contractors who were retained by the lessee to carry out contract works. The I.P.C. was not extended to cover an additional insurance period, and therefore it had expired before the accident.
The Court rejected Insurer’s allegation and ruled that the I.P.C. extended the insurance cover for any injured Third Party and is valid also during the additional insurance period.
On 25th November 2004, Mr. Vizman (an air-conditioning technician) passed away as a result of suffering an electric shock whilst repairing the air-conditioner in a shop located in Haifa. The owner of the property – “Beit Hakranot” – leased the shop to Mrs. Dar, who in turn sub-leased the shop to a company named Atraktzia in the City (2000) Ltd. (hereinafter: Atrakzia).
According to the claim, the deceased was retained by Atrakzia to repair and replace the air-conditioner installed in the shop ceiling, above the fitting rooms. The District Court determined that the deceased was electrocuted, due to one of the fitting room’s metal bars touching a live electric wire, whereas the light fixtures in the fitting rooms were not grounded. Menora Insurance Co. Ltd. (hereinafter: the Insurer) insured Atrakzia under a Third Party Liability Policy and in addition issued in the preceding insurance period, to the owner of the property – Beit Hakranot – an I.P.C. extending the cover to include Third Party liability cover for contractors and their employees.
The Insurer argued that the Policy issued to Atrakzia in the relevant period excluded accidents to contractors retained to perform contract works on the property. A similar exclusion existed in the previous insurance year, however, in the previous year, the Insurer agreed, at the request of the property owner to issue an I.P.C. which extended the Policy cover to contractors and their employees. The Insurer argued that the I.P.C. was relevant only during the first period of insurance and cannot apply to the second period of insurance during which the above accident occurred. The District Court denied the Insurer’s argument and determined that if the Insurer intended to terminate the extended coverage, it should have provided an explicit notice to Atrakzia and to Beit Hakranot. However, as the Policy was renewed without such notice, de facto, the Insurer renewed the I.P.C. as well. In light of the above, the Court ruled that the Insurer should compensate Plaintiffs according to the Policy.
The Insurer filed an appeal on the above judgment claiming similar arguments used in the District Court.
Discussion and Decision:
On 18th February 2016 the Supreme Court handed down a judgment denying the Civil Appeal filed by the Insurer ruling as follows:
- The owner of the property shall not be held liable for the risks in the property created by the holder of the property, without the owner knowing and/or being aware of these hazards.
- The property was under the control and supervision of the lessee Mrs. Dar. As the deceased passed away due to permanent defects in the property which could have been revealed in a reasonable manner, Mrs. Dar should bear partial liability for the occurrence.
- Regarding the two arguments presented by Insurers: the Supreme Court stated as follows:
I.P.C. is not a separate document which establishes separate insurance liability and cannot be disconnected from the Policy issued to Atrkzia. The I.P.C. confirms the existence of insurance and it may include extension of cover to the Policy. In this case it extended the cover to “Beit Hakranot” as a direct insured and provided cover for contractors and their employees. Such extension is valid towards any Third Party, regardless to whom the I.P.C. was addressed.
With reference to the second argument raised by Insurers, the Supreme Court repeated the ruling of the District Court. It stated that as Insurers failed to provide a notice regarding the termination date of the I.P.C. thus when the Policy was renewed for an additional period the terms and the extension provided in the first policy period continue to apply.
In light of the above, the Supreme Court held that Insurers are liable for the occurrence and should compensate Plaintiffs for the liability which was attributed to Atrakzia.