1.     As you may recall, the Supreme Court approved in November 2017, the District Court’s decision in the matter of VIG VIENNA Insurance Group v. The Drainage Authority, (C.A. 8044/15) that a foreign insurer which is not licensed under the provisions of the Supervision Law, is not entitled to file a subrogation claim in Israel.

2.     The reasoning which was upheld by the Supreme Court was that Article 62 of the Insurance Contract Law entitles an “Insurer” to file a subrogation claim against the wrongdoer who caused the damage. In the absence of a definition of the term “insurer” in that Law, the Court applied the definition of this term in the Supervision Law which requires that an Insurer be admitted to engage in insurance business in Israel.  Accordingly, being without a license for doing insurance business in Israel, the foreign Insurer is also outside the ambit of Article 62 of the Insurance Contract Law, and therefore, not entitled to file a subrogation claim in Israel.

3.     The court accepted the argument that the Supervision Law’s object is protecting the insured and therefore, a foreign insurer which is not subject to the Israeli regulations should not be entitled to the rights available to admitted insurers.

4.     It is our opinion that the result of this judgement is unjustifiable and its reasoning is irrelevant to the issue from either of the perspectives:  protection of the insured and the general context of the subrogation rights of Insurers.

A.   Granting the foreign Insurer the right of subrogation cannot harm the Insured

5.     At the subrogation stage, the Insurer had already indemnified the Insured and seeks recovery from the wrongdoer for the damage the latter caused to the Insured. At this stage the interest of the Insured in receiving insurance benefits has been completed and is no longer in question. In fact, blocking the claim against the wrongdoer serves the interests of the wrongdoer only and has no positive impact on the insured.

6.     Indeed, the object of protecting the Insured is in the basis of the Supervision Law, however allowing a foreign insurer to file subrogation claims does not harm this object. The notion of insurance is releasing the Insured from the need to chase after a wrongdoer and leave it to the Insurer to first indemnify the insured and then, recover from the party responsible for the loss or damage. There is no legal nor moral justification in giving the wrongdoer the benefit of being immune against the foreign insurer recourse.


B.    The VIG precedent may cause delays and complications of payment of insurance benefits to the Insured


7.     An insured who sustained damage is entitled to indemnification from either the wrongdoer or the insurer. The VIG judgement does not deny the right of the insured against the wrongdoer but rather determined that  where a foreign insurer fulfilled its obligation under the Policy, then the wrongdoer is exempt from any liability both towards the injured party and towards the insurer .. This may create an incentive to the Insurer not to pay Insurance benefits until a court claim is filed against the Insurer and the wrongdoer together.  In such a case the wrongdoer may be found liable for the damage in whole or in part, which would decrease the liability of the Insurer.


Hence, instead of protecting the insured, the VIG judgement may encourage behaviour which harms the insured’s interest. Also, where the insurer admits liability the VIG judgement would encourage arrangements with the Insured which would enable the proceedings against the wrongdoer, e.g. by granting a loan to the Insured which will be repaid only if the insured’s claim against the wrongdoer is successful.


All these unnecessary potential complications are not in line with the protection of the insureds, at the cost of (unintentionally) protecting the party that caused the damage.


C.   The Foreign Insurers are Essential for the Israeli Market


8.     Large and complicated risks are insured by the global insurance markets and the umbrella of these insurances is vital for the performance of great infrastructure projects, or for specific risks such as space etc. which are covered by foreign insurers that specialize in such insurances.


9.     For example, our firm represents foreign insurers in a claim which is currently being dealt with by the District Court C.C. 63630-01-18 the Israel Aviation Industry vs. Pembroke and Others  in relation to the destruction of a satellite of the Aviation Industry during a pre-launch test which failed. Such an insurance can be made only by global insurers and the existence of the Israeli space industry is dependent thereupon. It is not perceivable that such insurers who are sued in Israel (meanwhile their share was settled) would not be able to sue in Israel a party responsible for the damage.


Which interest is protected by the denial of the recourse claim of such  insurers?


10. During the time from the date of the VIG judgement, contradicting judgements were given in the lower courts which led to even more extreme results.


For example, in the matter of Teva Pharmaceutical Industries vs. T&M Roshem Security Services Ltd. (24 November 2019) the Tel-Aviv District Court decided that once the insurance claim was paid, the wrongdoer may not be sued by either the insured party or the foreign insurer, as the idea of filing the claim in the name of the insured was only an ” (non-binding side comment) in the VIG matter. This result is unjustifiable and the Supreme Court needs to reconsider its judgment also in view of the Teva case result.


In the same week (29th November 2019) the Haifa Court dealt with the matter of Aras Romorkor Hizmetleri Sanayi Ve Ticaret Ltd. Vs. Chrysopigi C.C. 35583-11-18 where foreign marine insurers filed a subrogation claim and the court denied the motion to strike out the claim based on the VIG judgement. The Court held that as far as marine insurance is concerned, the Insurance Contract Law specifically excluded this type of insurance from the scope of the law (except for article 62) and hence, the foreign insurer’s right of subrogation is valid.


As a side comment, the judge also opined that the interpretation adopted in the VIG judgement was not the only one possible. The definition of a term in one law can differ from its definition in another, according to the specific situation in question.


“no consumer protective object justifies enrichment of the injured party to enjoy double compensation or enrichment of the wrongdoer that will be exempt from any payment for damage which was indemnified by the insurer. … one may conclude that in the interpretation of the term insurer for the purpose of the subrogation provision under article 62 in the Insurance Contract Law, a different interpretation is required. Accordingly, it is possible to recognize that anybody who paid insurance benefits for an insured event either while holding an Israeli license or not, may enjoy the subrogation right which is granted to an Insurer”. (s.18 of the Decision).


This decision is now under an appeal in the Supreme Court.


11.  We would add that when interpreting the meaning of the term “insurer” in article 62 , the Court should not ignore article 72 in the Insurance Contract Law that explicitly provides that reinsurance contract is not subject to this law except for article 62.This shows that  the legislator’s intention was that a reinsurer being a foreign  insurer, which is also not subject to the supervision law, may yet file a subrogation claim.


Hence, being a foreign insurer, which does not meet the definition of the Supervision Law is not necessarily blocked from filing a subrogation claim in Israel.




As can be seen from the above, the Supreme Court is expected to readdress the VIG judgement in the near future. In view of the problematic outcome of the VIG judgement we hope the Supreme Court will take this opportunity to reconsider its position and to set a new, and a fairer precedent.