C.C. 23416-03-18 The Phoenix vs. Infrassure Ltd. (Tel Aviv District Court)


The limitation period for an insurance claim of Insured vs. Insurer is three years from the date of the Insured event in property, and in liability Insurance the three years period will start to run from the date of the claim of the third party against the Insured. The Reinsurance contract is not subject to the Insurance Contract Law and hence the General Law of Limitation grants the primary Insurer 7 years, as applies to contracts in general.

The Tel Aviv District Court dealt with a claim filed by a primary Insurer, the Phoenix, against a Reinsurer, Infrassure, for insurance benefits the Phoenix had agreed to pay its Insured for damage caused to the Insured’s project works in February 2012. After notifying its Reinsurers, who appointed experts, negotiations with the original Insured commenced for settlement of the claim. The amount was agreed with the original Insured (NIS 57 million) and 7 out of 8 Reinsurers signed the agreement on 23.3.15. The eighth Reinsurer argued that the limitation period had elapsed as the three years’ time for the original Insured’s claim was over.

The Reinsurer’s Argument:

The Reinsurer argued that the 3 years’ time was incorporated in the policy and therefore, the claim should not be recognized. The Settlement Agreement which was signed, explicitly excluded this Reinsurer who argued that the Phoenix did not ask for its consent to extend the limitation period. This is a defence against the claim, which the Phoenix was not allowed to waive without the Reinsurer’s approval. This wavier deprives the Phoenix from reinsurance coverage. Based on these arguments, the Reinsurer requested the Court to strike out the claim in limine.

 The Phoenix Arguments:

The striking out of a claim in limine at this preliminary stage of the trial is an extreme remedy which is granted only where the applicant can show that even if all what is claimed in the Statement of Claim is proven, the claim lacks a cause of action.

There is a factual issue concerning the limitation plea which deserves hearing.

The Phoenix undertook its insurance obligations in reliance of the undertakings of the Reinsurers.

The contractual obligation of the Phoenix towards the Insured was constituted when the damage occurred. Where there is a liability of the Insurer towards the Insured, this simultaneously gives rise to the liability of the Reinsurer towards the Insurer.  The Phoenix argued that it was entitled to manage the insurance claim in the manner it decided to.

Where the negotiations for settlement extended beyond the limitation period, the Phoenix was entitled to agree to that without the approval of the Reinsurer. The reinsurance policy does not prevent the Phoenix from waiving a limitation plea towards the Insured.

The Court’s Decision

  1. The striking out of the claim is a remedy which should be applied very carefully in order not to harm the basic right of access to Courts. Therefore, where the issue of limitation period requires factual findings, hence it is impossible to determine it at this preliminary stage. In light of this principle the Court decided to dismiss the motion at this stage.

However, the Court analyzes further the issue of limitation period and its basis.

  1. Although an insurance claim has a shorter period of 3 years, however this period may be extended in view of the power gap between Insurer and Insured. A proper judicial policy needs to encourage Insurers to act in the best interests of the Insureds including in respect of the limitation period. On this background, the Court favors the situation whereby the parties to an insurance policy negotiate for settlement and carry on with it although the limitation period has elapsed.

It is impliedly agreed that if the negotiations fail this will not prevent bringing the dispute for the determination in Court. In addition, the Court precedents have imposed on Insurers obligations stemming from the principle of good faith which may lead to an insurance liability also beyond the limitation period especially where negotiations were held near to the lapse of limitation period.

  1. In such a case, the Insurer should clarify to the Insured the risk of prescription of the claim. Furthermore, the circular of the Commissioner of Insurance of 2011 provided that where the Insurer did not warn the Insured of the limitation period, this may estop the insurer from arguing time bar.

This situation is more complicated where the Insurer has also contracted with Reinsurers. Indeed, the provision of the Insurance Contract Law do not apply to Reinsurance contracts, as the power gaps which characterize the primary Insurance contract are not present in these relationships, as the Reinsurance contracts are concluded between sophisticated Insurers with knowledge of how to protect their interests.

  1. The question is whether the Reinsurer that agreed to reinsure this specific insurance (facultative reinsurance) may argue that it is entitled to expect that the time for claims will be three years and that the Phoenix would not be able to extend the period in view of its negotiations with the insured.

This is an important issue, and the public interest may lead to an interpretation rule according to which also where there is reinsurance, the primary insurer will be entitled to give the insured coverage beyond the legal limitation period unless it was forbidden to do so in the scope of the relationship with the Reinsurers.

  1. As to the Reinsurers, they were able to limit the Reinsured’s power to extend the period, which they failed to do. Secondly, the timely notification of the insured event within the limitation period to the Reinsurers granted them time to investigate the circumstances, so it is not a surprise for them and thirdly, accepting the position of the Reinsurer would lead to causing the insured to file the court claim following which a Third Party Proceeding against the Reinsurer will be brought as well. This will complicate matters and add litigation where it is unnecessary.


  1. Besides the legal interpretation there is a question concerning the Reinsurer’s behavior which needs to be examined in light of its duty of good faith. This is the only Reinsurer which did not sign the agreement and this is a factual issue which needs to be heard in court.


  1. The Reinsurer refers to a provision in the reinsurance agreement (security details) according to which “terms …changes…to be agreed by Infrassure”. The court states the interpretations suggested by the Reinsurer is that any change, including the period of limitation, requires their prior approval. However, this may also be interpreted as requiring approval for a change of the policy itself and not as limiting the Phoenix power to waive a prescription plea, a waiver which does not change the policy. At this early stage the court will not choose the preferred interpretation, as there are still factual matters which should be decided.


  1. Another provision referred to by the Reinsurer is the “claims control clause” – arguing that its approval was required in order to confirm the insurance claim. The court regards this issue as requiring factual examination whether the Reinsurer was granted the opportunity to check the events and chose not to do so? Why? What did it respond at real time to the body which handled the matter on behalf of other Reinsurers? All these are relevant for deciding on the question whether it acted in good faith.


In conclusion, all these issues will be dealt with in the proceedings and hence the motion to strike out the claim in limine is dismissed.