Recent conflicting decisions were given, one by the Haifa District Court and the other by the Tel Aviv District Court, on the question whether a foreign Insurer is entitled to file a subrogation claim through its Insured after paying the Insured insurance benefits.
In these two instances the alleged tortfeasor requested from the Court to strike out the foreign Insurer’s claim arguing that the latter has no right to file the claim in Israel being a non-admitted Insurer. The Tel Aviv Court (the Teva Claim) accepted the motion and dismissed the claim whereas the Haifa Court (Aras claim) declined the motion.
In the background of this issue stands the judgement in the case of VIG. In that case (C.A. 8044/15 VIG, Vienna Insurance Group V. the Sharon Drainage Authority 23/11/17) the Tel Aviv District Court determined that a foreign Insurer which has no license to carry out insurance business in Israel, is not entitled to file a subrogation claim in the Israeli Court although it had paid insurance benefits to its Insured.
The reasoning of the judgement is that a subrogation claim is granted to an Insurer by virtue of Article 62(a) of the Insurance Contract Law which provides the right of subrogation to” an Insurer”. The term “Insurer” was not defined in the Insurance Contract Law however, it was defined in the Control over Financial Services Law (Insurance) as being an entity which is admitted to engage in insurance business in Israel.
The Court concluded that the definition of the Control Law should apply to the Insurance Contract Law and hence, only an admitted Insurer is entitled to file a subrogation claim as provided by Article 62(a). The District Court also indicated that the prohibition applies to the foreign Insurer however the claim against the tortfeasor may be filed in the name of the Insured who will be considered as a trustee for the benefit of the foreign Insurer for the money which may be recovered from the defendant.
The Supreme Court was requested by VIG to overturn the District’s Court judgement and approve the filing of the claim by the foreign Insurer. The Supreme Court denied the appeal and confirmed the judgement.
The Teva Claim. Tel Aviv 24th November 2019
(C.C. 67134-03-18 Teva Pharmaceuticals Ltd. v. T&M Goshen Security Services Ltd.)
In this case, Teva filed a claim on behalf of its Insurer, alleging that the defendant company Goshen, was responsible for a malfunction of a freezer for drugs which caused the loss and heavy damage to drugs amounting to over $ 5 million. Its insurer, NUFIC, a foreign insurance company paid Teva insurance benefits, and the current claim against Goshen, is aimed at recovering the paid amounts.
In addition, Teva was a co-plaintiff claiming its unpaid deductible.
The defendants, Goshen and Ayalon Insurance Co., which insured Goshen’s Professional Liability, requested the court to strike out the part of the claim which related to the claim of NUFIC, based on the judgement in the VIG case.
NUFIC argued that the judge of the VIG case in the District Court indicated that the Insured may file a claim against the tortfeasor, and the foreign Insurer will be entitled to the monies awarded in the claim. In other words, the foreign Insurer will have the right to recover from the tortfeasor the monies paid as benefits, through the claim of the Insured.
However, Judge Ilani, in the Teva case, stated that the Supreme Court in the VIG appeal determined that the foreign Insurer has no right for subrogation and this is a binding precedent which binds all lower instances. However, the reference of the District Court to the possibility of filing the claim in the name of the Insured, was only an obiter dictum (a side remark) which was not confirmed by the Supreme Court and therefore, has no binding effect.
In view of the above, the judge accepted the position of the defendants and struck out the insurer’s part of the claim. According to this decision, Teva received insurance benefits for the property damage and losses it sustained and therefore, cannot be indemnified again for this loss, hence Teva has no cause of action and its claim in the name of NUFIC, the foreign Insurer, was struck out.
The Aras Claim. Haifa ,29th November, 2019
C.C. (Haifa )35583-11-18 ARAS Romorkor Hizmetleri Sanayi v. the Vessel Chyrospigi
In this case, damage was caused to a barge by an oil tanker in the Haifa Bay Port and a Foreign Insurer paid insurance benefits to the owners of the barge. The owners filed a claim against the tanker and against the Haifa Bay Port and the insurance company joined as co-plaintiff.
Also here, a motion to strike out the claim was filed, arguing that according to the decision of VIG a non-admitted Insurer is not entitled to file a subrogation claim.
The Haifa Court, Judge Sokol, reviewed the basis of the subrogation right against a tortfeasor being founded on considerations of justice and avoidance of unjust enrichment. The court opined that there is no justification to discharge a wrongdoer from making good for damage caused thereby. The triangle of tortfeasor, insurer and victim is based on these principles of justice and judicial policy in view of which the term “insurer” in the Insurance Contract Law should not necessarily be identical to the definition of the Control Law. According to this opinion, in should be recognized that anyone who paid insurance benefits whether it holds an Israeli License for insurance or not, will enjoy the right of subrogation.
The Haifa Court emphasized that if it is established that the port is liable for the damage, and yet be discharged from indemnifying the Plaintiffs, this will be an absurdity.
In this specific case the insurance in question is Marine insurance which is exempted from the Control Law, and also not subject to the Insurance Contract Law except for specific articles, one of which is Article 62. In view of that, the right of subrogation under Article 62, applies to Marine Insurance Contracts.
The Court concluded that: “It is obvious that the legislator acknowledged that a foreign Marine Insurer which does not hold a license according to the Control Law, may benefit from the subrogation right according to Article 62 of the Insurance Contract Law therefore a long line of decisions and judgements provide that a Marine Foreign Insurance has a subrogation claim in Israel ” Hence, the Court declined the motion to strike out the claim.
It seems that the Supreme Court will have to deal with this issue again in the appeal which is expected to be filed. It is necessary to clarify this issue or even reach a conclusion in the spirit of the Haifa Court concerning the inappropriate results of limiting the subrogation right of the Foreign Insurer .It is a fundamental principle that the tortfeasor should not unjustifiably escape liability.