According to Clause 62 of the Insurance Contract Law 1981, once an insurer has compensated the insured, it is entitled to an independent right of subrogation against the tortfeasor. The question arises of whether the insurer's right to subrogate still exists where the insured has claimed the full amount of the loss from the tortfeasor while concealing that he or she has been compensated for part of its losses by the insurer.
On March 23 2011 the insured's apartment was burgled and some of its contents were stolen. The insured filed a complaint with the police and shortly thereafter three suspects were arrested. In April 2011 an indictment was filed against the burglars.
The insured approached Migdal Insurance Co Ltd, which insured the contents of the apartment. Migdal paid the insured IS12,409. On August 18 2011 – three months after receipt of compensation – the insured filed a civil claim against the three perpetrators for IS600,321, alleging that that was the amount of his loss. The statement of claim did not mention the compensation received from Migdal.
In October 2011 two of the perpetrators were convicted. The third perpetrator was convicted in November 2011. As part of the criminal judgment, each perpetrator was required to compensate the insured in the amount of IS100,000.
On July 7 2013 the court handed down its decision in the insured's claim and ordered the three perpetrators to compensate the insured, jointly and severally, in the amount of IS177,427 (plus interest and legal fees), disregarding the amount already awarded by the criminal court.
On June 7 2013 Migdal filed a subrogation claim to the Haifa Magistrates' Court against the three convicted perpetrators, demanding subrogation of the amount it had paid to the insured.
The court discussion related to the relationship between the tortfeasor and the insurer in case of subrogation.
According to Clause 62(b), an insurer is not entitled to exercise its right for subrogation in a manner which will infringe the insured's right to seek compensation from a third party for its losses over the amount paid by the insurer.
The Haifa Magistrates' Court analysed the influence of proceedings which the insured conducts against the tortfeasors on the insurer's subrogation right.
Based on a Supreme Court precedent in Lipshitz v Levi, the court determined that the insurer's subrogation right is not revoked, despite the fact that the tortfeasor has paid the insured the full amount of the loss.(1) Tortfeasors have the right to sue an insured that has withheld information about compensation received from the insurer.
The court differentiated between situations in which:
- the insured's claim against the tortfeasor was instigated before the insurer had paid the insurance benefit. In that case the insurer has no right of subrogation and can withhold payment to the insured; and
- the insured's legal proceedings against the tortfeasor were initiated after the insurer had paid the insurance benefits. In this case, the insurer has the right to subrogate the tortfeasor and is not influenced by proceedings between the insured and the tortfeasor (ie, under no circumstances is the insurer's right of subrogation revoked).
This decision relied on an additional Supreme Court precedent in Menora Insurance Co Ltd v Jerusalem Candles Ilum, in which the court emphasised that the insurer's subrogation right can be revoked only within the framework of the Insurance Contract Law or within the framework of an agreement between the insurer and the insured.(2)
The insurer's subrogation right is independent and can be exercised even where the tortfeasor must pay twice.
For further information on this topic please contact Ronit Warshai at Levitan, Sharon & Co by telephone (+972 3 688 6768) or email (firstname.lastname@example.org). The Levitan, Sharon & Co website may be accessed at www.levitansharon.co.il.
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