The Israeli non-life insurance market uses a document called an insurance policy confirmation, which is issued additionally to the insurance policy at the request of the insured. An insurance policy confirmation is also often requested by third parties that enter into a commercial contract with the insured (eg, a landowner that requires an insurance policy confirmation from its tenant). The developer of a project may require an insurance policy confirmation from the various contractors and subcontractors used.
The question of the correlation between an insurance policy confirmation and a policy issued to the insured has rarely been tested in court. However, in a recent case the Supreme Court determined that an insurance policy confirmation should be examined as an inherent part of the policy, which extends the coverage afforded by a separate document.
In Menora Insurance Co Ltd v John Doe (CA 7436/13), the insurer argued the following:
- The insurance policy confirmation 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 accident and damage caused, therefore the insurance policy confirmation did not apply.
- The insurance policy confirmation was added to the third-party liability policy in the previous insurance period. When issued, it was intended to cover the liability of contractors that were retained by the lessee to carry out contract work. The insurance policy confirmation was not extended to cover an additional insurance period and had therefore expired before the accident happened.
The court rejected the insurer's argument and ruled that the insurance policy confirmation extended the insurance cover for any injured third party and was also valid during the additional insurance period.
On November 25 2004 Mr Vizman (an air-conditioning technician) died after suffering an electric shock while repairing the air-conditioner in a shop located in Haifa. The owner of the property – Beit Hakranot – let the shop to a Mrs Dar, who in turn sub-let it to a company called Atrakzia in the City (2000) Ltd.
According to the claim, Vizman was engaged by Atrakzia to repair and replace the air-conditioner installed in the shop ceiling above the fitting rooms. The district court determined that he had been electrocuted because one of the fitting room's metal bars was touching a live electric wire and the light fixtures in the fitting rooms were not grounded. Menora Insurance Co Ltd had insured Atrakzia under a third-party liability policy and issued an insurance policy confirmation in the preceding insurance period to Beit Hakranot, which extended cover to include third-party liability cover for contractors and their employees.
Menora argued that the policy issued to Atrakzia in the relevant period excluded accidents to contractors retained to perform contract work on the property. A similar exclusion existed in the previous insurance year; however, in the previous year the insurer had agreed – at the request of the property owner – to issue an insurance policy confirmation that extended the policy cover to contractors and their employees. Menora argued that the insurance policy confirmation was relevant only during the first policy period and did not apply to the second policy period, during which the accident occurred. The district court rejected Menora's argument and determined that if the insurer had intended to terminate the extended coverage it should have provided an explicit notice to Atrakzia and Beit Hakranot. However, as the policy was renewed without such notice, Menora also renewed the insurance policy confirmation. In light of the above, the court ruled that Menora should compensate the plaintiffs according to the policy.
Menora filed an appeal claiming similar arguments used in the district court case.
On February 18 2016 the Supreme Court handed down a judgment denying Menora's civil appeal ruling as follows:
- The owner of the property would 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. As the deceased died due to permanent defects in the property which could have been discovered in a reasonable manner, the lessee should bear partial liability for the accident.
- Regarding the two arguments that Menora presented, the Supreme Court stated as follows:
- An insurance policy confirmation is not a separate document which establishes separate insurance liability and therefore in this case could not be disconnected from the policy issued to Atrakzia. An insurance policy confirmation confirms the existence of insurance and 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 an extension is valid towards any third party, regardless to whom the insurance policy confirmation was addressed; and
- With reference to the second argument that Menora raised, the Supreme Court repeated the district court ruling. It stated that since Menora had failed to provide notice regarding the termination date of the insurance policy confirmation, when the policy was renewed for an additional period, the terms and the extension provided in the first policy period continued to apply.
The Supreme Court held that Menora was liable for the accident and should compensate the plaintiffs for the liability that was attributed to Atrakzia.
For further information on this topic please contact Karin Barel at Levitan, Sharon & Co by telephone (+972 3 688 6768) or email ([email protected]). The Levitan, Sharon & Co website may be accessed at www.levitansharon.co.il.