The Tel Aviv District Court acknowledged jurisdiction over a claim filed by an Israeli insurer against a foreign reinsurer that had refused to participate in a settlement agreed by all of the other reinsurers. The court ordered a statement of claim to be served on the reinsurer.

Facts

The Phoenix Insurance Company Ltd (the insurer) issued Shafir Engineering Ltd (the assured) an insurance policy for risks involved in a road construction project. The policy was reinsured in a facultative reinsurance by several reinsurers.

Infrassure Ltd is a company registered in Switzerland, which was one of the eight reinsurers reinsuring the policy (the defendant).

The assured filed a claim for reimbursement under the policy following which the assured, the insurer and the other seven reinsurers entered into a settlement agreement and paid their relative shares of the insurance benefits. The defendant denied liability and refused to pay its share (12%) of the insurance benefits. Following the settlement, the insurer filed a claim against the defendant for payment of its unpaid share in the settlement and requested that the court allow it to serve the claim outside of Israel.

The Israeli court approved the motion, hearing only one side. The defendant filed a motion requesting cancellation of the leave to serve the claim.

Decision

The court noted that there was no dispute that the reinsurers' agreement included an exclusive jurisdiction clause referring to the Israeli courts. Further, there was no dispute that the Israeli forum was the most appropriate forum for the claim.

The defendant's argument for absence of cause of action was rejected. The court decided that the settlement agreement did not prevent the insurer from filing the claim against the defendant and prima facie, the claim presented "serious arguments" against the defendant which were sufficient at this preliminary stage.

The defendant argued that the insurers' claim was time-barred since it was filed after the special prescription period of three years stipulated in the Insurance Contract Law 1981.

The defendant alleged that the said shortened prescription period also applied to the relations between the insurer and the reinsurers.

The court ruled that, according to Article 72 of the Insurance Contract Law, the law does not apply to reinsurance (except for Article 62 which was irrelevant to the dispute). Therefore, the defendant could not rely on the special prescription period provided by the Insurance Contract Law. The relevant law in this case was the prescription law, according to which the regular prescription period is seven years.

Accordingly, the permission to serve the claim to the defendant outside of Israel was not cancelled and the defendants were ordered to file a statement of defence with the Israeli court.

For further information on this topic please contact Aviv Klepner at Levitan, Sharon & Co by telephone (+972 3 688 6768) or email (aviv@levitansharon.co.il). The Levitan, Sharon & Co website may be accessed at www.levitansharon.co.il.

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