Attorney Gil Nadel, Gilad Paz
Many times, the court will be presented with a subrogation in which an insurance company that has given compensation to a policy holder for cargo damages takes his place and sues the related parties in the transportation network whom they hold responsible for the damage, for instance: the port, the marine carrier, the air forwarder, the warehouse, the international delivery company etc.
This is a case where the suing rights are transferred from the policy holder to the insurance company, and so any cause for claim that the policy holder may have is also applicable to the insurance company.
In a subrogation, the court examines the evidence that has been presented with the intent of determining whether any party has been proven to be responsible for the damages. One of the manners by which this is deciphered is to examine the relations between the insurance company and the policy holder, that is: the court examines the evidence presented by the policy holder to the insurance company prior to receiving compensation and whether this evidence was sufficient enough for warranting the payment of the compensation.
Recently, the district court of Tel Aviv ruled that the insurance company failed to prove the claim, since they had not demanded sufficient evidence from the policy holder to prove the damage to the cargo. [Civil suit (District court of Tel Aviv) 41124-02-10 Leumit Insurance Agency Ltd. and others vs. The Ashdod Port Company Ltd., Judge Meir Ifrach, verdict of July 7, 2012. Party representatives: on behalf of the Insurer- Attorney Irit Leshem Kiperman. On behalf of the Ashdod Port- Attorney Ilan Orli].
In this case, the policy holder (The Electric Company) received compensation from the insurance company at a sum of approximately $900,000 for damages to imported cargo, and the insurance company sued the Ashdod Port for these damages.
The cargo in question was imported from Siemens for the purpose of erecting a power station, and the damage occurred within the premises of the Ashdod Port.
The key point in the verdict is that the insurance had not insisted and had not demanded of the Electric Company to sufficiently prove the damages to the cargo prior to transferring the compensation funds to the policy holder.
The court noted that the insurance policy revoked compensation for damages caused by moisture/humidity, since the cargo was partial wet prior to the shipment. However, the insurance company had not been able to revoke because they had failed to properly examine whether the damage that was discovered in Israel, or part of it, was caused as a result of dampness. It was therefore ruled that the insurance company had hastened to recompense the policy holder prior to the sufficient examination of the facts.
In addition, it was stated that the insurance company had blindly relied upon the assessment of Siemens' appraiser, without examining the damages for itself, and this is not reasonable behavior for an insurer.
Therefore, it was eventually ruled that the insurance company had erred in its decision to compensate the Electric Company without demanding proof of damage.
The court noted that it was not wrong for the insurance company to choose to compensate the policy holder, but if they go to court with a subrogation, they must come equipped with more substantial evidence so that their claim will be accepted.
Notes:
According to the Supreme Court ruling of 1997 [Civil appeal 7148/94 Hachsharat Hayeshuv Insurance Company Ltd. vs. Hashmira Company Ltd.], in most cases of subrogation, the court tends to assume that the insurance company did not "volunteer" on its own to compensate the policy holder for the damage, but conducted a thorough investigation and examination regarding the cause of damage and those responsible for it, before reaching the decision to compensate the policy holder.
In this case the court noted that in the event an insurance company compensates the policy holder within the framework of a valid insurance policy, the insurance company's motives should not be looked into and it should not be assumed that this was collusion, unless it would appear the insurance company's actions were unreasonable in the extreme. Furthermore, it was noted that it would be inappropriate for the party responsible for the damage to attempt to write off their responsibility by investigating the insurance company's motives when paying the compensation.
In the case at hand which was debated in the district court of Tel Aviv, the court noted that in order for the insurance company to have the right to subrogation, it must first prove that its actions were befitting to a reasonable insurance company and that its considerations for paying the compensation were appropriate, otherwise they do not have the right to this claim.
In addition, the court determined that blindly relying upon the assessment of an appraiser from abroad constitutes unreasonable behavior on the part of the insurance company, and this withholds the insurance company's right to subrogation.
It is reasonable to say that the district court ruling in this case implements the Supreme Court ruling, and does not deviate from it. It is also reasonable to say that in this case, the court determined that the insurance company's behavior was unreasonable in the extreme to the point that it rescinded the insurance company's right to this claim.
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