Who hasn't sold an apartment and forgotten to cancel? The insurance policy And then he discovered, after a few months, that he was still paying for it? The issue, which is of great concern to policyholders, reached the Supreme Court, where it was determined, among other things, that an insurance policy cannot be renewed without the written consent of the policyholder.
However, if there is a practice between the insured and the insurance company for automatic extension of the policy, and when this is done for the benefit of the insured, the insurance agent and/or the insurance company may renew the insurance policy. This is also stated in the Insurance Supervision Directives.
Moreover, according to the supervision, an insurance policy cannot include a note stating that the contract will be renewed if one party has not notified the other of its desire to terminate the contract. It is also determined that there will be no situation in which, until the insurance period is extended, the insured will remain without insurance coverage.
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This was the case with C., the owner of a business selling aluminum products, who insured his store with an insurance company through an agent. One day, when his employees arrived at the store, they discovered that a break-in had occurred and office equipment and business inventory worth hundreds of thousands of shekels had been stolen. C. notified the insurance agent of the incident, but the insurance company claimed that he was not entitled to compensation because the insurance policy was not renewed at the end of the insurance period.
C. filed a lawsuit in the Magistrate's Court, claiming that there was a practice between the insurer and the insurance agent whereby the policy was automatically renewed unless the agent or the insured sent the insurer a notice of non-renewal of the policy. The plaintiff claimed that the insurance agent acted as an extension of the insurance company, and therefore everything agreed with him was binding on the insurance company.
Insurance company, on the other hand, claimed that at the end of the insurance period, a draft for the new year was sent to the insurance agent for the purpose of renewing the policy, which was not responded to, and therefore no insurance contract was signed for the new year. The insurance company presented the Insurance Supervision Directive concerning the "automatic renewal" of the insurance policy, and stated that it is not permitted to renew an insurance policy without the signature of the insured. The company also claimed that the insurance agent exceeded his authority and acted without authorization by approving the extension of the policy without her consent.
The Magistrate's Court ruled that this was a clear attempt by the insurance company to evade payment of benefits by claiming that the policy was not renewed during the "seam" between two insurance periods. The court was impressed that the company's conduct was in bad faith, and ordered it to compensate the plaintiff.
The company appealed to the District Court, which ruled that the insurance policy was automatically extended for another year as part of the practice that existed between the parties. The court based its decision on the Insurance Contract Law and the Insurance Supervision Directive, according to which "if the parties expressly or by custom stipulated an extension of the contract, the meaning of the extension of the insurance contract is that all the terms that were fixed between the parties will continue to apply during the additional period." It was further determined that the insurance agent did not exceed his authorization and therefore upheld the Magistrate's Court's decision.
The insurance company did not give up and appealed to the Supreme Court. It determined that the renewal of the insurance policy would only be done with the consent of the insured, but at the same time, according to the Insurance Contract Law, the parties are entitled to determine the automatic renewal of the insurance policy when there is a practice between the insured and the insurance company for automatic extension, and when this is done for the benefit of the insured. So in the end, the court ordered the insurance company to pay compensation to C.
Notify in advance
Meanwhile, in March 2014, a draft circular was published regarding the renewal of an insurance contract, in which it was proposed that an insurance company that wishes to renew an insurance policy for an additional period should notify the policyholder thereof 45 days before the end of the insurance period. In the notice of a proposal for renewal, the insurance company will specify the insurance premiums for the next insurance period; the data on the basis of which the insurance premiums were calculated (e.g. age, claims history, insurance amount, etc.); changes in the insurance terms in relation to the terms that were customary in the previous period; the need for the policyholder's consent and the method for settling claims.
An insurance company that has sent the policyholder a notice of a proposal to renew an insurance policy and has not received his consent will send the policyholder a notice of the end of the insurance period 14 days before the end of the insurance period, detailing the date of the end of the insurance policy period, the implications of the lack of insurance continuity, and stating that it is the policyholder's responsibility to ensure insurance coverage. The policyholder's consent will be documented by the insurance company via mail, e-mail, text message, recorded conversation, etc.
As mentioned, this is still a draft, but its content indicates the trend of insurance supervision in all matters related to protecting the rights of the insured.
The writer is an expert in insurance and torts, the owner of the John Geva Law Firm and serves, among other things, as the legal advisor to the members of the Insurance Agents Association.
