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Mitigation of Loss and Gross Negligence

C.C. 20934/91 Ladzinski vs. Menorah Insurance Company (Magistrates Court)

Plaintiff`s car was insured by the Defendant – Menorah Insurance Co. Ltd. Plaintiff`s car was stolen but defendant refused to indemnify Plaintiff. The Defendant argued that Plaintiff breached his duty to mitigate the loss and therefore is not entitled to insurance benefits.

The Court rejected Defendant`s argument and determined that since Defendant could not prove gross negligence on the part of the insured, the latter is entitled to insurance benefits.

Circumstance of the Occurrence
On the day of the occurrence, Plaintiff parked his car near the beach and placed his car keys at the bottom of his hand bag. He then put his bag on the beach, and sat at a distance of about 10-25 meters from his bag. Except for a few minutes, Plaintiff had eye contact with the bag. At a certain stage, Plaintiff discovered that the keys were missing from his bag. He then ran to the parking lot and found that his car had been stolen.

The Defendant argued that Plaintiff acted negligently and breached his duty to mitigate the loss, under Section 61 (a) of the Insurance Contract Law ("the Law") which provides as follows:

"The insurer is not liable to pay insurance benefits for damage which the insured could have prevented or mitigated, on or after the occurrence of the insured event, by taking reasonable measures…".

Court`s Decision
The Court determined that Section 61 (a) of the Law does not apply since the alleged negligent acts were carried out prior to the occurrence of the insured event and not "on or after the occurrence of the insured event".

A well established rule in Insurance Law is that the insured`s negligence is no defence for the insurer. The Court mentions the Supreme Court ruling in C.A. Rosenzweig vs. Rosenblit and others PDI 56(4) 511, in which it was determined that an insurer, who attempts to repudiate liability in cases of negligence on the part of the insured, must include in the policy an explicit exclusion to this effect. Moreover, even in cases where the policy includes such exclusion, the insurer must prove gross negligence on the part of the insured. Gross negligence could be proven where:

1. The insured`s behaviour constitutes substantial deviation from the standards of a reasonable person.
2. The insured actually foresaw the possibility of the occurrence of the loss, however was indifferent as to the results of his actions i.e. the insured acted recklessly.

The Court held that in the circumstances of this case the insured`s behaviour does not constitute gross negligence.

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