Hilchos Choshen Mishpat

Volume I : Number 31

Insurance Fraud

Question:

Reuven brought his car into a body shop to be repaired, after it was in a minor accident. Once it was there, the owner of the body shop decided on his own to do some other repair work that was not related to this accident, and was not covered under Reuven's insurance policy, and filed one claim for the entire job.

Is Reuven obligated to reimburse the insurance company for the excess money that they paid to repair the damage that was not covered under his policy?

Answer:

1. It is absolutely forbidden for a car owner or body shop to file a claim for repair of damages that are not included under the owner's insurance policy.

   Similarly, it is absolutely forbidden to file a claim for damage or theft to a car that was not actually covered at the time that it happened. For example, if a person driving the car at the time of the accident had rented it from the owner, and this is against the terms of his insurance policy, or if someone who did not have a valid drivers license was driving it, or the driver had a learners permit but was not accompanied properly, a claim may not be filed. Additionally, if a policy states that the car must have a working alarm and it doesn't, or that the owner must lock the car to be covered for theft and he does not, no claim may be filed.

   Anyone who collects on a claim in any of the above situations is a thief, and is obligated to return any money collected to the insurance company.

2. In any of the above situations, it makes no difference if the insurance company is owned (wholly or partially) by Jew or non-Jew. It is also forbidden to collect even if the insurance agent cooperates in filing the false claim, and if collected the payment must be returned.

3. Regarding our question, the owner of the body shop is obligated to return the money received illegally to repair the extra damage not covered in the policy.

For example, if it was an older car, and with or without the additional repair Reuven would receive the same amount if he would want to sell the car, he would not be obligated to pay the insurance company at all.

However, if the resale value of the car went up $500 because of the additional repair, even if the body shop was paid an additional $2000 for the repair, Reuven must only pay $500.

Similarly, if the insurance company paid the body shop $2000 for this repair, even if this is the actual amount that the resale value went up because of this, but Reuven could have found another body shop that would have done the same repair for him for $500, he is only obligated to reimburse the insurance company $500.

Sources:

Regarding our question, the following issues must be addressed. On the one hand, Reuven did not request that the body shop do the additional repairs. On the other hand, because of the body shop owner's actions, a false claim was filed on Reuven's behalf, and Reuven did receive from the insurance company the benefit of an increase in the value of his car. In this situation, Reuven is only obligated to pay the amount that he would have had to pay to receive this additional benefit. This is the Halacha that we find in Bava Metzia 101a regarding a gardener who enters someone else's field without permission and plants and otherwise improves the field, that the owner is only obligated to pay the actual amount that he has benefitted, and not the gardener's total fee.

Feedback is appreciated! It can be sent toatendler@torah.org.

This week's class is based on a column by Rabbi Tzvi Shpitz, who is an Av Bais Din and Rosh Kollel in the Ramot neighborhood of Jerusalem. His Column originally appears in Hebrew in Toda'ah, a weekly publication in Jerusalem. It has been translated and reprinted here with his permission and approval.

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Please Note: The purpose of this column is to make people aware of Choshen Mishpat situations that can arise at any time, and the Halachic concepts that may be used to resolve them. Each individual situation must be resolved by an objective, competent Bais Din (or Rabbinic Arbitrator) in the presence of all parties involved!