Reuven sold his car to Shimon on a Friday, and received payment for it. Shimon drove the car home, thus making a Kinyan (Halachic Acquisition) on the car. At the time of the sale the car was covered under an extended warranty and had full insurance coverage. Since Reuven did not have the title of the car on hand at the time of the sale, they agreed that they would meet again on Monday and officially transfer the title and the warranty to Shimon. At that time Reuven’s insurance policy would be terminated, and Shimon’s would be instated.
On Motzaei Shabbos (Saturday night), the car was in an accident and was totaled. The insurance company is prepared to pay the entire book value of the car to Reuven, the policyholder.
- Shimon is claiming that since Halachically the car is his, he is rightfully deserving of the insurance payment. Is Reuven obligated to give the insurance benefits that he will receive to Shimon?
- In this situation, the company that provides the extended warranty will refund the owner of the car the amount of money that was paid for the time on the warranty that will not be used. Does Reuven have to give that refund to Shimon?
- The insurance payment for the book value of the car solely belongs to Reuven, the seller.
- The refund for the unused portion of the extended warranty belongs to Shimon, the purchaser. Even if the company would make out a check to Reuven, he must turn that money over to Shimon.
Sources:We must make a distinction between an insurance policy on someone’s property, and a warranty on someone’s property. An insurance company will only issue payment to the insurance policyholder. Although there may be others that are covered under the policy, e.g. if the car is lent to a friend, he may also be covered if the policy allows it, the person who has taken out the policy is the beneficiary. As a matter of fact, generally, a policyholder does not necessarily have to be the owner of the insured item. Anyone can take out a policy on anyone else’s property or even life, and may collect if the property is damaged or if the person is injured or dies. Although, for various reasons, there are certain types of insurance that require an “insurable interest”, i.e. a financial stake, for a policy to be issued (most notably in our own case of auto insurance), by it’s very nature an insurance transaction is a separate entity, not necessarily related to ownership of the item being insured. For further discussion on this, see the Ohr Somayach in Hilchos Sechirus (5:6).
Therefore, although the car may have Halachically been acquired by Shimon, as long as Reuven is the insurance policyholder, he is deserving of the benefits paid by the insurance company, since this is not dependent on ownership of the car. (This is assuming that the company will have no problem maintaining coverage for Reuven under these circumstances. After consulting a very knowledgable agent, I have been informed that the insurance company would keep the policy in place until the actual title has legally been transferred to Shimon).
However, a warranty is something that is directly connected to the car. The company issuing the warranty is guaranteeing the owner of the car that it will be in good working order for a specific amount of time, otherwise they will fix it at their expense. If the item under warranty should break, the owner has no right to claim the money and pocket it, all he can do is demand that the car be fixed. Additionally, a warranty is generally transferable from owner to owner. Therefore, the warranty is part and parcel of the ownership of the car. Consequently, when Shimon acquired the car, he also acquired ownership of the extended warranty, even though the company still thinks that Reuven is the owner of the car. Even if the check for the refund is issued to Reuven, that money is rightfully Shimon’s, as long as the car was acquired with an effective, Halachic Kinyan.
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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!