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.
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
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,
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
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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!