תוכן עניינים
The Right to Interest on Delayed Insurance Payment
The Insurance Contract Law 5741–1981 requires an insurance company to pay insurance benefits within 30 days of receiving all required documents. When the company delays beyond that, it owes interest on the overdue amount. This is not a discretionary remedy left to the court — it is a statutory right that attaches automatically to every policyholder harmed by a delay.
Section 28: The 30-Day Rule
Section 28 of the Insurance Contract Law sets the obligation to pay within 30 days from the date the policyholder submitted all documents required to clarify the company’s liability. The interest clock begins on day 31, not from the date of the insured event and not from the date the first claim form was filed. So if you filed a claim in January and sent all required documents in February, interest starts running from the 31st day after the documents were delivered.
The interest rate is set in law — currently arrears interest determined annually by law, plus an indexation differential linked to the consumer price index. This interest cannot be waived by contract, since it is a mandatory protection that cannot be reduced to the policyholder’s detriment under Section 39 of the law.
In large claims, the interest can accumulate to significant sums. In a life insurance claim of one million shekels that was delayed for a year, the interest alone could reach tens of thousands of shekels.
Special Compensation Without Proof of Damage Under Section 28a
Beyond ordinary interest, the legislature added a powerful tool against insurance companies that refuse to pay in bad faith. Section 28a of the Insurance Contract Law allows the court to award special compensation without actual proof of damage, at a rate of up to three times the insurance benefits that reached the policyholder.
For the court to award enhanced compensation under this section, the policyholder must prove the company acted in bad faith. Not every delay constitutes bad faith, even when the delay is eventually revealed as a mistake. But certain patterns of conduct that Israeli courts have identified qualify as bad faith and justify such compensation.
When Does the Court Award Enhanced Compensation?
Israeli courts have awarded enhanced compensation under Section 28a in various types of situations. A baseless factual rejection without any real grounds — when the company raised a defense that was clearly unfounded. A change in the rejection reason during the legal process, meaning the company arrived at court with arguments it had not raised in the prior correspondence. A prolonged unreasonable delay where the company remained silent for months without responding to the policyholder’s communications. Demanding documents irrelevant to the claim in order to exhaust the policyholder and cause them to give up. A vague or ambiguous expert opinion on behalf of the company — when the expert opinion the company appointed does not meet professional standards. In property insurance claims, courts awarded enhanced compensation when companies tried to attribute damage that occurred in an accident to a pre-existing condition that predated it. In health insurance claims, courts awarded enhanced compensation when companies sought documents already submitted, repeatedly, knowing the policyholder was in distress.
How to File a Claim for Special Compensation
A claim for special compensation under Section 28a is filed as part of the regular insurance claim. That is, you do not file a separate procedure. In the claim document you request both the insurance benefits themselves, the interest under Section 28, and special compensation under Section 28a. You should detail in the claim document the circumstances constituting bad faith and attach all correspondence with the insurance company as exhibits. The court weighs all the company’s conduct and decides at the end of the process on the amount of enhanced compensation, if any.
Arrears Interest: Practical Calculation
The interest is calculated on the amount that should have been paid, from day 31 after delivering the documents until the date of actual payment. The longer the delay, the higher the interest. In claims that dragged on for one to two years, the interest and indexation add up to tens of percent on the original sum. This is real economic pressure on insurance companies to reach settlements and not to drag proceedings.
Common Questions
What interest rate is the insurance company required to pay me for a delay?
The rate set in law on the insurance subject is the arrears interest rate determined annually, plus an indexation differential. It is generally higher than ordinary bank interest and reflects the real economic cost of the delay to the policyholder.
From what moment does the interest clock start running?
The clock starts on the 31st day after you submitted all documents required by the company to clarify its liability. Not from the date of the event and not from the date you filed the first form — but from the date you delivered the last required document.
How much enhanced compensation can be awarded?
Under Section 28a of the Insurance Contract Law, the court can award up to three times the insurance benefits. That is, if you received one million shekels and the court determines the company acted in bad faith, the compensation can reach three million shekels.
Does every delay entitle me to enhanced compensation?
No. Ordinary interest on a delay accrues to anyone whose payment was delayed beyond 30 days. But enhanced compensation under Section 28a requires proof of bad faith from the insurance company’s side — meaning conduct that goes beyond ordinary negligence and reaches the level of intentional or knowing use of means the company knew were required.
The insurance company rejected me and later agreed to pay. Do I still get interest?
Yes. Interest accrues on the entire amount the company paid late, even if ultimately it reached payment outside court. You need to count the days that passed from day 31 and claim interest and indexation on them.
Can I claim interest and enhanced compensation in a small insurance claim too?
Yes. The right to interest exists in every insurance claim in which payment was delayed beyond 30 days. Enhanced compensation depends on the circumstances and proof of bad faith, and is not tied to the size of the claim. Even in a small claim, enhanced compensation can be financially worthwhile.
For assistance with a claim for interest and special damages from an insurance company, contact the insurance claims attorney at Lev-Taieb Law Firm: 072-2428822.
