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A FIERY SUMMER RENTAL

By: Rabbi Max Sutton

Daniel rented from Richard a summer bungalow in the mountains for the first four weeks of August. After finding out that the bungalow was uninsured, Daniel decided to take out a complete insurance policy for the property. Without prior consent, Daniel instructed his insurance agent to register the policy under the name of Richard, the homeowner, and prepaid the entire sum. On August 28th, the last day of his stay, Daniel moved out of the bungalow as agreed. Thereafter, during the last two days of August, an electrical fire broke out in the bungalow, burning Richard’s property to the ground. Not long after the fire, the insurance company mailed a check to Richard, the policyholder, for his financial loss. Daniel, who was immediately aware of the payment, since he facilitated the insurance claim, requested that Richard forward the insurance payout to him. Daniel claimed that since he both ordered and paid for the policy, he is the rightful owner of its proceeds. In Bet Din, Daniel stated emphatically that Richard is not entitled to payment since he left his property uninsured. Richard counterclaimed that the policy was in his name, and since it was his home that burnt down, he is not required to forward to Daniel anything other than the cost of the policy. Furthermore, Richard pointed out that the fire broke out after Daniel’s lease ended.

Is Richard required to forward the insurance money to Daniel? Or is Daniel not entitled to the funds? How should the Bet Din rule, and why?

TORAH LAW

According to the ruling of the Shulhan Aruch when two independent parties are equally entitled to proceeds of a transaction, they are required to divide the revenue equally. In a classic ruling in which a messenger was sent to make a purchase and received additional merchandise as a bonus from the seller, the Shulhan Aruch ruled that the bonus is to be split between the messenger and his sender. Since the purchase order was for a fixed quantity at a set price, the additional bonus deliberately given to the messenger was not necessarily intended for the sender. On the other hand, if not for the sender’s purchase, the seller would not have extended the bonus to the messenger. Since the bonus was extended because of both the sender’s purchase and the messenger’s relationship with the seller, they are required to divide the bonus equally.

This above ruling is seemingly applicable to two parties who are equally entitled to collect an insurance payment. In our case at hand, the tenant who initiated the purchase of the policy is seemingly entitled to the proceeds, as well as the homeowner who sustained the damage and whose name is listed on the policy. Hence, at first glance one can assert that perhaps they should split the proceeds.

However, after research and deliberation, we concluded that a tenant who somehow purchased homeowners insurance is halachically not entitled to collect its proceeds. By law, only a homeowner can insure his property for structural damage.
Although a tenant can buy renters insurance, such a policy is significantly less costly, and is limited to protection against loss to the tenant’s personal property. Since a tenant cannot buy homeowners insurance, if by chance he manages to do so, the payment extended by the insurance company is clearly not intended for him. The underlying reasoning a tenant cannot purchase insurance for structural damage is that the structure of a building does not belong to the tenant, and he is not entitled to collect damages if a loss is sustained. The payment of the insurance company is solely collectable by the homeowner, and is precisely the reason why the policy was listed in his name. This ruling is based on the teachings of our Sages of the Mishnah, which restricts an outside party from collecting on the loss of another’s possession.

By rule of the Shulhan Aruch, if one invests in another’s property without the owner’s knowledge, although he is unable to reap the proceeds of his investment, since the property is not his, he is entitled to reimbursement of the cost of investment. In our case at hand, since the tenant purchased insurance prior to the damage of the home, he is entitled to reimbursement for the money he paid to buy the policy.

It must be noted that a ruling of a Bet Din awarding a party with an insurance claim is contingent on the terms and conditions of the insurance company. If the parties conducted their affairs in violation of the terms and legalities of their policy, the ruling is null and void.

VERDICT Fire Extinguished

Our Bet Din ruled that Richard the homeowner is entitled to the money paid to him by the insurance company, and he is not required to forward any of the proceeds to Danny. Nevertheless, by Torah law Richard is obligated to reimburse Danny for the money he paid to buy the policy. Since Danny is not the homeowner he is not entitled to collect damages for a loss he did not sustain. By law, he cannot buy insurance for structural damage to a property that he does not own, and if he somehow manages to do so, the payout by the insurance company is intended strictly for the homeowner. Although Danny the tenant could have purchased renters insurance at a significantly cheaper price, it would not have covered damages of the fire to the property. Renters insurance only protects the tenant’s personal belongings, and by listing the policy in Richard’s name Danny subsequently purchased homeowners insurance. As mentioned, Richard is required to reimburse Danny for the cost of the policy by rule of the
Shulhan Aruch. Since Richard benefitted from the purchase of the policy, Danny is entitled to his costs.

Disclaimer:Our Bet Din awarded Richard the proceeds of the payout by the insurance company contingent on the review of the policy by a licensed professional. For if the terms and conditions of the policy were violated as a result of the unconventional purchase, our decision and involvement in the matter is rendered null and void.