netanya - Ilan Lior - June 17 2011
Netanya apartment building after gas explosion, June 17, 2011. Photo by Ilan Lior
Text size

The explosion in Netanya late Thursday night, which killed four people, injured dozens more and caused extensive property damage, is expected to lead to legal battles between the insurance companies and pension funds of the victims on one hand and the Phoenix and Migdal insurance companies on the other. The latter two companies are the carriers for Pazgas, one of whose technicians was arrested on suspicion of negligence in connection to the explosion.

The precise scope of the insurance companies' exposure is not yet known, but since dozens of claims can be expected, from residents of the five-story building as well as the owners of businesses on the ground floor, it is likely that all of Israel's general insurance firms will be affected. The largest of these are Clal, Phoenix and Harel.

The firms can expect to receive property damage and physical injury claims, as well as life insurance claims from the families of the deceased. If any of the deceased held pension funds, then these will also be affected. Owners of affected businesses can also be expected to file claims for loss of income.

If Pazgas is determined to be responsible for the disaster, it can expect to face a massive subrogation action from all the insurance companies and pension funds that made payouts to their own clients in connection to the incident. Subrogation is what happens when one insurance company tries to recoup expenses for a claim it paid out when another party - in this case, the insurance carriers for Pazgas - should have been responsible for paying at least a portion of that claim.

Pazgas carries third-party liability coverage through a consortium of Phoenix and Migdal, that can be expected to field subrogation claims from the various insurance companies.

Insurance executives are already claiming that since the Netanya building was supplied by natural gas canisters from suppliers other than Pazgas as well, it's not a foregone conclusion that Pazgas was responsible for the explosion.

In any event, initial estimates indicate that property, life and injury claims resulting from the incident will amount to tens of millions of shekels.