E.2. The Insurance Issue
- As may be recalled, the main question at the center of the dispute between the plaintiffs and the insurance company relates to the interpretation of the term "authorized manager" that appears in the exception in clause 4.14.3 of the policy, which states that the insurer will not be liable for the payment of any monetary damage "in connection with and/or as a result of any claim filed or managed at the initiative or at the direction of the company or any officer, except for a claim filed by a liquidator, receiver or authorized manager appointed by a competent authority". This is an exception that is not uncommon, and is included in directors' liability insurance policies, among other things, due to concerns about collusion. The exception is intended to allow insurance coverage where the initiator of the claim has an independent status vis-à-vis the company, exercises independent judgment and also represents other interests, such as those of the company's creditors.
E.1.2 The parties' arguments
- According to the plaintiffs' approach, CPA Darman is "an authorized manager appointed by a competent authority", and therefore the insurer must cover the damage caused to the company as a result of the directors' negligence. It was argued that although the agreement on the appointment of CPA Darman in place of Pinkowitz, as part of the steps taken in favor of the company's recovery, was reached between the parents and Pinkowitz, the agreement was subsequently brought to the approval of all creditors and the General Custodian, and the agreement was given the force of a judgment. The plaintiffs emphasized that since this agreement was given the force of a judgment, it meant that CPA Darman was appointed to his position by the court, and added that if they had sought to dismiss him, approval from the court was necessary. It was also argued that the mere agreement of all creditors to the appointment of CPA Darman should not be interpreted as a change in the nature of his position as a special manager appointed as part of the company's recovery proceedings.
The plaintiffs added that the insurer's argument that the term "authorized manager" that appears in section 4.14.3 of the policy is limited to the meaning of this term should be rejected in four specific pieces of legislation - the National Health Insurance Law, 5754-1994; the Banking Ordinance 1941; The Insurance Business Supervision Law, 5741-1981; The Right to Alternative Civil Burial Law, 5756-1996. It was argued that this term was not defined in the policy at all, and it certainly does not delimit the meaning of this term in the aforementioned legislation. It was also argued that these pieces of legislation are not relevant to liability insurance for officers of the company in question, since it is not a bank, insurance company, health fund or burial corporation - a fact that was well known to the insurer.