The plaintiffs further argued that the trial court erred in determining that the insurer was exempt from its duty because the acts for which the claim was filed were done maliciously, fraudulently and in breach of trust. It was claimed that with regard to the transfer of the funds to the subsidiary, Pinkowitz acted negligently and not fraudulently. Alternatively, it was argued that even if Pinkowitz's insurance coverage was revoked due to the commission of intentional acts, this does not negate the insurance coverage of the other directors who were negligent in not supervising his actions.
With regard to the claim that the company breached its duty of disclosure to the insurer, the plaintiffs argued that the trial court erred in holding that "taking into account Mr. Pinkowitz's conduct... Obviously, he also sinned against the truth in his representations to the insurance company - and there is truth in Migdal's claim that the policy is invalid in view of the misleading information that was given to it" (paragraph 194 of the trial judgment). It was argued that the insurer did not prove its claim that the duty of disclosure was breached, and the fact that Pinkovich made false representations to the board of directors, parents and consultants is not sufficient proof of the determination that he breached the duty of disclosure towards the insurer. In any event, it was argued, even if Pinkovich breached the duty of disclosure, this does not negate the insurance coverage of the other directors.
With regard to the retroactive coverage, and the trial court's determination that this claim was not raised in the statement of claim, it was argued that although in the amended statement of claim (as well as in the original statement of claim) it was stated that the insurer should be liable by virtue of the policy, but according to the plaintiffs, the retroactive coverage should be included in the policy. In addition, the plaintiffs claimed that the issue of retroactivity was discussed at length during the proceeding, and the insurer even responded to the plaintiffs' argument on its merits, so that even if it was a matter of expanding the scope and changing the façade, this was done with implicit consent.