However - and this is the main thing - when the company found itself in a crisis in its management, the court appointed, according to the agreement of the parties, an external entity that would operate the company in place of the incumbent CEO, examine its situation and act to reach an agreement with all of its creditors. The settlement agreement did not stipulate that the operating manager would be subordinate to the board of directors, and his managerial independence, which is expressed mainly in the filing of the lawsuit by CPA Darman against the directors, also characterizes the other officers mentioned in clause 4.14.3 (liquidator, receiver and licensed manager). At the very least, his appointment was a kind of "hybrid", which could, in my opinion, be included in the term "licensed manager" that appears in the said section, in view of the purpose of the clause and the principles of interpretation of insurance contracts, as detailed above. CPA Darman derived his powers from the letter of appointment issued by the court, as distinct from the company's organs, and in this too his independence and independence were expressed. As stated above, this state of affairs is consistent with the logic underlying the reservation to the insurance exception in clause 4.14.3 of the policy.
- For the aforesaid reasons, I accept the plaintiffs' interpretation, which includes within the framework of section 4.14.3 the claim of CPA Darman, as a reasonable interpretation, and to a certain extent even preferable to the interpretation of the insurance company. As claimed by the insurer itself, clause 4.14 is intended to deny insurance coverage for financial damage resulting from or related to a claim filed or managed at the initiative of the company or its officer . However, when the claim is filed by an external party, which is used here for the company's creditors, the insurance coverage will exist. My position is that the appointment of CPA Darman as the "operating manager" of the company in the circumstances in which he was appointed, and with the aim of clarifying its situation, improving it, and reaching an arrangement with all its creditors, is consistent with the objectives of the exception to the exception set out in section 4.14.3, and therefore his claim should be included in the category of claims to which the insurance coverage applies.
- The interpretation of clause 4.14.3 was indeed at the center of the dispute between the insurance company and the plaintiffs, but the insurer had two other main arguments, which, in its opinion, exempted it from the obligation to pay the policy benefits to the plaintiffs. I will discuss these arguments below.
Breach of the duty of disclosure
- As stated, the trial court ruled that in view of Pinkowitz's conduct, it can be assumed that he "presumably committed a sin of truth in his representations to the insurance company as well", and therefore Migdal's claim that the policy was invalid due to the erroneous information provided to it is substantial. However, the court emphasized that it did not address this argument "in more detail", since in any case it reached the conclusion that the claim against the insurer should be dismissed.
- After reviewing the rulings of the trial court, as well as the insurance company's arguments on this issue, I am of the opinion that there is substance to the plaintiffs' claims, according to which it has not been proven or even determined that the company breached the duty of disclosure towards the insurer. Indeed, in order to establish a factual finding that the company - through Pinkowitz - breached the duty of disclosure towards the insurer, logical inferences based on Pinkowitz's general conduct are not sufficient, but a factual and clear determination based on evidence proving that the insurer was misled as to the company's situation prior to signing the policy. The trial court refrained from making such a factual determination, and did not even specify what evidence is capable of establishing this conclusion.
The insurer, in its response summaries in the appeal, also did not specify the normative basis for determining the scope of the duty of disclosure, and did not substantiate its claim - neither factual nor legal - that the company was required to provide the subsidiary's financial statements or other data relating to the work of the company's board of directors. Since no factual and legal basis has been laid as to the scope of the duty of disclosure and as to the question of whether this duty was actually breached, it is not possible to accept the insurer's claim regarding the invalidity of the policy.
- I will note above and beyond necessity that even if I assume that Pinkovich did indeed conceal material information that he knew about the company's situation from the insurer, it is not at all certain that Pinkowitz's failure leads to the denial of insurance coverage from the other directors insured under the policy.
Indeed, a situation often arises in which a number of policyholders are insured through a single policy, some of whom deliberately caused the insurance incident or provided partial and misleading information to the insurer (before or after the conclusion of the insurance contract). In these cases, it is understood that policyholders who acted maliciously or violated the duty of disclosure will lose their entitlement to insurance benefits. The question that arises in these circumstances is what will be the law of the "innocent" insureds, who did not know and were not complicit in the breach of the duty of disclosure or in causing the insurance incident. Will these policyholders also lose their eligibility by virtue of the policy?