The case law distinguished between two situations in this regard: in the first case, all the insured have a common interest in the object that is the subject of the insurance, and in this case, the innocent insured will not be entitled to insurance benefits if his partners breached the duty of disclosure or maliciously caused the insurance incident. In the second situation, there is a difference between the interests of each of the insured in the matter of insurance. In such a case, the innocent insured will be entitled to benefits by virtue of the policy:
"I am inclined to accept the distinction between partners in a policy who have an identical interest in the property (such as joint owners, in which case partners are partners 'for better or for worse', and the innocent partner is not entitled to any compensation), and partners who have a different interest (such as a landlord and a tenant, in which case this can be seen as two different policies, each covering a different interest, and the innocent tenant should not be harmed by the landlord's malicious act). All the more so I am of the opinion that public policy, and the general principle according to which 'no sinner is rewarded,' require such an outcome when it comes to an identical interest, when the partner involved in the event will indirectly benefit from the entitlement of his innocent partner" (Civil Appeal 391/89 Weissner v. Aryeh Insurance Company Ltd., IsrSC 47(1) 837, 867-868 (1993) (hereinafter: the Weissner case))
The difference between the two situations lies in "policy considerations of public policy not to encourage collusion between policyholders, which by their nature are difficult to discover and prove" (paragraph 17 in the Weissner case; Shahar Weller, Duty of Disclosure of Insured Persons in Insurance Contracts 326-328 (2002)).
- In our case, it is not possible, in my opinion, to point to an identical and common interest of the directors and Pinkowitz. Pinkowitz acted on behalf of the company when managing the engagement with the insurer, and on behalf of the company he purchased "officers' insurance" for the directors. It is clear that the insurance interest of the directors in this case is not identical to the interest of the company, and this is more similar to the insurance that an employer purchases for its employees, as required by the employment contract between them, than to the insurance of a business in which there are two partners, or to the insurance of an apartment owned by a couple, in which the identity of the interests is clear. At the end of the day, the purchase of the policy for the directors is a benefit or a right given to the insured, and I do not find in these cases the same interests in the object that is the subject of the insurance, since the directors have a direct and clear interest in the insurance to cover their activities, while the company may be indifferent to this. The case at hand is also a good example of the fact that the directors, with regard to the insurance coverage, were indeed in good faith, and the concern of a conspiracy of the insured does not exist in our case. This is because, among other things, directors have a strong interest in maintaining their good name, which extends beyond their narrow economic interests.
- In any event, and in view of my conclusion that the insurer did not prove its claim regarding Pinkowitz's breach of the duty of disclosure, I do not rule on this weighty question, and I will suggest that it be left for further future examination. Obviously, a decision on this question in relation to officers' insurance, but also in relation to many other insurances, has dramatic implications for the insurance market and risk management within it, and I did not see the need to put nails in these issues in this case (for a similar question that arose on the issue of breach of the duty of disclosure and the denial of exemption from liability to external directors as a result, see: Derivative Claim (Tel Aviv) 35114-03-12 Ashash v. Attia, paragraphs 137-140 (June 24, 2015)).
The Retroactive Cover
- Another claim made by the insurer relates to the date of the commencement of the retroactive coverage of the policy. There is no dispute between the parties that the policy relevant to the present claim is the policy for 2002, which includes, according to what is stated therein, retroactive coverage from August 1, 2000. The dispute between the parties relates to the circumstances of the change in the scope of retroactive coverage, which according to the plaintiffs in the previous policy was for a longer period (from 1996). The shortening of the period of retroactive coverage in the policy for 2002 was done, according to the plaintiffs, without drawing the company's attention to this material change. The trial court did not address this question when it ruled that the claim regarding retroactive coverage beyond what was stated in the policy was not mentioned in the statement of claim.
- I also did not find it necessary to address the dispute between the parties on this matter, since I did not find that a decision thereon would have an operative effect on the outcome of the appeals before me. As may be recalled, the plaintiffs set the amount of the damage at ILS 12,000,000 for toll purposes. According to the plaintiffs, which relies on the opinion of CPA Bilu, in 2001 the company transferred the sum of ILS 3,510,263 to the subsidiary, and in 2002 the company transferred the sum of ILS 8,978,680 to the subsidiary. In other words, during the years 2001-2002 alone, in respect of which there is no dispute that they are included in the retroactive coverage of the policy, more than ILS 12,000,000 was transferred from the company to the subsidiary - the amount of the damage claimed. Therefore, I did not see practical importance in discussing the dispute regarding the circumstances of shortening the period of retroactive coverage in the policy.
To summarize this part: If you listen to my opinion, I would suggest interpreting the policy in such a way that CPA Darman's claim will be considered as an "authorized manager" claim, and therefore the insurance coverage will apply to the damages resulting from it. In addition, and since there is no dispute that the retroactive coverage in the policy applies to damages caused from August 2000 to 2002, the insurance company will be liable for damages in the amount stated in the claim - a sum of ILS 12,000,000, which, as stated, is less than the damage caused to the company for all the money transfers to the subsidiary during those years.
- In the margins, it should also be noted that the insurance company's claim that no claim or notice of a third party was filed against it by any of the directors should also be rejected, and therefore it should not be liable for damages to the company, in view of the provision of section 68 of the Insurance Contract Law, 5741-1981, which grants a third party the right to a direct claim against the liability insurer, and creates a direct rivalry between the third party and the insurer (Civil Appeal Authority 4395/14 Cohen v. Hachshara Insurance Company Ltd., paragraph 7 (August 19, 2014)). In our case, the claim was filed against the insurance company, and therefore it is liable jointly and severally with the directors for the company's damages, even without a third-party notice being sent to it by the directors. By the way, it was explained that the directors refrained from sending a third-party notice in view of the high fee they would have had to bear if they had acted in this way.