The directors raised a claim of reliance on the advice and expertise of others, but no document or opinion or advice was presented on which they relied, so this claim is also not to be relied upon.
- Hence the conclusion that the directors - who served not in order to receive remuneration but with good intentions - were negligent in their duties, albeit in good faith out of lack of knowledge and lack of understanding, and in the absence of the appropriate qualifications to serve on the board of directors. The directors did not understand or internalize that the company was pouring millions of shekels into the subsidiary. It seems that the meaning of the agreement, which stipulated that Pinkovich is entitled to receive as a salary 6% of the subsidiary's turnover (as opposed to the profit), has also disappeared from the directors' eyes, to the extent that this agreement has been brought to their attention at all.
At this point, I will address the issue of the policy.
- I share the conclusion of my colleague Justice Zilbertal that the vague claim raised by the insurer that the company allegedly breached the duty of disclosure should be rejected.
"A central reason underlying the duty of disclosure is an economic reason - incorrect information about the risks posed by the insured may result in a misclassification by the insurer, so that the premium set for the insured will not reflect the level of risk of the insurer... The discrepancy between the level of risk and the amount of the premium undermines the business-economic logic on which the insurance contract is based, and constitutes externalization of risks to the insurer and to the entire insured public (HCJ 6215/12 Bastacar v. Minister of Finance, para. 18 (June 16, 2015) (hereinafter: the Bastacar case)).
The insurer, who knew how to collect insurance premiums over the years, did not bother to find out anything about the situation of the company and its board of directors. A questionnaire that the company was asked to fill out before the policy was established was not even presented, let alone a specific question to which the company refrained from answering (cf. Civil Appeal 282/89 Rotenberg v. Clal Insurance Company Ltd., IsrSC 46(2) 339, 350 (1992)). To this, it should be added that "the trend of the legislation in matters of insurance is to reduce the duty of disclosure of the insured, and to recognize the right of cancellation of the insurers due to a breach of this duty only for situations in which the insured acted with fraudulent intent" ( Bastakar, para. 19). In the case before us, the insurer did not ask the company and did not ask for documents except for one balance sheet, and was not interested in who the directors were under insurance coverage. It seems that all that interested the insurer's underwriter was to recruit another customer and collect the premium for a standard policy (a shelf policy, as opposed to a policy that was "tailored" specifically to the insured's size). In short, the claim of breach of the duty of disclosure was raised by the insurer purely and without any basis.
- I agree with my colleague that a purposive interpretation of the policy tipped the scales in favor of the directors. This is according to the interpretive rule according to which in the event of doubt in the interpretation of the definition of the insurance case or of the exceptions, the supplier acts to the detriment of the insurer. This rule was created over the years, by virtue of a number of contractual interpretation rules that intertwined until they became one:
( - ) The rule of interpretation "against the drafter" (see, for example, Civil Appeal 769/86 Rubinstein v. Zemran, IsrSC 42(3) 581, 586 and the references there (1988)). This rule has now found its place in section 25(b1) of the Contracts (General Part) Law, 5733-1973 (hereinafter: the Contracts Law), which states that "a contract that is given to different interpretations and one of the parties to the contract has priority in shaping its terms, an interpretation against it is preferable to an interpretation in its favor."