From a material point of view, the claim filed by the parents against the incumbent management can be viewed as a kind of derivative action, even though it was not filed in the form of a derivative claim (the plaintiffs are not shareholders in the company, and according to them, since CPA Milner controlled the parents' organization, it was not possible to make a decision on filing a derivative claim that includes him as well). It is difficult to argue that the insurer could have discharged its liability if a derivative claim had been filed, arguing that only functionaries such as liquidators and receivers are allowed to represent creditors and third parties.
- And from another angle.
The directors knew and relied on the fact that nothing bad would happen to them in their position, since this is exactly why directors' liability insurance was made for them. This was the reasonable expectation of the directors, and if we had asked them about the distinction between an "operating manager" and a "licensed manager," they would probably have raised an eyebrow in astonishment. In this case, no insurance offer was presented, from which it is possible to learn about what was offered to the company, and the assumption is that Pinkovich, as someone who acted on behalf of the company, and the directors themselves, expected that the policy would cover them in cases where a claim of negligence would be raised against them.
The expectation of the directors is consistent with another rule of interpretation in insurance law, which is "the test of the reasonable expectations of the insured" (Civil Appeal 846/76 Attia v. Ararat Insurance Company Ltd., IsrSC 31(2) 780 (1997)). There are several versions of the use of this doctrine.
In the "weak" or "softened" sense, the doctrine is used in every case of textual ambiguity (as was done in Civil Appeal 3128/94 Cooperative Society of the Ramat Chen Synagogue v. Sahar Insurance Company, IsrSC 50(3) 281 (1996) (hereinafter: the Ramat Chen case)). This is similar to the implied warranty doctrine known in the United States, in the sense of the insurer's implied liability that the policy will reasonably fit its intended purpose (Ramat Chen, pp. 289-299). In the "strong" or "strict" sense, the doctrine allows the court to detach itself from the language of the text, and to rule against the insurance company, even where the language of the text is unequivocal (for the distinctions and considerations underlying the doctrine and its application, see Dudi Schwartz and Rivi Schlinger, Insurance Law - Duty of Disclosure, Interpretation and Development Trends 319-340 (2005). For more on the doctrine of reasonable expectations, see Dudi Schwartz and Rivi Schlinger, "The Insurance Contract: Duties of Disclosure and Interpretation - Developments from the Perspective of the Psychological Analysis of the Law," Kiryat HaMishpat 349 (2004-2005); Dudi Schwartz and Rivi Schlinger, "The Interpretation of the Insurance Contract: Interpretation Against the Drafter and the Test of the Reasonable Expectations of the Insured," Kiryat HaMishpat 345, 382-388 (Memoirs of Chaim Cohen, 2003); Shahar Weller, The Insurance Contract Law, 5741-1981 Volume 1 150-153 (5765)).