Gutwein's name is claimed to be a sick man, a Holocaust survivor, who has already reached heroism, and who was one of the founders and builders of the village (his daughter has been living in the village for many years). It was claimed that for years Gutwein acted for the benefit of the village and the shelters, without any compensation, in consultation with professional bodies, who in retrospect turned out to have not brought to his attention all the relevant information regarding what was happening in the village and about the investment in the subsidiary, and in fact some of them misled him and others even deceived him. It was also claimed that over the years Gutwein fell ill and spent a large part of his time abroad and was not involved in the company's activities at all.
On behalf of the directors, it was argued that the establishment of the subsidiary was not negligent, and in fact, even though the subsidiary had accumulated losses since 1997, and despite the fact that since its inception (in 1991) the company had transferred large sums of money to the subsidiary, negligence was not attributed to the board of directors for those years. Therefore, the directors argued, it is not clear why the investment in the subsidiary suddenly became a negligent act that gives rise to a cause of action, and where the line between a legitimate investment and a negligent investment passes. According to the directors, at most it can be argued that the investment in the subsidiary was an unsuccessful investment that does not indicate negligence. It was emphasized that accepting the lawsuit against them would lead to a situation in which any losing company would be able to file a negligence lawsuit against its directors.
B.3. The parties' claims regarding the insurer's liability
- According to the plaintiffs, Migdal insured the directors under the "Liability Insurance for Officers of the Company" policy numbered 2520000311/02 (hereinafter: the policy), and therefore Migdal must compensate the plaintiffs for the damages caused due to the negligence of the directors. In response, Migdal argued that the claim against her should be dismissed due to the lack of insurance coverage in accordance with the policy and its exceptions.
Migdal made several main claims: First, it was claimed that prior to the issuance of the policy, false and misleading answers were given regarding the status of the company and the subsidiary in the offer forms filled out and signed by Pinkovich, and that the failure to disclose this information constitutes a breach of the duty of disclosure imposed on the insured. Second, according to Migdal, since the policy is based on Claims Made, and it covers only claims submitted for the first time during the period of insurance coverage under the policy (including circumstances that may lead to such claims), the circumstances of the case in question, which were known prior to the conclusion of the insurance contract and were not delivered to Migdal, are not covered by the policy. Third, it was argued that the claim revolved for the vast majority of acts committed prior to the policy period or the retroactive date set therein. Fourth, according to Migdal, some of the acts attributed to the directors (including a blatant breach of the fiduciary duty and all the acts attributed to Pinkowitz) are excluded from the policy and cannot be insured, as appears in section 263 of the Companies Law. Finally, it was argued that according to the provision of clause 4.14 of the policy, a claim filed at the company's initiative is not included in the insurance coverage.