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27 August 2019
On 28 July 2019 the Supreme Court (Justices N Hendel, M Mazuz and A Baron) declined an appeal filed by Eran Polack and several companies controlled by him against the insurers Allianz Versicherungs, Menorah Mivtachim Insurance Company and HDI-Gerling Industrie Versicherungs. The insurers argued and proved in the district court that the claim was fraudulent. The Supreme Court stated in the appeal that the factual basis determined by the district court was sufficient to conclude that the insured event had not occurred.
The insured filed a claim in the Lod Central District Court under a jewellers block policy, alleging that he had been the victim of a violent robbery in which diamonds and cash worth approximately $11 million had been stolen. The appellant claimed that he had been beaten, stripped and tied up by two robbers who stole all of the diamonds and cash held in his office in Hong Kong. In a lengthy trial, which drew on professional diamond experts from the United States, witnesses from Hong Kong and video footage from the building where the office was located, it was proven that 400 diamonds worth more than $6 million – which had been claimed as stolen – were in fact in Polack's stock or had been sold by him after the alleged robbery having been marked with new identification certificates. The district court stated that this fraud concerned the core of the claim and dismissed it with costs.
The district court found the appellant's version of events problematic and many doubts that the court raised were unanswered by the insured. However, the claim was fully dismissed based on the fact that the 400 diamonds reported as stolen were proved to be in the appellant's possession after the alleged event. The district court held that whether or not the robbery had occurred, the fact that the appellant had wrongfully reported diamonds worth more than half of his claim as missing and his fraudulent behaviour following the alleged robbery justified the denial of his claim.
The district court held that the insurers had not proven that the robbery had been staged (ie, ruled that the robbery had occurred); however, according to Section 25 of the Insurance Contract Law, when an insured communicates false facts to an insurer, the insurer is relieved of liability.
Polack filed an appeal to the Supreme Court arguing that the judgment should be set aside and that he was entitled to partial insurance benefits for the diamonds, which the insurers had been unable to definitively prove were in the insured's possession after the alleged robbery.
The appellant argued that as the Insurance Contract Law does not apply to the insurance of diamonds, a partial payment was due to him under the General Contracts Law.
The Supreme Court upheld the district court's dismissal of the claim; however, its decision was based on a different reasoning.
In a rare decision, the Supreme Court accepted the insurers' argument that no robbery had taken place based on the district court's factual findings. Justice Hendel held that the long list of facts contradicting the appellant's version of events, the serious doubts raised by the district court that had been left unanswered and the lack of external evidence to prove the robbery all lead to the conclusion that the robbery had not occurred. Justices Mazuz and Baron stated that "where there is no robbery, there is no claim" and Justice Baron added that appellant's fraud was "under the flashlight".
The Supreme Court concluded that since it had been established that the insured event had not occurred, the discussion of the partial payment of insurance benefits was redundant. Nonetheless, Justice Hendel stated that the exclusion of diamond insurance from the Insurance Contract Law does not close the door to applying similar rules stemming from general principles, such as good faith.
Similarly, marine and aviation insurance are also excluded from the Insurance Contract Law and laws and doctrines such as the Standard Contacts Law 1982 and the good faith principle may apply to these branches of insurance where the Insurance Contract Law does not.
For further information on this topic please contact Peggy Sharon or Sharon Shefer Levitan, Sharon & Co by telephone (+972 3 688 6768) or email (email@example.com or firstname.lastname@example.org). The Levitan, Sharon & Co website can be accessed at www.israelinsurancelaw.com.
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