On July 28th 2019, the Supreme Court of Israel (Justices N. Hendel, M. Mazuz, A. Baron) declined an appeal filed by Eran Polack and several companies controlled by him against Insurers: Allianz Versicherungs, Menorah Mivtachim Insurance Company and HDI-Gerling Industrie Versicherungs. Insurers were represented by Levitan, Sharon & Co. (P. Sharon, S. Shefer, K. Barel) 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 enough to conclude that the Insured event did not occur.
The Facts
Polack, the Insured, filed a claim in Lod Central District Court, under the Jewelers Block policy, alleging that he had been a victim of a violent robbery whereby diamonds and cash at the value of approximately $11M were stolen. Appellant claimed he was beaten up, stripped down and tied up by two robbers who stole all the diamonds and cash held in his office in Hong Kong. In a lengthy trial, with professional experts of diamonds from the US, witnesses from Hong Kong, Camera videos 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, laying in his stock or sold by him after the alleged occurrence, marked with new certificates of identification. The District Court stated that this fraud related to the core of the claim and dismissed the claim with costs.
The Arguments
The District Court found the appellant’s version of events problematic and puzzling, many doubts were raised by the court and were unanswered by the insured. However, the claim was fully dismissed based on the fact that 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 occurred since the appellant wrongfully reported diamonds worth more than half of his claim as missing, his fraudulent behavior following the alleged robbery justifies fully denial of his claim.
The District Court held that Insurers did not discharge the heavy burden to prove that the robbery was staged, however according to Section 25 of The Insurance Contract Law, in case the Insured communicated false facts to the Insurer, the Insurer is totally relieved of liability.
Appellant filed an appeal to the Supreme Court arguing that the judgment should be set aside, and alternatively that he is entitled to partial insurance benefits for the diamonds which Insurers were not able to positively prove were found in the Insured’s possession after the alleged robbery.
The Appellant argued that as the Insurance Contract Law does not apply to diamonds, hence according to the General Contracts Law, a partial payment is due to the Insured.
The Judgement
The Supreme Court upheld the District Court’s dismissal of the claim, however, it based the dismissal on different reasoning.
In a rare decision, based on the District Court’s factual findings, The Supreme Court reached a different conclusion: no robbery had taken place. Justice Hendel held that the long line of facts contradicting the appellant’s version, the serious doubts raised by the District Court and were left unanswered, and lack of external evidence to prove the robbery, leading to the conclusion that the robbery did not occur. “Where there is no robbery, there is no claim“. Justice Mazuz and Baron consented, and Justice Baron added that the appellant’s fraud is “under the flashlight”.
The Supreme Court concluded that since it was established that the insured event did not occur, the discussion re partial payment of insurance benefits is redundant. Nevertheless, Justices Hendel made some comments on this matter: The exclusion of Diamond Insurance from the Insurance Contract Law does not close the door to applying similar or identical rules stemming from general principles, such as Good Faith.
Similarly, Marine and Aviation Insurance were 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.
