In one of her last judgments before retirement, Judge Denia Keret-Meir from the Tel Aviv Economic District Court handed down a comprehensive and significant judgment that involved several insurance issues.(1)


A claim was filed by 37 plaintiffs who had invested their life savings through Apolo, an investment consulting firm. Apolo was owned and managed by a convicted felon who had been involved in various capital markets felonies. The felon's involvement had been concealed from Apolo's clients. The felon had instructed an investment consultant to invest the plaintiffs' money in several fictitious funds that he owned. In this way, the felon had stolen millions of shekels from the plaintiffs.

The plaintiffs filed a claim against Apolo, the felon, Apolo's director (who held the felon's Apolo stocks in escrow) and Apolo's insurer, AIG Israel Insurance Company Ltd.

Insurance issues

AIG denied its liability based on several arguments. Its main argument was that the felon's existence and involvement had been concealed from AIG during the underwriting and issuing of the policy. AIG claimed that Apolo's director had completed and signed a detailed questionnaire in which he had lied and withheld relevant information. AIG argued that no insurer would have agreed to insure an investment consulting firm owned and managed by a convicted felon. According to Clauses 6 to 7 of the Insurance Contract Law, the insured must provide the insurer with all relevant information. According to the law, a breach of the insured's disclosure duty will exempt the insurer company from liability in one of two circumstances:

  • the insured meant to deceive the insurer; or
  • no reasonable insurer would have agreed to insure the insured having known the full facts.

In this case, AIG claimed that both circumstances applied. In addition, it argued that the policy explicitly exempted coverage of any claim or loss "arising out of any dishonest, fraudulent, criminal or malicious act or omission of any director or partner of the insured".

In her judgment, Keret-Meir examined in detail the various insurance issues raised by the parties. She accepted AIG's position and dismissed the claim against it.

The court determined that the insured has a broad disclosure obligation during the underwriting of a policy. An insurance contract – like any other contract – is subject to duties of good faith and fairness. Therefore, the insurer is entitled to rely on the information provided to it by the insured and is not obliged to conduct additional independent investigations.

Regarding the validity of the above exemption, the court rejected the plaintiffs' interpretation, that this exclusion does not apply to the liability of negligent individuals in Apolo as they did not commit fraud. The court preferred AIG's argument that as long as the damage was caused due to fraud committed by a director or partner, the exclusion will apply.

The court determined that the reliance of third parties on the existence of the insurance policy was not relevant to the examination of the existence of insurance coverage.


The claim against Apolo and its employees (ie, the felon, the director and the investment consultant) was accepted and the court ordered them to pay the plaintiffs approximately NIS2.4 million. Further, the claim and the third-party notices against AIG were dismissed and the court ordered the plaintiffs and the defendants who had filed the third-party notices to pay AIG expenses of NIS290,000.

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For further information on this topic please contact Dror Zamir or Hadas Adler at Levitan, Sharon & Co by telephone (+972 3 688 6768) or email ( or The Levitan, Sharon & Co website can be accessed at


(1) CC 24088-08-13, Leibowits v Apolo Investments Ltd.