The UK Reform An Israeli Perspective Professor Ronen Avraham Tel Aviv Univ Faculty of Law

3 Periods. 1948-1973: English law applies (Pro-Insurer). “Insurance is a contract upon speculation. The special facts, upon which the contingent chance is to be computed, lie more commonly in the knowledge of the insured only: the underwriter trusts to his representation… Although the suppression should happen through mistake, without any fraudulent intention; yet still the underwriter is deceived, and the policy is void.” Carter v. Boehm (1766) 3 Burr. 1905

3 Periods. 1973-1981: General Contract Law applies (More equal treatment).  Section 12- Negotiation in Good Faith. 12. (a) In negotiating a contract, a person will act in customary manner and in good faith. (b) … Section 15- Deceit. A person, who has entered into a contract in consequence of a mistake that is the result of deceit practiced on him by the other party…may rescind the contract. For this purpose, 'deceit' includes the nondisclosure of facts which the other party, according to law, custom or circumstances, should have disclosed. Note: State of mind of inusred does not matter.

3 Periods. 1982-present: Insurance Contract Law (Pro Insureds) Highlights: One statute for both consumer and commercial insureds. Courts treat the statute as a consumer protection law. Lower courts sometimes distinguish between sophisticated and non sophisticated insureds. Duty of good faith applies only to insurers (Rotenberg, Piamenta). State of mind of insured apparently matters. And yet, it is very hard for insurers to win on fraud. As a result, duty of voluntary disclosure by insureds is virtually non existent. Partial remedies (no longer all-or-nothing).

Misrepresentation 6. (a) Where…the Insurer asks the Insured in writing…a question as to a point likely to affect the willingness of a reasonable Insurer to conclude the contract at all or to conclude it on the conditions contained in it (hereinafter: ‘material matter‘), the Insured will reply to it in writing completely and straightforwardly (honestly). (b)… (c) …

Remedies for Misrepresentation (Sections 7 & 8) Is Misrepresentation Fraudulent? Did insurer know or should have known the true situation? Full Coverage Did the misrepresentation still exist before the occurrence? Did it affect the extent of liability of the Insurer? Would any reasonable insurer agree to cover had real facts been known? Partial Coverage based on real facts Void No Coverage Yes No No No No ) a reasonable Insurer would not have entered into the contract, even for higher premium, had he known the true situation; in this case, the Insured is entitled to a refund of the premium paid by him for the period subsequent to the occurrence of the event Insured against, less the expenses of the Insurer. Yes Yes Yes Made in Israel

Voluntary Disclosure. 6. (a) … (b)… (c) The concealment by the Insured, with fraudulent intent, of something he knows to be a material matter will be treated as the giving of a reply which is not complete and straightforward (honest). In practice- no duty. The reason- among other things, courts in Israel are unlikely to ever find fraud.

Warranties & Condition Precedent (Sec 18-21) Did the breach of condition affect the extent of liability of the Insurer? Would any reasonable insurer agree to cover had it known conditions were breached ? Partial coverage based on the fact conditions were not met No Coverage. Full Coverage Made in Israel Yes Yes No No

Questions?