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The Duty of disclosure by Insureds under Israeli Law

The Insurance Contract Law, 1982 requires that an insured provide full disclosure of any "material matter" where a direct question is put to it.

A material matter is that which a reasonable insurer would regard as affecting his decision to enter into the contract or enter the contract under the conditions included therein.

It is important to note that pursuant to the Israeli Law, the insured`s duty of disclosure applies only to questions presented to the insured either in the proposal form or in any other written document. The insured has no independent duty of disclosure unless he fraudulently conceals information.

In case the insurer becomes aware of non disclosure of a material matter, prior to the occurrence of the insured event, the insurer is entitled to cancel the policy, within 30 days.

However, if the insured event has already occurred, the general remedy for material non-disclosure is payment of reduced insurance proceeds (corresponding to the amount of increased premium which insurers would have charged, had they been made aware of the true circumstances).

Avoidance is not an option under Israeli law. However, it is possible for an insurer to decline coverage for specific claims if there has been:

1. Fraudulent non-disclosure. Insurers would bear the burden of proof as to any such allegation and the test for fraud in this context is extremely strict under Israeli law.

2. Non-disclosure of a matter which is so important that no reasonable insurer would have assumed the risk for any premium whatsoever. Where this test is satisfied, insurers will be entitled to decline coverage in respect of claims directly related to the matter which was not disclosed.

It is important to note that the insurer will not be allowed to rely on this remedy in case he knew, or ought to have known the true situation at the time of the conclusion of the contract or in case the insurer caused the reply not to be complete and straightforward.

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