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On 29th July, 1997, the Israeli Pfarliament (the Knesset), approved an amendment to the Israel Insurance Business Control Law - 1981, (hereinafter: the Control Law) to include a specific chapter regarding class action.
The amendment provides:
CHAPTER E1: CLASS ACTION
Class Action:
62A.(a) A person, the Israeli Consumer Council or other consumer organisation which the Ministry of Justice approved pursuant to Section 31(c) of the Consumer Protection Law - 1981 (hereinafter: the Plaintiff) may file a claim in the name of a group of people regarding any cause in respect of which the Plaintiff can claim in his own name and against any defendant against which he can claim in his own name according to Section 38 and 39 as well as according to Chapter E (hereinafter: a class action).
(b) Where the cause of action, according to the provisions of subsection (a) is damage, it is sufficient that Plaintiff shows that damage was caused to him.
(c) A judgment in a class action will be res judicata in respect of all those composing the Class, subject to Section 62C(b).
Approval by the Court:
62B. The filing of a class action requires the approval of the Court which will not give such approval unless it is convinced that the following conditions have been complied with:
(1) The size of the Class justifies the filing of the claim as a class action.
(2) There is a reasonable possibility that material questions of fact and law common to the Class will be determined in the Class Action in favour of the Class.
(3) The filing of the class action is, in the existing circumstances, preferable to filing personal claims, and is a justified and fair way to resolve the dispute.
(4) There are reasonable grounds to assume that Plaintiff represents the interests of all the participants in the Class in a proper way.
Definition of the Class:
62C.(a) When the Court has approved the filing of the claim as a class action, it shall define the Class in whose name the claim is filed, and it shall order the manner in which its decision shall be published.
(b) Every person who belongs to the Class defined by the Court shall be deemed to have agreed to the submission of the claim as a Class Action, unless he informs the Court of his desire not to be included in the Class, within 45 days of the day on which the Court's decision was made public. The Court may, upon application by any person, extend the said period for such person if it finds special cause to do so.
Arrangement or Compromise:
62D. A Plaintiff shall not opt out from a class action nor shall he make any arrangement or compromise with a defendant without the Court's approval.
Regulations:
62E.(a) The Minister of Justice shall set the procedure for the submission of a Class Action and its conduct, and he may provide for ways to hear the position of the Attorney General and the Supervisor and, with the agreement of the Minister of Industry and Commerce, the position of the Israeli Consumer Council or a different consumer organisation mentioned in Section 62A(a) (hereinafter: a consumer organisation).
(b) The Minister of Justice may enact rules on the ways of proving the damage caused to each member of the Class.
Notification:
62F. A Plaintiff who files a class action shall notify the Attorney General and the Supervisor thereof, in writing.
Exemption from Court Fees:
62G. The filing of a class action will be exempt from payment of Court fees.
Attorney's Legal Fees:
62H. The legal fees of the attorney representing Plaintiff in the class action will require the approval of the Court.
Special Indemnification and Compensation:
62I.(a) If the Court decides on monetary compensation in a class action, then -
(1) It may order that the compensation be paid immediately or within a period set out by the Court.
(2) It may order that the compensation be paid periodically according to conditions which will be set out by the Court.
(3) It may order a part of the amount adjudged - as it finds appropriate after costs and attorneys' fees have been deducted - to be paid to the Plaintiff who took the trouble to file and prove the claim, and the rest to be divided among the members of the Class, in proportion to the damage suffered by them, or in any other way which the Court may order.
(b) If the Court finds that monetary compensation to the members of the Class, in all or in part, is not practicable under the circumstances, either because it is impossible, with reasonable expenditure, to identify them and effect the payment, or for any other reason, it may award any other remedy for the benefit of the Class, in whole or in part, or for the benefit of the public, as it may deem fit in the circumstances.
Other Remedies not Excluded:
62J. The provisions of this chapter shall not deny a Plaintiff according to this Law, other legal redress against a defendant.
This amendment applies only to a cause of action which crystallised after 29th July 1997.
Obviously, due to the fact that the Law is very recent, there are no legal precedents dealing with the new provisions.
However, the amendment is identical to the provisions of other laws dealing with the filing of a class action (for example, The Israeli Securities Law and the Israeli Consumer Protection Law). Therefore, there is reason to believe that if and when the Court is faced with the question of whether to approve a claim against an insurance company as a class action, it will construe the provisions in the same manner as it construed the provisions in the above mentioned laws.
In the following, we will briefly mention some of these provisions:
Causes of Action:
One of the legal issues raised in applications to recognise claims as a class action under the Israeli Securities Law is whether the cause of action fon which the Class Action is founded must be confined to breach of the Securities Law or whether it can rely on causes of action based on tort. The Courts considered this question in view of the provision in the Securities Law that: '...a person who holds a security may sue on any grounds for which the Plaintiff, according to Law, can sue on his own behalf'.
In a Lower Court decision the Court decided that such Class Action should be confined to breach of the Security Law. An appeal was lodged. It is expected that the Court of Appeal will reverse this decision.
Unlike the provision in the Securities Law, the Control Law is very clear: a person may file a Class Action against an insurance company only based on Sections 38 and 39 as well as according to Chapter E of the Control Law. Although on the face of it, it seems that these stipulations greatly restrict the causes of action for Class Actions, a close look at these provisions discloses that they are very wide and include most of the causes in respect of which a person may wish to sue an insurance company.
The said provisions deal with the form and presentation of the insurance policy (emphasis of certain terms, size of letters etc.); the insurer's and agent's duty to correctly present the insurance transaction; the correct presentation of the risks covered, the period of insurance, sum insured, the rate of premium; prohibition to condition the purchase of one kind of insurance with the purchase of another; prohibition to exploit the insured's distress, etc. However, negligence, as a general cause of action, is not specified in these sections.
Uniformity of Factual and Legal Questions:
Section 62B(2) of the amendment conditions Court approval on its finding that 'There is a reasonable possibility that material questions of fact and law common to the Class will be determined in the Class Action in favour of the Class'
Similar provisions were construed to mean that there is no need for total uniformity of the members of the Class. It is sufficient that the substantial aspects of facts and law of the case are common to all the members of the Class.
The test which should be implemented relates to the main question, as opposed to incidental and supplementary questions.
(CC 19, 114/92 Z.T. Economic Consultation Ltd. and others v. Teva Pharmaceutical Industries & others (not yet published).)
Regarding the 'reasonable possibility' of the Court determining in favour of the Class, in the above mentioned Z.T. case, the Court ruled that it is up to the Plaintiff to convince the Court that on the face of it, the claim has a reasonable chance of succeeding. The Court's decision as to 'reasonable chances' is based only on the Statement of Claim, the interrogation of the Plaintiff and any affidavit of the defendants if such is introduced. The Court should not accept, at this stage of the trial, an expert opinion on behalf of the defence.
The Members of the Class:
Plaintiffs who wish to claim in the name of the Class, do not have to identify each and every member of the Class prior to lodging the claim.
(Global Management Investment & International Finance Consultation Ltd. v. '5 Yod' Jewellery, Precious Metals Ltd. (not yet published))
Suitability of Claimant to Lodge Class Action
In order to prove the suitability of the parties applying for a class action, they should prove to the Court their financial ability to continue the litigation until termination as well as the proficiency and ability of the attorney representing them, to conduct such a case.
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