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Most policies which cover diamonds during exhibitions, include a special condition according to which: "Stock should be displayed in key-locked showcases at all times during exhibition hours other than whilst removed for showing to customers".
 The above wording seems very clear, doesn't it? However, as always, reality is beyond all anticipation. In a recent case (C.A. 42662/99 Schwartz Diamonds v. I.L.U Companies and Others, Magistrates Court, Tel Aviv - not yet published), it transpired that disputes on interpretation could not be avoided. The question was whether the policy covers a situation where, whilst showing one item from stock to a customer, the showcase with the remaining stock was left closed but not locked with a key. The missing item was most probably stolen from the
showcase while the insured's representative was busy showing stock to potential customers. The court examined the various rules of interpretation to the policy terms as follows:
(a) The strict interpretation based on the written words - leads to the conclusion that only the item removed from the showcase for display to customers may be not locked during that time. The word "removed" relates only to the stock that is actually removed, but not to the remaining stock.
(b) The logical meaning and objective of the contract - the basic rule is that a policy, just as any other agreement, should be interpreted in the context in which it was made, according to its purpose and objective. In our case, the purpose was to insure the diamonds during exhibition hours, but only if proper precautions are taken, namely, to lock the stock in a showcase when it is not being shown to a customer. The wording reflects the reasonable risk and the limitation of the risk which the insurers were willing to accept.
(c) Interpretation against the drafter (contra proferentum) - any ambiguity should be interpreted against the drafter, i.e. against the insurance company. This rule should be applied in cases of doubt not only regarding the wording but also regarding the purpose of the relevant term.
(d) Giving validity to a term rather than its voidance - The court will usually prefer the interpretation of a term which leads to the obligation of an insurance company to indemnify the insured, rather than one which exempts it from liability; all subject to the nature of the risks which the policy intended to cover.
Taking into consideration the above principles, the Magistrates Court ruled that the insured did not fulfill its obligation to lock the goods in a showcase, and therefore is not entitled to indemnification under the policy.
The claim was dismissed. The insured filed an appeal to the District Court, however, in view of a settlement which was reached, the appeal will not be heard.
Although there is no Supreme Court precedent regarding the proper interpretation of the Exhibition Clause, the importance of the above case is in the analysis of the policy interpretation principles, and the emphasis it gives to the special risks covered under this kind of policy.
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