Clyde & Co– U.K – Adv. Michelle Radom
Levitan, Sharon & Co – Israel – Adv. Sharon Shefer
Differences between legal systems regarding the rights and obligations of parties to an agreement, may have particularly significant consequences in the insurance industry. This is especially true where a primary insurer is subject to Israeli law under the original insurance policy, while the corresponding reinsurance contract is governed by a different law.
Under the Israeli Insurance Contract Law, 1981, reinsurance contracts, marine insurance and aviation insurance are exempt from the scope of the statute. Consequently, reinsurance policies not necessarily are subject to Israeli law.
A recent decision of the English Commercial Court in Grimes v. Liberty Mutual Insurance Europe SE [2026] illustrates the substantial differences between English and Israeli law regarding an insurer’s obligation to specify the grounds upon which a claim is denied.
The principal issue before the Court was whether an insurer that fails to include all available coverage defenses in its denial letter is precluded from relying on additional defenses which were known to it at the time the letter was issued.
In Grimes, the insurer declined the insured’s claim relying upon one coverage defense, I.E event not covered by the policy, but did not invoke another available defense, namely the insured’s failure to comply with a Condition Precedent requiring immediate notification of an alleged insured event.
The insured argued that by referring only to one reason for declination, the insurer waived its right to rely on another reason, under the doctrine of Waiver by Estoppel.
The Court rejected that argument, stating that an insurer’s reliance on one policy defense does not, by itself, amount to an unequivocal representation that it will not rely upon other available defenses at a later stage. For waiver by estoppel to arise, there must be:
- a clear and unequivocal representation by the insurer that it will not rely upon additional policy defenses; and
- detrimental reliance by the insured on that representation.
Neither requirement was satisfied in the present case.
Accordingly, the Court concluded that Liberty Mutual was entitled to rely upon the insured’s breach of the notification condition even though that defense had not been included in the original denial letter.
The Israeli Position
Israeli law adopts a significantly stricter approach, for the benefit of the insured.
In the relationship between insurer and insured, Israeli courts have consistently held that an insurer must set out, in its denial letter, all grounds for rejecting the claim that are known to it at the time the decision is made.
This obligation derives directly from directives issued by the Israeli Capital Market Insurance and Savings Authority, which have been repeatedly endorsed and enforced by the Israeli Supreme Court.
The leading judgments include:
- CA 10641/05 Phoenix Israeli Insurance Co. Ltd. v. Assulin
- CA 2121/14 Eliyahu Insurance Co. Ltd. v Yashar
As a rule, an insurer that fails to raise a particular defense in its denial letter will not subsequently be permitted to rely upon that defense during litigation, unless the relevant facts were unknown to the insurer, or could not reasonably have been discovered, when the denial letter was issued.
The Israeli approach reflects the insurer’s enhanced duty of good faith.
Accordingly, an insurer is expected to:
- conduct a proper investigation;
- make an informed coverage decision; and
- disclose to the insured all grounds supporting its denial of the claim.
If the Grimes case would be litigated in Israel, the court decision would be different. This case serves as a clear reminder that the legal consequences of an insurer’s denial letter vary significantly depending on the governing law.
For insurers and reinsurers operating across jurisdictions, appreciating these differences is essential for their day-to-day operation.
November 2, 2026
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