Adv. Peggy Sharon, Adv. Sharon Shefer and Adv. Karin Barel
On 25th September 2017, the Central District Court (Judge Kinar) declined a Claim filed by Plaintiffs: Eran Polack (hereinafter: Polack) and several companies controlled by Polack against Insurers: Menorah Mivtachim Insurance Company, after Menorah, represented by Levitan, Sharon (P. Sharon, S. Shefer, K. Barel) proved to the Court that the claim was filed with fraudulent intent.
In February 2010, Eran Polack, an Israeli diamonteer, opened a new office for diamond trade in Hong Kong. A day after the office opening, Polack reported to his Insurers that he was robbed under threats and violence and hundreds of diamonds that were shipped to the HK office, in an overall value of $10,000,000, were robbed. Polack was insured under “Jewelers Block” Policy with a limit of liability of $ 3.5 million. However in January 2010 (just days before reporting the alleged robbery), he extended his
insurance coverage under the Policy to $10,000,000.
Most of the c reported robbed were not owned by Polack, but rather by other diamonteers, from whom he had collected the goods on memo basis prior to the “robbery”.
According to the statement Polack provided his Insurers, he travelled to HK in order to execute a diamond deal with a new client. When Polack arrived in HK he met two African men who allegedly presented themselves as representatives of an African businessman who was sent by a broker from Moldavia and wanted to purchase high valued diamonds. Polack agreed to the Africans request to meet them before dinner in order to show them where his office is located and ensure that it was properly secured for the deal. Polack argued that when the African men exited the elevator leading to the floor where the office was located, they suddenly became aggressive and demanded that he open the door. Polack argued that the men attacked him with a knife, ordering him to open the safes and empty the safes’ contents into their bags.
Insurers suspected that the circumstances of the occurrence, as described by Polack, were not truthful and declined the claim setting out several contentions relating to both the failure of Polack to prove an insurance event, and to breach of insurance conditions (permitting strangers to enter his office when he was alone in the premises).
A few months after the claim was submitted to Court, the GIA Laboratory which had issued gemological certificates prior to the robbery for most of the diamonds that were “robbed”, notified that a number of diamonds which were flagged as “robbed”, had been sent by Polack asking the lab to issue new certificates for these stones. This development led the Insurers to open a further investigation revealing that tens of diamonds which had been reported as stolen remained in Polack’s inventory after the alleged robbery, under a different identity and a new code. Some of the diamonds had undergone polishing which was intended to disguise their identity.
Following the above shocking discovery, Insurers requested to amend their Statement of Defence and added the allegation of fraudulent Claim.
The allegation of fraud was supported by the expert opinion of Mr. Don Palmieri, referring to 400 diamonds which were reported as stolen, but had in fact remained in Polack’s stocks after the “robbery” with an overall value of over $6 million.
Polack argued that the stones that were allegedly found in his possession were actually different stones from the ones robbed and that they were part of his stock. However, he could not trace any purchase invoices for these diamonds nor could he provide reasonable explanations for the duplications of the certificates.
The District Court Judgment
On 25th September 2017, the District Court handed down an extensive Judgment declining the Claim filed by Plaintiffs and determined that the Claim was fraudulent.
The above judgment analyzed Insurers’ argument of “fraudulent intent” according to three elements that were determined in an Israeli Supreme Court precedent, ruling that the circumstances of the case prove that each and every element was fulfilled:
- Providing false or fraudulent facts.
- Awareness of the fraudulent facts that were provided.
- Intent to receive funds based on fraudulent or inaccurate facts.
Firstly, the Court examined the allegation of fraud relating to the stones allegedly robbed and discovered in Plaintiff’s stock after the robbery. The Court accepted the theory presented by the Insurer’s gemological expert, Mr. Don Palmieri, according to which one can compare between two diamond certificates in order to discover whether the two certificates belong to the same stone. Establishing that the method of comparing certificates is accepted, the Court also accepted Insurers’ arguments that many of the diamonds that were allegedly stolen remained in Plaintiffs’ stock.
The Court concluded that Insurers proved all three elements of “Fraudulent Intention” i.e. not only that Plaintiffs provided false facts in their Claim as they included diamonds that they knew had not been stolen, but were aware that these facts were false and they provided them in order to receive unlawful insurance benefits from their Insurers. The Court found proof that at least 115 stones (over 1 carat), valued at over $5 million had remained in Plaintiff’s stocks after the robbery, and this was not a marginal fact of the claim, but the heart of the claim which set the fate of the entire claim to be declined.
Notwithstanding the above, the Court also referred to the question of whether in fact the robbery occurred or not and to the circumstantial indications brought to the table by Insurers which raised many doubts about the possibility that the robbery as described by Polack could occur. The Court expressed its doubts as to the credibility of the facts provided by Polack including the fact that no steps were taken to find out the identity of the “buyer”, in respect of the condition of the office which was not organized properly for the alleged business transaction, the fact that Polack released his secretary earlier than usual, the fact that the Polack ordered her to cover the windows, and etc.
Although only circumstantial evidence was brought to substantiate the allegation of a staged robbery, the Court determined that the distance between what was presented and the lifting of the heavy burden to prove fraud which is imposed on Insurers in this case, is a hair’s breadth.
The Court ruled that Insurers had succeeded in proving that Polack had provided false facts in connection with the onset of the robbery, in that he alleged that he only allowed them to enter his office after they threatened him. The Court determined that Insurers proved that Polack willingly allowed the African men to enter the office.
Therefore, in view of the fraudulent version in respect of the entry into the office, the Court ruled that Polack had fraudulent intent, and for that reason as well, the claim was dismissed with costs.