By: Adv. Moshe Taieb | Lev-Taieb Law Firm

Duty to Explain Policy Exclusions Over the Phone: A Tort Ruling

A pivotal court ruling established fundamental principles in the field of insurance law regarding the obligations of insurance companies toward their policyholders, specifically when policies are sold or renewed over the phone.

The Facts of the Case

The insured purchased an insurance policy via a telephone conversation with a sales representative. When the insured later filed a claim, the insurer denied coverage citing a policy exclusion. The insured argued that the exclusion was never explained to them during the phone call.

The Court’s Ruling

The court held that insurance companies have a duty to clearly explain material exclusions when selling policies by telephone. A policyholder who was not informed of a significant exclusion cannot be bound by it. The insurer was held liable in tort for the representative’s failure to disclose the exclusion.

The Duty to Explain

Israeli insurance law imposes an affirmative duty on insurers to proactively disclose and explain all material exclusions to potential policyholders. This duty is heightened when policies are sold remotely, as the buyer cannot physically review the contract before purchase.

Liability for Sales Representatives

The court also affirmed that insurers bear vicarious liability for representations made by their sales representatives. A promise or assurance given by a sales agent during a phone call binds the insurer.

What Policyholders Should Know

If an insurance company denied your claim citing an exclusion that was never clearly explained to you, you may have grounds for a legal claim. Keep records of all telephone conversations and written communications with your insurer.