"We Thought Everything Was Arranged": The Moment When Your Apartment, Business and Insurance Fall Apart

Three lawyers specializing in insolvency, family law and insurance law explain that legal, financial and insurance risks that appear settled can turn out to be problematic in a moment of crisis, when typically the warning signs were already present before.

A legal, financial or insurance risk that seems settled can turn out to be problematic in a moment of crisis, since usually it already existed, hidden within a family agreement that was never written down, an insurance policy that was never updated, a contract that was never reviewed, or a business that was run on gut feeling. Attorneys Avihai N. Vardi, an expert in insolvency and debt arrangements, Meir Bar Mocha, an expert in family law, and Oz Barkovitz, an expert in insurance law, explain that in most cases reality requires documents, data, evidence and full disclosure, and that a sense of security alone is insufficient.

According to Vardi, the timing of identifying difficulties is sometimes the difference between a problem that can be solved and a crisis that is hard to stop. 'When someone identifies the difficulties is dramatic for the ability to solve them,' he said, adding that 'like in medicine, the later you discover the problem, the harder it is to treat it.' According to him, the signs of a business in trouble come through the numbers or through relationships with the environment, such as pressure from the bank, concerns of suppliers, cash flow difficulties, growth in credit or a shift to more expensive sources of financing.

Attorney Bar Mocha describes a similar gap within the family: according to him, people tend to rely on understanding, behavior and family norms, but at the moment of separation, death or conflict the legal language changes, which requires evidence, documents and proof. He brings as an example spouses who live for years in a house that belongs to the parents of one of them, renovate and expand it, while the registration remains in the parents' names or one side only. 'A woman can say: I lived in this house for thirty years, we expanded it, renovated it, made it a beautiful home,' he explains, 'but the registration remains the same. In such a situation, very complicated disputes arise.'

Attorney Barkovitz explains that 'a policy is not a blank check' but rather 'a precise contract in which the insurance company assumes a defined risk that is priced in advance based on the information presented to it.' According to him, if the property is insured for less than its true value, if protection measures have been removed or if business activity has changed, the sense of security can prove misleading. Regarding underinsurance he said: 'Often the insured declare property values lower than their true value in order to reduce the premium,' and added that the law protects insurance companies and determines that compensation will be proportional only, since an insurance company cannot be required to bear the full damage for property that was not insured at its full value.

Attorney Barkovitz noted that the insured who rush to repair damage, remove damaged items or change the scene of the incident before an assessor arrives prevent proper examination of the extent of the damage and its causes, and that the insured who rush to accept liability in place of an incident involving a third party or to guarantee compensation to the injured party can harm the insurance company's ability to conduct a legal defense. He added that 'an insurance contract must faithfully reflect the changing reality of life' and that 'any material change in risk requires immediate notification of the insurance company.' Attorney Bar Mocha added that the first step is to consult with a lawyer, and that early consultation is not a betrayal of family trust.