Levitan, Sharon & Co

On April 13, 2026, the Israeli Supreme Court delivered an important judgment in Renault S.A.S. v. Ganot (Civil Appeal 22239-04-25), addressing the long-standing approach of Israeli courts toward awarding legal costs against unsuccessful plaintiffs in class action proceedings.The ruling may prove significant for insurers and businesses operating in Israel, particularly in sectors frequently exposed to consumer class actions, including automotive, financial services, pharmaceuticals, telecoms and insurance.For many years, Israeli courts have followed what is commonly referred to as the “moderation rule” – namely, a restrained approach to awarding costs against representative plaintiffs whose motions for certification of class actions are dismissed. The rationale behind this approach was the concern that substantial cost exposure could create a chilling effect and discourage the filing of legitimate class actions serving the public interest.The new Supreme Court judgment does not formally abolish this principle. However, two of the three justices expressly stated that the time may have come to reconsider the traditionally lenient approach and gradually move toward more substantial costs awards in appropriate cases. The Underlying ProceedingsThe proceedings arose from a proposed class action filed against Renault and its Israeli importer, alleging that certain vehicle safety systems failed to comply with Israeli regulatory standards.The motion for certification relied heavily on an expert opinion which the District Court later described as fundamentally flawed and incapable of supporting the allegations advanced in the application.After lengthy proceedings, including preliminary hearings and the submission of the regulator’s position, the plaintiff ultimately withdrew the certification motion. The District Court nevertheless ordered the plaintiff to pay costs of ILS 80,000 to the defendants, noting both the weakness of the claim and the late stage at which the withdrawal occurred.Renault appealed, arguing that the costs awarded represented only approximately 10% of its actual legal expenses and asking the Supreme Court to reconsider the traditional “moderation” approach applicable in Israeli class actions. The Supreme Court’s DecisionThe appeal itself was dismissed, and the Supreme Court declined to increase the specific costs awarded in this case. However, the broader significance of the judgment lies in the competing opinions expressed by the panel.Justice Grosskopf, writing the principal opinion, supported maintaining the existing restrained approach. In his view, representative plaintiffs already face substantial financial risks, including court fees, expert costs and litigation expenses, and exposing them to substantial adverse costs could discourage legitimate class actions.Justice Grosskopf also emphasized the inherent information asymmetry in class actions, where much of the relevant information is held by the defendant. Accordingly, the dismissal of a certification motion does not necessarily mean that the proceedings were abusive or frivolous.However, Justices Ronen and Kasher took a markedly different view.Both justices accepted that Israeli courts may now need to move, cautiously and gradually, toward awarding materially higher costs against unsuccessful representative plaintiffs, even where bad faith cannot necessarily be established.Justice Ronen noted the dramatic increase in class action filings in Israel in recent years, as well as empirical data suggesting that only a relatively small percentage of class actions ultimately result in relief for the represented group.According to Justice Ronen, higher costs awards may be appropriate not only in clearly abusive or bad-faith proceedings, but also in cases where certification motions lacked adequate factual or legal foundation, should never have been filed, or should have been withdrawn at a significantly earlier stage.Justice Kasher went even further in emphasizing the substantial burden imposed on defendants merely by the filing of class actions. He highlighted that class actions expose defendants not only to potentially enormous financial liability, but also to reputational damage, loss of customers and increased regulatory scrutiny, even where the claims ultimately prove meritless.Importantly, both Justices Ronen and Kasher stressed that any such shift should develop gradually through the lower courts on a case-by-case basis rather than through an immediate formal doctrinal change. The Last Word Has Yet to Be SaidAt present, the judgment does not create a formal new rule requiring substantial costs awards against unsuccessful representative plaintiffs. The appeal itself was dismissed, and the specific costs award remained unchanged.Nevertheless, the opinions of Justices Ronen and Kasher strongly suggest that parts of the Supreme Court are increasingly concerned by the growing volume of weak or speculative class actions filed in Israel and may support a gradual recalibration of the balance between encouraging legitimate public-interest litigation and protecting defendants from excessive litigation burdens.Whether lower courts will adopt this approach in practice – and how far the shift will ultimately go – remains to be seen.Moshe Abady: [email protected] Navon: [email protected]

Adv. Liron Elias, Head of Med Mal Team Levitan, Sharon & Co.A recurring issue in the law of evidence concerns privileged documents that have found their way into the hands of a third party without the knowledge or consent of the privilege holder. The central question is whether privileged documents that have been leaked or otherwise obtained by a third party may be used in civil proceedings.This question has become increasingly significant in malpractice litigation, especially in the age of digital communication and electronic document storage, both of which are vulnerable to hacking.Recent Israeli case law has provided a clear answer to this question. Both the Supreme Court and the District Court have affirmed that privileged documents do not lose their protected status merely because they have been leaked outside the original attorney-client relationship.The leading authority is LCA 6171/17 Anonymous v. Meuhedet Health Fund, decided by the Supreme Court in 2017. During medical malpractice proceedings, a journalist obtained an internal risk assessment prepared by the respondent’s counsel. The document was later published, and the applicants sought to submit it as evidence.The Supreme Court rejected the applicants’ attempt, holding that attorney-client privilege belongs to the client and is not waived merely because the document was disclosed without the client’s consent.The Court emphasized that legal privilege protects not only the client’s private interests, but also the broader public interest in candid and effective legal representation. Privilege is not confined to documents physically held by the lawyer or the client. Rather, it attaches to the protected communication itself and therefore “runs with the document,” even when it reaches a third party without the client’s consent.This approach was reaffirmed in Civil Case (Nof HaGalil-Nazareth District Court) 75969-09-25, Matzarwa v. Meir Hospital et al., decided on June 14, 2026. That case arose from a medical malpractice claim that ended in a court-approved settlement in 2015.Nearly a decade later, the plaintiffs claimed that the defendants’ internal risk assessments had reached them through a third party, who claimed he had received them from an anonymous source. They argued that the documents showed the defendants had internal knowledge of negligence despite denying liability in the original proceedings. They therefore sought to reopen the matter on grounds of fraud.The District Court dismissed the claim. It held that the way the documents reached the plaintiffs was irrelevant: even if the plaintiffs themselves had done nothing improper, the documents remained privileged. The Court found that, as internal legal evaluations, litigation risk assessments, settlement recommendations, and communications made in preparation for litigation, the documents are protected by both attorney-client privilege and litigation privilege and are therefore inadmissible.The Court also rejected the argument that the internal assessments constituted proof of fraud. Such materials reflect ordinary legal risk analysis and litigation strategy, not admissions of liability or deceit. Generalized allegations of fraud are insufficient to displace privilege absent a recognized exception. The Court emphasized that the original proceedings had ended in a settlement agreement approved by a court and refused to allow the matter to be reopened.The District Court’s conclusion is consistent with the precedent laid down by the Supreme Court: judicial awareness of privileged information does not by itself make the underlying document admissible.These decisions establish a clear rule in Israeli civil litigation:Legal privilege is not a technical rule of convenience. It is a fundamental condition for candid legal advice and fair litigation preparation.

Uncontrolled Use of AI – court guidelinesRonit Warshai, Adv. Levitan, Sharon & Co.The use of AI programs such as ChatGPT and similar tools has rapidly become a popular research resource for legal matters. The legal system consists of vast amounts of written material, including statutes, regulations, judicial decisions, and academic articles, all of which AI systems can readily access and summarize. However, this benefit also has a darker side.One of the well-known characteristics of generative AI systems is their tendency to provide answers that satisfy the user, even when those answers are not based on reliable information. In some cases, AI programs invent statutes, regulations, case law, or quotations. This phenomenon is commonly known as “hallucination.” Courts have already encountered situations in which parties cited non-existent laws or precedents allegedly supporting their arguments.The following case illustrates the consequences of relying on unverified AI-generated content, the negligence involved in failing to verify such information, and the resulting question of liability.C.A. 63194-08-25 – Nevo Ben Cohen v. Ramat Gan Municipality & OthersIn March 2026, the Israeli Supreme Court delivered its judgment in a case that reads almost like a practical guide to what not to do when using generative AI in legal and administrative work.The dispute began as a routine administrative matter. Ramat Gan Municipality denied a request for special transportation services from the residence of a divorced father, relying on what it claimed was a Ministry of Education Director-General Circular and on “recent case law” allegedly interpreting that circular. The problem was straightforward: the circular did not exist, and several of the cited judicial decisions and quotations were entirely fabricated.The father contacted the Ministry of Education and requested a copy of the alleged circular. The Ministry responded that it was unaware of any such circular. The father then approached the Municipality with the Ministry’s response but received no reply.The father subsequently filed an administrative petition with the District Court. Even in its response to the court, the Municipality and/or its counsel continued to rely on the fictitious circular and the non-existent precedents.On the substantive issue of transportation services, the parties eventually reached a settlement. Nevertheless, the father argued that, in light of the Municipality’s bad-faith conduct in repeatedly relying on AI-generated content without verification, costs should be awarded against it.The District Court denied the father’s request for costs, leading to an appeal before the Supreme Court.The Supreme Court held that the Municipality’s unrestrained reliance on artificial intelligence without reviewing or verifying the information generated amounted to recklessness, constituted serious misconduct, and was wholly unacceptable, particularly given the heightened duty of fairness owed by an administrative authority.Accordingly, the Court ruled that costs should be imposed on the Municipality at the higher end of the scale.This judgment extends far beyond the field of municipal law. It represents a clear judicial statement regarding accountability in the age of artificial intelligence and has implications for all users of AI-generated content.The Court’s Core Message: AI Is Not the Problem – Unverified AI Output IsThe Supreme Court drew an important distinction. The use of AI tools is not inherently improper. What is improper is relying on AI-generated content without adequate oversight, verification, and human judgment when that content forms the basis of decisions, legal submissions, or communications with the public.In this case, the citizen independently examined the alleged circular and the cited case law and discovered that neither existed. Despite being informed of these inaccuracies, the Municipality failed to correct its position until formal legal proceedings were initiated.The Court regarded the submission of pleadings containing unverified AI-generated content as a serious breach of professional obligations and a severe misrepresentation to both the court and the opposing party. Importantly, the Municipality’s conduct was not an isolated mistake; the inaccuracies were repeated at several stages of the proceedings, including after they had been explicitly brought to their attention.This is not the first occasion on which the Supreme Court has addressed the improper use of AI-generated material in legal proceedings.What makes this case unique is the Municipality’s persistent reliance on fabricated information in its dealings with a private citizen.The Court emphasized that individual citizens often lack the expertise, resources, or confidence necessary to challenge official communication that appears well-reasoned and legally supported. A decision that appears lawful on its face may rest on entirely fictitious foundations and may never be subjected to meaningful review. The Court therefore concluded that the Municipality’s conduct amounted to serious negligence.The Court also rejected the Municipality’s attempt to shift responsibility to its attorney by arguing that counsel had failed to correct the submissions after the substantive dispute had been resolved.Important lessons can be drawn from this and other cases involving AI-generated content. Such material should always be reviewed and verified with the same degree of care that would be applied to work prepared by a junior associate or trainee. AI can be a valuable tool, but it cannot replace professional judgment, independent verification, and accountability.

A motion to dismiss a Third-Party Notice Against an Insurer in the early stage of the Litigation based on a War and Terror Exclusion One of the events arising from the 7 October massacre has recently been brought before the Court in proceedings filed against the Municipality of Sderot, a town located approximately eight kilometers from central Gaza.On the morning of 7 October, a group of pensioners set out on a trip by minibus, traveling from central Israel to the Dead Sea. When the minibus arrived at Sderot, it stopped due to a flat tire. A few minutes after the minibus stopped, sirens sounded. The 13 pensioners tried to enter a nearby reinforced shelter, whose doors were supposed to be open when rocket sirens were activated.The shelter doors did not open leaving the pensioners exposed outside, trying to lie on the floor to protect themselves. Shortly afterwards, armed Hamas terrorists arrived and opened fire on all the 13 men and women lying on the floor. All of them were murdered on the spot except for the bus driver who was the only survivor.A claim for negligence was filed by the estates of the murdered pensioners against the City of Sderot.Sderot in turn issued a motion to adjoin several third parties, such as Motorola Solutions (the builders of the shelter doors that failed to open) and Israel Phoenix Insurance Co. (hereinafter: the Phoenix) which is the Insurer of the Public Liability Policy of Sderot.  The Israel Phoenix was represented by Adv. Sharon Shefer and Adv. Moshe Stern, a senior partner of Levitan, Sharon & Co.Adv. Shefer, on behalf of Phoenix, issued a motion to dismiss the said request in limine – mentioning that Phoenix had previously issued a formal coverage declination letter relying on a war/hostilities/terror exclusion.The Grounds for the motion to dismiss:The request to adjoin the Phoenix does not give any explanation how the Terror and War exclusion can be circumvented.The said Exclusion which is a standard exclusion states:“The Policy does not cover any loss or damage caused directly or indirectly due to war, invasion, act of a foreign enemy, act of hostility or any war like acts (whether war was declared or not), act of Terror and Sabotage.”No coverage as a matter of law: even assuming the factual allegations in the main claim were correct, the event described falls within the war and terror exclusion.No ambiguity requiring interpretation: the Exclusion is explicit and standard, leaving no genuine interpretive dispute.“Reasonable expectations” of the insured cannot rewrite the contract: the Municipality’s assertion for expectation of broad coverage for “any act or omission” could not nullify an express and unambiguous Exclusion.Tender framework and Insured’s awareness: the insurance policy wording was tied to tender documentation and policy wording known to the Insured; accordingly, arguments premised on surprise or a “hidden” exclusion cannot be relevant in these specific circumstances.Phoenix also argued that there was no necessity to await the outcome of the main action: as the third-party claim on the face of it is not relevant. Early dismissal promotes procedural economy and avoids unnecessary litigation, with no merit.  The decisionThe Court accepted Phoenix’s contention, stating that in appropriate cases, a third-party notice may be struck out at the preliminary stage where it is clear that it lacks a legal basis. On that basis, the Court ordered the third-party notice against Phoenix to be dismissed (without costs).Practical implicationsThis outcome underscores several important points relevant to coverage disputes:Early-stage dismissal request should be used where the third-party notice, on its face, cannot succeed even if the main claim’s facts are assumed to be true.Express exclusions carry significant weight when they are clear, unambiguous, and consistent with standard market practice.The “reasonable expectations” of the insured doctrine remains limited and is not typically applied to negate explicit contractual terms absent real ambiguity.Tying the policy to tender documentation may strengthen the Insurer’s position where the Insured’s awareness of the operative wording can be demonstrated from the contractual framework.Effective case management and strategic procedural planning can generate substantial cost savings by narrowing issues early and avoiding unnecessary participation in irrelevant litigation.Although the underlying case was tragic, a well-prepared motion to strike out the claim in limine, filed by the Levitan, Sharon team led by Adv. Sharon Shefer, was granted, thereby saving the Insurers significant costs.