Good news to report and a special shout out of thanks to Noach for all the help!
When I returned the car to hertz today, I asked the CSR why my Citi AA Platinum Visa card's insurance (and the letter that proves it) wasn't accepted and an extra $42 was tacked on.
She said that Visa told them that they don't cover Israel. So in hebrew I began explaining what the term benefit administrator means vis a vis Visa (no pun intended) and while Visa may have correctly told them that they don't cover me, they have an agreement with Chubb Insurance group who do - hence the letter of proof.
Furthermore, I told them, that being that the renter has to pay upfront in the event of damage and then seek reimbursement from the CC company/3rd party - you guys get paid from me so what is the difference if I can then get money back or not?
And so, she nodded in agreement and took off the fee though she did ask for the original CC to redo the contract so I just took back the keys, went home and came back
She said that I shouldn't have any trouble on the next rental so that's good news and all is well that ends well!