This chapter aims to provide an overview of the sources of the UAE insurance law and regulations, including the latest developments in the insurance sector. It examines the recent case laws of the onshore UAE courts on insurance-related cause of actions. It also discusses the latest trends and areas likely to evolve further in insurance disputes in the UAE.
II THE LEGAL FRAMEWORK
i Sources of insurance law and regulation
The UAE Civil Transactions Code, Federal Law No. 5 of 1985 (as amended by Federal Law No. 1 of 1987) (the Civil Code) governs civil transactions relating to different types of contracts in onshore UAE. Parties to any contract including insurance contracts are subject to the provisions of the Civil Code. Part III of the Civil Code, commencing from Article 1026 to Article 1055, specifically applies to the contracts of insurance.
The insurance sector in the UAE is governed by the Federal Law No. 6 of 2007 (as amended by Federal Law No. 3 of 2018) (the Insurance Law) concerning the Establishment of the Insurance Authority and Organisation of Insurance Operations. This chapter will focus on onshore insurance, re-insurance entities and the prevailing case laws issued by the UAE courts (excluding the offshore).
The Insurance Law applies to all onshore insurance companies including foreign companies registered and licensed to operate in the UAE, engaged in the operations of cooperative insurance, takaful insurance, reinsurance companies and insurance professionals.
The Insurance Authority established by virtue of the Insurance Law oversees the onshore UAE insurance sector and draft rules and regulations to support the process of regulating and developing the insurance sector.
The main duties of the Insurance Authority as set out under the Insurance Law include protecting the rights of the insured and its beneficiaries, improving performance and efficiency of insurance companies, receiving applications to establish insurance and reinsurance companies, issue necessary licences, determine unified tariffs to certain types of insurances and proposing programmes to develop the insurance sector. Apart from the Insurance Authority, there are health insurance regulators in Dubai (Dubai Health Authority) and Abu Dhabi (Health Authority of Abu Dhabi). The Insurance Authority supervises the health sector in coordination with the Dubai Health Authority and the Health Authority of Abu Dhabi.
The provisions of the Insurance Law are not applicable to the insurance companies registered to operate within the free zones in the UAE. The financial free zones have their own legal and regulatory framework. The Dubai Financial Services Authority and the Dubai International Financial Centre (DIFC) Authorities regulate the framework of insurance companies registered to operate within the DIFC. The Financial Services Regulatory Authority of Abu Dhabi Global Market (ADGM) oversees the insurance companies operating within the ADGM.
The insurance and reinsurance companies operating in the onshore UAE must also follow the regulations issued by the Chairman of Insurance Authority Resolution No. 2 of 2009 (the Resolution No. 2 of 2009) and the Insurance Authority Board of Directors Resolution No. 3 of 2010 that sets out some professional code of conduct.
The key regulations issued by the Insurance Authority over the past 12 months with respect to the insurance and reinsurance markets are listed below:
- Resolution No. 42 of 2017, which amends certain provisions of the Insurance Authority Board of Directors Resolution No. 25 of 2016 on standardisation of motor vehicle insurance policies regulations;
- Insurance Authority Board of Directors Resolution No. 12 of 2018 concerning the licensing and registration of insurance consultants and regulation of their operations; and
- Insurance Authority Board of Directors Resolution No 14 of 2018 on the application of financial solvency requirements contained in Chapter 2 of the financial regulations for insurance companies (including takaful insurance companies) on the branches of foreign insurance companies operating in the UAE.
ii Insurable risk
Resolution No. 2 of 2009 provides for three categories of insurance; namely, life insurance and capital insurance, property insurance and liability insurance.
Life insurance and capital insurance includes insurance operations with the objective to pay certain amounts owing to death, disability or attaining a specific age. Further, it includes health insurances, personal accidents insurance and capital insurance.
In addition, property and liability insurance refers to the following categories of insurance:
- insurance against fire risks, risks of land, sea and air transport;
- insurance of ships and aircraft, including machinery and cargo;
- insurance of satellites and spacecraft, and their machines and materials;
- insurance of trailers, railway locomotives and land vehicles;
- engineering and oil insurance;
- health insurance of all types including insurance against various accidents and liabilities, such as personal accidents insurance, security and breach of trust insurance, insurance of currency, deeds, bonds, shares, either during transport or during safekeeping;
- insurance against theft and burglary;
- professional liability insurance, inclusive of the liability in the health, engineering, financial, accounting and legal professions and other professions;
- workers' compensation insurance and liability insurance by the employer;
- crop insurance, and livestock and other animal insurance; and
- other insurances usually within accident insurance of various risks.
Mandatory insurance is applicable to medical and motor insurances. This is a compulsory requirement applicable for all the seven emirates in the UAE. Every owner of a motor vehicle has the duty of making a compulsory contract of insurance that will cover his or her civil liability arising out of death or injury from accidents occurring from the vehicle.
Professional liability insurance is mandatory with respect to certain categories of professionals in the field of accounting, and financial and legal professions. Federal Law No. 12 of 2014 regulating the profession of auditors provides for compulsory insurance for auditors against liability to professional mistakes.
Federal Decree No. 4 of 2016 on medical liability prohibits practising medical professions without obtaining civil liability insurance against medical errors. Health facility providers are required to insure their medical practitioners against civil liability for medical errors.
There is no specific legislation in the UAE that restricts the insurable risks of a policyholder. However, any contract of insurance against the elements of public policy of the UAE and the principles of sharia law, such as risks against speculative gains similar to gambling, are considered as uninsurable risks.
iii Fora and dispute resolution mechanisms
The UAE local courts have jurisdiction to determine insurance disputes in onshore UAE. The UAE court system involves a combination of a federal and local system. The emirates of Ajman, Fujairah, Sharjah and Um Al Quwain are part of the federal court system, and the emirates of Abu Dhabi, Dubai and Ras Al Khaimah have local court systems.
The federal court system consists of the court of first instance, which has jurisdiction to hear any civil disputes within the emirate, a court of appeal and a court of cassation, which is the highest court. The UAE Union Supreme Court is the highest court in the federal court system.
The financial free zones have their own independent courts. The DIFC courts, based in the DIFC, and the Abu Dhabi Global Markets Courts located in the ADGM have jurisdiction to hear all civil and commercial matters within their respective financial zones.
Insurance disputes are also capable of settlement through arbitration. It is noteworthy that under Article 1028 (1) (d) of the Civil Code, an arbitration clause may not be included in an insurance policy, unless the arbitration clause is contained in a special agreement separate from the general printed conditions of the insurance policy.
III RECENT CASES
The majority of the cases on insurance litigation filed before onshore UAE courts are in connection with claims related to vehicle insurance, insurance covering accidents in the event of a fire, and insurance claims on errors or omissions with regard to professional liability.
The UAE courts have established in numerous cases (referring to Article 1026 of the Civil Code) and held that a contract of insurance is a contract of risk in which the insurer is bound to pay compensation to the assured, if the insured risk materialises. It is noteworthy that similar to any other contract, a contract of insurance must be implemented under its own terms and conditions, and in accordance with the requirements of good faith.
The parties to the contract have complete freedom in agreeing on the conditions and applicable scope of the insurance cover, and in determining the identity of the beneficiaries who will have the advantage of the insurance subject to the exceptions and conditions prohibited by Article 1,028 (1) of the Civil Code.
Under Article 1,035 of the Civil Code, if an insured risk materialises, the beneficiary (third party) can file a claim against the insured seeking compensation. Another type of remedy available for the insured is to seek replacement or repair of the insured good. In such cases, the insurer will assess the claim and provide the appropriate benefit outlined in the insurance contract. However, this depends on the scope of the insurance contract and the conditions agreed by the parties in the insurance contract.
In general, the approach followed by the UAE courts in awarding compensation for material harm requires that there must have been an infringement of a property right of the aggrieved, and the harm must have materialised. For instance, the criterion as to whether there has been a material damage to a person as a result of the death of another is that the deceased was supporting such person at the time of his or her death in a permanent manner. In that event, the court must assess the value of the loss of opportunity sustained by the aggrieved party by loss of the support, and must award compensation on that basis. In a decision dated 1 February 2018 (Cassation Case No. 1/2018), the Dubai Court of Cassation upheld the decision issued by the court of appeal granting the aggrieved party compensation for an amount of 1.1 million dirhams in addition to 9 per cent interest, against an insurance company for the loss of opportunity and physical inability caused by a motor accident.
In another decision dated 8 March 2018 (Cassation Case No. 3/2018), the Court of Cassation confirmed the Appeal Court's decision to reject a claim filed by a UAE entity that claimed damages owning to professional error in connection with its website and trademark protection (intangible assets). The court appointed expert, in the present case confirmed that there was no evidence to prove the alleged professional mistakes. The first instance court and the appeal court dismissed the case and the Court of Cassation affirmed the same.
The limitation period for claims under the insurance policy is a three-year time limit, commencing from the date of the occurrence of the incident or the date on which the person having an interest obtai ned knowledge about the incident (Article 1,036 of the Civil Code).
It is established by the UAE courts that the liability of the insurer to pay compensation is based on the contract of insurance and not on liability in tort. The UAE courts have in numerous cases held that the contract of insurance seeks to compensate the assured from the loss sustained by the insurer as a result of an insured risk but within the limits of the actual loss suffered and without exceeding it.
In a decision dated 26 April 2018 (Cassation Case No. 34/2018), the Court of Cassation upheld the decision by the Appeal Court that awarded an insurer an amount of 55,000 dirhams for a claim with respect to motor insurance. In this case, the claim raised by the insurer was for an amount of 250,000 dirhams, which was the total insurance sum covered. The Court of Appeal determined that the actual damages to the insurer was 55,000 dirhams, and accordingly the Appeal Court awarded the actual damages rather than the total insurance sum.
There is no specific regulation governing the notice of claim, but in general, the conditions set out in the insurance policy are applicable for notice of claim. The UAE courts have established in numerous cases that the insured must give written notice to the insurance company of the occurrence of the events as a condition precedent to the company's liability under the policy. In case of failure to meet this precondition, the insured cannot recover the indemnity paid to the aggrieved party from the insurance company (Dubai Court of Cassation Case No. 68-2010 dated 27 June 2010).
IV THE INTERNATIONAL ARENA
Articles 20 and 21 of the UAE Civil Procedure Law deal with the jurisdiction of the onshore UAE courts. The UAE courts have jurisdiction to hear disputes in the following cases, even if the parties agreed to a different jurisdiction. With the exception of actions in rem relating to real property abroad, the courts shall have jurisdiction to hear actions brought against nationals and claims brought against foreigners having domicile or a place of residence in the state if:
- the defendant has an elected domicile in the state;
- the action relates to property in the state or the inheritance of a national or an estate opened therein;
- the action relates to an obligation entered into or performed, or that is stipulated to be performed in the state; a contract intended to be notarised therein or to an event that occurred therein; or to a bankruptcy declared in one of its courts;
- the action is brought by a wife having domicile in the state against her husband who had domicile therein;
- the action relates to the maintenance of one of the parents or a wife or a person under restriction or a minor, or in connection with the guardianship of property or a person if the applicant for the maintenance or the wife or the minor or the person under restriction is domiciled in the state;
- it relates to personal status and the plaintiff is a national or a foreigner having a domicile in the state, if the defendant has no known domicile abroad or if national (UAE) law is mandatorily applicable in the action; or
- one of the defendants has a domicile or place of residence in the state.
V TRENDS AND OUTLOOK
The UAE economy continues to grow by diversifying its resources. The UAE has been making huge investments in the tourism, financial and construction sectors.
The introduction of compulsory health insurance in 2017 for all the residents in the UAE resulted in contributing a rapid growth in the health insurance sector. However, in 2018 it is expected that the health sector will see a stabilised growth. Other sectors that are likely to witness growth in 2019 are real estate, manufacturing, construction, education and tourism. With the much-awaited Dubai Expo 2020 lined up, there has been an increase in construction projects.
The areas that are likely to evolve and become more important to insurance disputes in the UAE largely relate to real estate, construction and professional malpractice sectors. With the advancement of the Hyperloop system, transportation services are expected to progress and this is another area that could evolve further. Similarly, rapid advancement in the area of integrated smart digital systems in the UAE is likely to pay more importance to the field of the artificial intelligence.
A noteworthy development that is anticipated to be introduced soon is the establishment of the insurance disputes resolution committee, a committee under the supervision of the Insurance Authority, to hear insurance disputes.
This committee helps to fast-track the disposal of disputes in a cost-effective manner. There is no official announcement yet on this subject, however, it is expected that a committee will be established in due course.
1 Hassan Arab and Mohammad Muhtaseb are partners, and Jyothi Venugopal is a paralegal at Al Tamimi & Company.