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 insurance contracts.
The insurance sector in the UAE is governed by Federal Law No. 6 of 2007 (as amended by Federal Law No. 3 of 2018) on Establishment of the Insurance Authority and Organisation of Its Operations (the Insurance Law). 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, companies 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 issues 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, issuing necessary licences, determining unified tariffs for certain types of insurance and proposing programmes to develop the insurance sector. Apart from the Insurance Authority, there are health insurance regulators in Dubai (the Dubai Health Authority) and Abu Dhabi (the Department of Health – Abu Dhabi). The Insurance Authority supervises the health sector in coordination with the Dubai Health Authority and the Department of Health – 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. Unless there is a specific provision governing insurance in the free zones, the Insurance Law refers to the application of the laws and regulations governing insurance in the onshore 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.
Insurance and reinsurance companies operating onshore in the UAE must also follow the regulations issued by the chairman of the board of directors of the Insurance Authority in Board Resolution No. 2 of 2009 Issuing the Implementing Regulations of Law No. 6 of 2007 Concerning the Establishment of the Insurance Authority and the Regulation of Insurance Business (Resolution No. 2), and Board Resolution No. 3 of 2010 on Instructions Concerning the Code of Conduct and Ethics to be Observed by Insurance Companies Operating in the UAE. Circular No. 19 of 2014 (Circular No. 19) prohibits insurance brokerage companies operating onshore in the UAE from dealing with insurance companies that are unlicensed or not registered with the Insurance Authority; insurance contracts concluded with unlicensed or unregistered companies shall be considered null and void.
In 2019, the Insurance Authority issued Board Resolution No. 33 of 2019 Concerning the Regulation of the Committees for the Settlement and Resolution of Insurance Disputes (Resolution No. 33). The committees established for resolving insurance disputes are authorised to settle and resolve all types of insurance disputes arising from the complaints of the insured, beneficiaries or the relevant affected parties against insurance companies incorporated in the UAE and foreign insurance companies licensed to carry out insurance activities in the UAE, including takaful insurance companies. The committees shall consist of a chairman and two or more members appointed by the chairman of the Insurance Authority. The committees are not competent to hear summary and interim cases or precautionary attachments or insurance disputes that include an arbitration clause. Resolution No. 33 was published in the Official Gazette (659 of 2019) dated 31 July 2019 and will come into effect three months after its publication.
The key regulations issued by the Insurance Authority over the past 12 months with respect to the insurance and reinsurance markets are listed below:
- Board of Directors Decision No. 23 of 2019 Concerning Instructions Organising Reinsurance Operations, which provides new regulations for the practice of reinsurance operations and the necessary licensing and registration requirements;
- Board of Directors Decision No. 15 of 2019 on the Instructions Concerning the Rules of Ownership Ratios in the Capital of Insurance Companies;
- Cabinet Resolution No. 7 of 2019 Concerning the Administrative Fines Imposed by the Insurance Authority, which sets out a schedule providing for administrative fines for any person, company or insurance-related profession committing any of the violations contained in the schedule;
- Board of Directors Decision No. 12 of 2018 Concerning the Regulation of Licensing and Registration of Insurance Consultants and Organisation of their Operations, which sets out new regulations for the practice, licensing and registration requirements for insurance consultants;
- Board of Directors Decision No. 42 of 2017 on the amendment of some provisions of Insurance Authority Board of Directors Decision No. 25 of 2016 Pertinent to Regulation of the Unified Motor Vehicle Insurance Policies; and
- Board of Directors Decision No. 14 of 2018, Pertinent to the Application of Financial Solvency Requirements Stipulated in Chapter Two of the Financial Regulations for Insurance Companies and the Financial Regulations for Takaful Insurance Companies on the Branches of Foreign Insurance Companies Operating in the State.
ii Insurable risk
Resolution No. 2 provides for three categories of insurance; namely, life insurance and capital insurance; property insurance; and liability insurance.
The life insurance and capital insurance category includes insurance operations with the objective of paying out certain amounts as a result of death, disability or attaining a specific age. Further, it includes health insurance, personal accident 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 insurance, usually falling within accident insurance for various risks.
Mandatory insurance is applicable to both medical and motor insurance. This is a compulsory requirement applicable for all seven emirates in the UAE. Every owner of a motor vehicle has a compulsory duty to take out an insurance contract covering his or her civil liability arising out of death or injury from accidents involving the vehicle.
Professional liability insurance is mandatory with respect to certain categories of professionals in the field of accounting and in the financial and legal professions. Federal Law No. 12 of 2014 Concerning Auditing Profession Law regulates the profession of auditors and provides for compulsory insurance for auditors against liability for professional mistakes.
Federal Decree Law 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 shariah law, such as risks against speculative gains similar to gambling, are considered 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 is a combination of federal and local systems. 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 insurance litigation cases filed with onshore UAE courts are in connection with claims related to vehicle insurance, insurance covering accidents in the event of a fire and insurance claims with regard to errors or omissions and 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, similarly to any other contract, an insurance contract 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 cases of this kind, 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 material damage to a person as a result of the death of another is whether the deceased was supporting that person at the time of death and in a permanent manner. In that event, the court must assess the value of the loss of opportunity sustained by the aggrieved party through the loss of 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 UAE 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 obtained 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 cost of the actual damage to the insurer was 55,000 dirhams, and accordingly the Appeal Court awarded the actual amount as 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 the 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 the event 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.
The process and requirements for enforcing foreign judgments and orders onshore in the UAE are governed by the provisions of Articles 85, 86 and 88 set out under Chapter IV of Cabinet Resolution No. 57 of 2018 concerning the Executive Regulation of the Civil Procedure Law (the Cabinet Resolution). The aforementioned Articles replace the previous requirements provided under Article 235 to 238 of the Civil Procedures Code. Pursuant to Article 85(1) of the Cabinet Resolution, judgments and orders issued in a foreign country may be ordered to be enforced in the UAE on the same conditions as those prescribed in the laws of that country for the enforcement of similar judgments and orders issued in the UAE.
Article 85(2) of the Cabinet Resolution provides that an application for the recognition and enforcement of the foreign judgment before the onshore UAE courts shall be submitted before the execution judge and an order shall be issued no later than three days from the date of submission of the application. The order issued by the execution judge can be appealed in accordance with the rules and procedures provided for appealing a judgment. The onshore UAE courts may grant an order granting enforcement after verifying the following:
- The onshore UAE courts do not have exclusive jurisdiction over the dispute on which the judgment or order has been issued, and the foreign courts that issued the order have jurisdiction in accordance with the rules of international jurisdiction provided in their laws.
- The judgment or order has been issued by a court in accordance with the law of the country in which the judgment or order has been issued and duly certified.
- The parties to the lawsuit for which the foreign judgment or order is issued were properly summoned and duly appeared.
- The judgment or order has acquired the force of res judicata under the law of the court that issued it, and a certificate has been provided confirming that the judgment has acquired the force of res judicata, or this is confirmed in the judgment itself.
- The judgment does not conflict with a previous judgment or an order issued by a court in the UAE and it would not be contrary to public policy or morality.
- The enforcement judge has the authority to demand documents that support the application before an order for enforcement is issued.
Pursuant to Article 86 of the Cabinet Resolution, the aforementioned provisions of Article 85 shall apply to the enforcement of foreign arbitral awards, provided that the award is issued in a matter for which arbitration is permissible in accordance with UAE laws and is enforceable in the country where it was issued.
V TRENDS AND OUTLOOK
The insurance sector in the UAE has continued to witness growth in the year 2018. The introduction in 2017 of the unified motor vehicle insurance policies and compulsory health insurance for all residents in the UAE contributed to substantial growth in the health insurance sector.
The recently announced new infrastructure projects in Abu Dhbai and the upcoming Dubai Expo 2020 are viewed as driving factors boosting the UAE economy. Other sectors likely to witness growth are real estate, manufacturing, construction, education and tourism.
The areas that are likely to evolve and become more important to insurance disputes in the UAE largely relate to professional malpractice and the real estate and construction sectors. With the advancement of the Hyperloop system, transportation services are expected to progress and this is another evolving area that could further impact the insurance field. Similarly, rapid advancement in the area of integrated smart digital systems in the UAE is likely to result in more importance being attached to the field of the artificial intelligence.
A noteworthy development is the establishment of the insurance disputes resolution committee, operating under the supervision of the Insurance Authority and hearing insurance disputes. This committee helps to fast track the disposal of disputes in a cost-effective manner.
1 Hassan Arab and Mohammad Muhtaseb are partners and Jyothi Venugopal is a paralegal at Al Tamimi & Company.