Introduction:

In light of the recent heavy rainfall in the UAE, both insurers and businesses must understand the legal framework outlined in Federal Law No. 5/1985 on Civil Transactions Law or Civil Code. This law provides comprehensive guidelines on insurance contracts, defining the rights, obligations, and procedures for both insured parties and insurers.

 Understanding Insurance Contracts:

Under Article 1026 of the Civil Transactions Law, an insurance contract is defined as a cooperative agreement between the insured and the insurer, where the insured pays premiums to an insurer. In return, the insurer agrees to compensate for specified risks or events. This includes damages caused by natural occurrences such as heavy rainfall, which may lead to flooding, property damage, or business interruptions. Insurers are obligated to compensate the insured or beneficiaries in case of specified risks, depending upon the payment of premiums by the insured.

Article 1027 of the same law further explains the types of insurable risks, including damages from natural calamities like heavy rainfall-induced floods. This provision ensures that businesses and individuals can secure insurance coverage against property damage, business interruption, or other liabilities arising from such events, ensuring financial protection during unforeseen circumstances.

 Obligations and Responsibilities:

For businesses and individuals seeking insurance coverage against heavy rainfall damages, compliance with Articles 1032 and 1033 is essential. Insured parties must fulfil obligations such as timely premium payments as per the insurance contract and providing accurate and complete information regarding risks to the insurer. Failure to disclose relevant information or acts of bad faith may lead to contract cancellation by the insurer under Article 1033. Insured parties must also inform the insurer promptly about any changes that may increase the risk covered under the policy as outlined under Article 1032.

On the other hand, insurers are mandated by Article 1034 to promptly compensate insured parties upon the occurrence of insured risks, including damages caused by heavy rainfall. The insurer must hold the terms of the policy and pay the insured or beneficiary the agreed amount. Article 1035 clarifies that insurance obligations do not release the insurer from civil liabilities unless a separate claim is filed by affected parties.

Specific Classes of Insurance:

Under Articles 1037 to 1055, primarily addressing fire insurance, the law also covers damages caused by other risks such as water. Insurers are responsible for damages caused by flooding unless explicitly excluded or limited by the policy terms. This includes damage to property, inventory, and disruptions to business operations. In the context of heavy rainfall, particularly concerning property damage, fire insurance provisions under Articles 1037-1045 become relevant. These articles specify the insurer's responsibility for damages resulting from fire, even if triggered by natural events associated with heavy rainfall, such as thunderstorms or flooding. Businesses operating in the UAE should review their insurance policies to ensure adequate coverage against heavy rainfall and associated risks. It is advisable to engage with insurers to clarify coverage terms, including exclusions and limits, as specified under Articles 1028 and 1029. Businesses must also maintain transparency with insurers regarding any changes in risk exposure due to heavy rainfall events, in compliance with Article 1032(b). Moreover, in the result of heavy rainfall, prompt reporting of damages and adherence to claims procedures outlined in Articles 1036 and 1038 are important for securing timely compensation and avoiding disputes.

Force Majeure Considerations:

Article 287 of the Civil Transactions Law provides that a person is not liable for compensation if they prove that the prejudice resulted from a cause beyond their control, such as a heavenly blight, unforeseen circumstances, force majeure, the fault of others, or the fault of the victim. This is particularly relevant in the background of heavy rainfall, where damages might be classified under force majeure, affecting both the claims process and liability considerations.

Conclusion:

UAE businesses and insurers must be well-versed in the provisions of Federal Law No. 5/1985 when dealing with insurance claims related to natural calamities. A clear understanding of rights, obligations, and procedural requirements outlined in the Civil Code is essential for effective risk management and swift resolution of claims.