Generally, United Arab Emirates insurance policies provide the parties with both formal and informal dispute resolution processes. For example, UAE insurers may have their own informal complaints procedures within the policy terms and conditions. On a more formal basis under the legal requirements insurers are required to deal with a policy holders’ notified claim under the policy and coverage within a set period, i.e., within 15 days as of the date of receipt of the complete documents to the insurer, which may be subject to further extensions.

Insurance policies can include references to arbitrate insurance disputes, both institutional arbitration and ad hoc, although it was trite law historically that if the parties wished to arbitrate the insurance dispute a separate arbitration agreement was required outside the policy terms and conditions as a free-standing arbitration agreement. However, recent case law and the UAE Federal Arbitration law (Federal Law No. (6) of 2018 Concerning Arbitration) has cast doubt on this position. The policy may also refer to the parties’ right to litigate the dispute through the UAE courts in the different Emirates where the parties are domiciled or the risk is situated, subject to a form of pre-action protocol. (See below at 2.) In terms of the UAE offshore courts, i.e., the Dubai Financial Centre (DIFC) in respect of wholesale (re)insurance policies provide both litigation and alternative dispute resolution, including arbitration and mediation to resolve (re)insurance disputes.

Yes. Historically, an unsatisfied insured was required to raise a direct complaint with the Insurance Settlement Dispute Committee (the “IDC”) against an insurance company in respect of a claim. By virtue of Federal Law No. 48 of 2023, the IDC has been replaced by the Banking and Insurance Dispute Resolution Unit (the “BIDRU”).

Resorting to the BIDRU is the first step an insured must adopt in raising a complaint against an insurance company before pursuing litigation in the UAE courts. Complaints are made to the BIDRU through an online submission the Central Bank of United Arab Emirates, where BIDRU undertake conciliation and mediation processes as an independent juristic body. Limitations are placed on the insurer where they are not permitted the right to appeal the decisions of BIDRU which are in favour of the insured and where the claim value is AED 50,000 or below.

Generally, local onshore courts in the UAE rely on expert evidence under a civil legal system including (re)insurance disputes. There are no specialists UAE onshore courts like the English Commercial Court in London that handle (re)insurance disputes, including complex disputes. Given the lack of specialist courts and experts in (re)insurance in UAE onshore, the UAE onshore courts find it challenging to handle complex (re)insurance disputes and many parties now choose alternative forums, such as the DIFC/ADGM courts and arbitration.

No. Alternative dispute resolution is not mandatory. However, it is strongly encouraged as a method of resolving disputes, particularly in (re)insurance and commercial matters. The UAE Ministry of Justice, for example, has recently launched an e-mediation platform where parties can mediate their dispute. Equally, the DIFC Courts and the ADGM Courts encourage mediation as a prerequisite to litigation although not yet a mandated process.

Yes, policyholders are entitled to recover limited costs related to insurance disputes from insurers. For example, if the case is litigated onshore, policyholders may be entitled to recover their out-of-pocket expenses but not their legal expenses/costs. Whereas, in the offshore courts, DIFC/ADGM policyholders are entitled recover their legal and out-of-pocket expenses generally as successful parties to the litigation.

Yes. In the onshore courts, court decision can be appealed up to the court of cassation, which varies depending on the emirate of the UAE. In the DIFC, there is no court of cassation. The court of appeal is the final stage. Arbitral awards, on the other hand, are usual final and binding, however, the courts of the UAE, including the offshore courts (DIFC/ADGM) have the power to nullify an arbitral award.

Both the policyholder and the insurer are bound by the duty of good faith under UAE law and the policyholder must disclose all material facts and information in respect of the risk.

Usually, insurers will provide policyholders with a proposal form, which will include a set of questions for the policyholder to respond to, which are relevant for insurers to make a determination on coverage and either underwrite the risk and set the premium or otherwise decline to underwrite the risk.

The policyholder’s duty of disclosure is continuous throughout the policy term and does not end after inception of the policy. Generally, the policyholder’s duty ends at the termination or cancellation of the policy.

If a policyholder has breached their duty of disclosure (Good Faith), whether under the policy terms and conditions or as a matter of law, the insurer has a number of remedies available: (1) voiding the policy and returning the premium amount to the policyholder; (2) assessing whether the breach is material to the risk and whether it affects coverage, (or part of the coverage), compelling insurers to either void the policy or increase/decrease the premium amount; or (3) deny any of the policyholder’s claims, if the insurer identifies the breach following notification of any claims under the policy.

The policyholder’s state of mind is relevant when disclosing information to insurers, particularly when determining whether a breach of the duty of disclosure was fraudulent or innocent (whether the policyholder intentionally withheld or misrepresented information), which can impact the insurer’s rights, actions and remedies.

Yes. Provisions that conflict with UAE Public Policy and Sharia law, i.e., to cover an unmarried mother for a pregnancy benefit under a UAE medical insurance policy.

The UAE civil code outlines, inter alia in Article 1028 the provisions of a policy of insurance that are void, including:

“(a) any provision which provides that the right to insurance shall lapse by reason of a breach of the law unless the breach involves a felony or a deliberate misdemeanour;

(b) a provision whereby the right of the assured shall lapse by reason of his delay in giving notice of the incident insured against to the parties which should be notified or to provide documents in the event that it appears that there is a reasonable excuse for the delay;

(c) any printed clause not shown conspicuously, if it relates to any circumstance leading to the avoidance of the contract or the lapse of the right of the assured;

(d) an arbitration clause unless contained in a special agreement separate from the general printed conditions in the policy of insurance; and

(e) any arbitrary clause breach of which it appears would have no effect on the occurrence of the incident insured against.”

The concept of good faith is not only implied into insurance contracts but also expressly stated in UAE law and enforced by the local UAE courts by virtue of Article 246 of the UAE Civil Code, which provides that “a contract must be performed in accordance with its contents, and in a manner consistent with the requirements of good faith”.

Some UAE insurance contacts/policies will provide express references to the insured’s duty of good faith while others will rely on the implied obligation although as a general rule, the UAE onshore law does not recognize implied terms as English law does.

No. The UAE law does not recognise implied terms generally including in consumer contracts except for the duty to act in good faith which is implied into all contracts in the UAE as part of the wider Sharia law framework.

Yes. Insurers’ rights are generally limited to those defences that would only be available against the insured under compulsory insurance that provides and extends third party coverage. In addition, the insurer can rely on any defence the insured would have had against the third party had the action been brought against the insured, such as fraud, limitation or contributory negligence.

In respect of third party claims, exclusion may apply, which may limit coverage to third parties and which provided certain defences the insurer may rely on.

The “usual trigger” for coverage under insurance policies depends on the type of insurance coverage. If we are considering first-party losses, the triggering point is when an insured event/peril occurs or when the insured becomes aware of the insured event/peril.

The triggering point for liability policies can either be the occurrence (or the event) or the date of notification of the claim, as it depends on the policy. If it is an occurrence-based policy, i.e., medical insurance cover is triggered by the event that causes injury or damage to a third-party, regardless of when the claim is lodged. If the policy is a claims-made policy, coverage is triggered when a claim is notified and lodged by the policyholder during the policy period, regardless of when the event occurred.

To ascertain whether the policy is an occurrence-based policy or a claims-made policy, the insured or its broker will need to carefully review the terms of the insurance policy.

There are limitation periods for the commencement of an action against an insurer, which is dependent on whether the insurance policy is governed under UAE local laws or DIFC/ADGM laws.

Under UAE laws, the limitation period is three years, as stipulated under Article (298) of the UAE Civil Code, which provides that “no claim for compensation arising out of a harmful act shall be heard after the expiration of three years from the day on which the victim became aware of the occurrence of the harm and of the identity of the person responsible for it.”

With respect to the DIFC/ADGM laws, the limitation period is generally six years, which is recognised by Article 123 of the DIFC Law No 6 of 2004 and the ADGM Application of English Law Regulations 2015.

Policy exclusions differ depending on the type of insurance, however, there are common exclusions including, but not limited to, loss due to fraud, war, terrorism, natural disasters, nuclear incidents, infrastructure and pre-existing conditions.

Yes. UAE law, specifically the Civil Code recognise the English law concept of contra proferentem, which provides the principle that governs the interpretation of ambiguous clauses in contracts, including insurance policies. The rule basically provides that if the terms of an insurance policy are ambiguous or not clear, it should be interpreted to the benefit of the insured and not the insurer. The reasoning behind the rule is that insurers are the policy drafters and hold the responsibility of ensuring that the language is clear and not vague. The English law concept of contra proferentem is also applicable in the DIFC and ADGM law and is applied to (re)insurance policies.

Yes, the ‘but for’ test of causation is recognised by the onshore courts in the UAE. The ‘proximate cause’ test of causation is recognised by off shore DIFC/ADGM courts in the UAE given its English law application. Such tests are determinative for the purposes of liability and coverage under insurance policies.

When assessing whether losses in a complex wide-area damages case occurred but for a specific event (or action), courts typically ask: but for the event in question, would the loss have occurred or were there intervening act in the chain? By way of illustration, in respect of a large fire loss claim in a building, which results and triggers the business interruption coverage portion of a properties all risks policy, the court will need to address whether and to what extent the insured peril was a causative factor of the shutdown of the businesses and not other intervening events such as existing structural defects within the building before the fire loss event.

The ’proximate’ test of causation is more nuanced and focuses largely on whether the event was the most direct cause of the loss or was closely linked to the loss in terms of both time and space. It also focuses on whether the loss was a nature and foreseeable consequence of the event, i.e., the insurer is only liable for losses “proximately caused” by an insured peril, and not liable for any loss which is not proximately caused by the peril insured against. While proximate test for causation is not a well developed concept in local UAE courts, (much emphasis is given to expert evidence by the UAE onshore courts which tend to apply the but for test), it is generally applied in the offshore courts, DIFC/ADGM and by international loss adjusters in their report findings in onshore litigation.

In a wide-area damage scenario involving two events, such as a flood and a faulty drainage system, insurers will need to apply both the ‘but for’ and ‘proximate’ test to ascertain whether the damage was caused by the flood or a leak from the faulty drainage system. In such a case, insurers will need to evaluate whether the flood itself was the most direct cause of the damage, or whether other facts (such as the faulty drainage system) contributed to the loss.

If loss results from multiple causes, courts usually undertake an assessment of causation to try and identify the exact cause of the loss. If the exact cause cannot be determined and there are likely to be multiple causes, the courts will assess the proper contribution for each cause and apportion responsibility/liability accordingly. Alternatively, the courts may, and are at liberty to dismiss the action and find no causative loss.

Generally, insurers have the standard remedies for breach of the policy terms, such as voiding the policy coverage for serious breaches, such as fraud and non disclosure. For minor and unintentional breaches, insurers may either provide the policyholder with an opportunity to remedy the breach, which may result in re-underwriting the risk and charge higher premium, or reduce the the claims amount by percentage if the insurer suffered any loss resulting from the policyholder’s breach. By way of illustration, an insurer can proportionately reduce the sum paid out on a claim, where an insured breached its duty of non disclosure, but the breach was neither intentional or reckless, and the insurer would have still entered into the policy, but charged a higher premium.

UAE law recognises the legal concept of “joint and several” liability. Generally, it depends on the nature of the insurance policy/coverage and if the policyholders are insured jointly. In such a case, a breach by one insured could potentially affect coverage for all insureds. However, if there are distinct individuals or entities under the same insurance policy,  then a breach by one policyholder may not affect cover for all policyholders if the breach is not material or a significant violation of the policy terms.

Some insurance policies may even contain a severability clause, which ensures that the breach by one insured party does not affect the rights of other insured parties under the policy. However, coverage may still be affected if the breach is material.

Yes. If the insurer declines cover for a claim, policyholders are still required to comply with the policy conditions, otherwise the policyholder’s coverage may be affected, and the policyholder may not be able to lodge any further claims under the policy.

Depending on the insurance policy, policyholders are generally covered for one-year terms, which means that policyholders may lodge claims for any loss or event that occurs or occurred throughout the year. If a policyholder lodges a claim, which is declined by the insurer, any other claim lodged by the insured generally may not be declined. Therefore, the policyholder will need to comply with the policy conditions, which is an ongoing continuous obligation, otherwise the policyholder may not be able to obtain any benefits, including indemnities under their insurance policy.

Quantum is generally assessed on an indemnity basis by calculating the actual loss suffered by a policyholder. The terms of the insurance policy will need to be considered, as there are limits and deductibles that may affect the quantum amount. Further, a policyholder has a duty to mitigate their losses, which is considered when assessing quantum. If the loss is a major loss, insurers will generally appoint expert loss adjusters to provide a fair and reasonable assessment of the losses if the insured perils are covered.

Generally, reinstatement is recognised in the UAE as a fair and appropriate measure of indemnity under an insurance policy as is diminution in the market value. Where reinstatement is the correct measure of the loss under the main insuring clause in the policy, pre-existing plans for a change of use may be relevant when calculating the recoverable loss if they influence the reinstatement process or the cost of restoring the property to its original condition. However, unless the policy explicitly covers future changes or upgrades, insurers generally will only cover the cost of reinstating the property to its prior state, excluding any expenses related to planned changes in use. In addition, it is common for property all risks policies to exclude change of use in the coverage. It is crucial to carefully review the coverage terms of the insurance policy to understand how such plans may affect the claim.

UAE law recognises the legal concept of subrogation in respect of (re)insurance policies. Therefore, insurers are entitled to subrogate their loss to third parties that caused the loss and seek indemnification.

Once an insurer has compensated a policyholder for the loss, the insurer acquires the legal and contractual right to recover the loss from a third party who is also responsible for the loss. Subrogation is typically built into insurance policies as a matter of express contractual rights but is also a free-standing right under UAE law. The subrogation may be partial or full and may be recoverable from the third party themselves or from their insurer.

UAE law recognises the insured’s right to seek damages/compensation for delayed payment of an insurance claim. In addition, the UAE insurance law provides statutory obligations for insurers to pay the claim “without delay in case the claim was approved and the parties agreed on such amount.” (See Article 9(5) Claim Procedure Insurance Authority Board Resolution No. 3 of 2010 Instructions Concerning the Code of Conduct and Ethics to be Observed by Insurance Companies and Insurance-Related Professions Operating in the UAE)

Generally, the policy terms and conditions set out the time periods for insurers to pay claims as a matter of contact. If the policyholder establishes that the insurer is not acting consistent with the terms of the policy and law and is trying to avoid payment, the policyholder may bring an action against the insurer for breaching the policy terms and acting in bad faith.

UAE law recognises creditors rights, including third parties and beneficiaries right to claim against a policy of insurance taken out by companies that have become insolvent under the UAE Bankruptcy Law with limitations. Article 95 (2) (Filing a Lawsuit Against the Company) of Federal Decree-Law No. (48) of 2023 Regulating Insurance Activities provides “a Person affected by the liquidator’s actions or procedures may challenge the same before the competent court having jurisdiction where the Company’s (Insurer’s) head office is located, pursuant to the provisions of the legislation in force in this regard.”

Generally, claims can be made against insurance policies held by companies that have become insolvent; however, the process may be more complicated. The ability to lodge a claim is dependent on the type of insurance, the specific circumstances of the claim, and the company’s insolvency proceedings. Claims are usually pursued through the company’s liquidator or administrator, with any recoveries being used to settle debts with creditors. However, the exact process may vary based on the jurisdiction (onshore/offshore) and the terms of the policy.

Generally, UAE law does not recognise class actions including class-action lawsuits or group litigation. For claims involving numerous policyholders, such as those against an insolvent entity or claims arising from a major event, the policyholders will need to pursue their cases individually, which can be inefficient and costly and may also be prejudicial to the other policyholders as the outcome may differ from case to case.

The insurance disputes sector in the UAE faces a variety of challenges due to evolving market conditions, regulatory changes, and the complexities of (re)insurance law. The UAE insurance sector is facing a diverse set of challenges that are reshaping the industry. Technology is at the forefront, with advancements such as automation and AI improving efficiency in claims processing and risk assessment, which enhances customer service. Recent floods in April 2024 tested the resilience of many insurers, highlighting the need for stronger reserves, strong partnerships with capacity providers and robust claims management to maintain customer satisfaction. Additionally, the sector is navigating rising healthcare costs, the impacts of climate change, and increasing cybersecurity risks, which are affecting pricing and underwriting but also offering opportunities for innovation. Despite these hurdles, the industry has substantial opportunities for growth and improvement by focusing on technological innovation, efficient operations, new risk transfer structures and customer-centric approaches.

In the next five years, it is expected that technology will reshape how insurance disputes are handled in the UAE. Automation and AI will likely make claims processing smoother and more accurate. Blockchain could also make things clearer and more transparent, reducing conflicts over claims and payment histories. Meanwhile, advanced data analytics will help insurers tailor policies more precisely, which should lessen disagreements about policy coverage and terms. It is expected that more online dispute resolution options will be available, which would offer quicker, less expensive ways to settle disputes without going to court.

Over the last couple of years, the insurance disputes landscape in the UAE has undergone significant changes, influenced by several key factors. One major shift has been the widening of the jurisdiction of the offshore courts, i.e. DIFC/ADGM to accept jurisdiction over onshore (re)insurance disputes through jurisdictional gateways applying a specialist common law approach to, for example London market wordings, which are generally used in UAE policy wordings. In addition, the increase in regulatory oversight from the regulatory authorities, the Central Bank of the UAE. This has led to stricter compliance requirements, resulting in more disputes over policy interpretations and enforcement.

Alternative dispute resolution, such as mediation of very complex claims and losses is a large growth area in the UAE as well a consideration of a specialist commercial court to deal with (re)insurance disputes, i.e., the Technology & Construction Division of the DIFC courts.

In respect of the coverage side where expertise will be needed, Cyber insurance is at the forefront, as increasing digital threats drive demand for policies that cover data breaches and cyberattacks. Business interruption insurance is also seeing heightened interest, especially after the disruptions caused by events like the COVID-19 pandemic. Environmental and climate-related insurance is another key growth area, with more companies seeking coverage for natural disasters and environmental liabilities as climate change accelerates. Health insurance disputes are likely to rise too, given the escalating healthcare costs and evolving policies.