Policy wordings – looking through different

lenses
Alfred Thornton – Partner
Angela Haylett – Senior Associate
Saud Alsaab – Senior Associate
 Middle East and Africa

Manchester Guildford
Oxford London
Tripoli Doha
Riyadh Dubai
Abu Dhabi

Dar es Salaam

Johannesburg

Cape Town
Clyde & Co offices

Associated / cooperation offices

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 The jurisdictions we will speak about:

Bahrain
Dubai
Qatar
Abu Dhabi
Saudi Arabia

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 Outline:
Policy interpretation in London, the Middle East’s common law courts,
the GCC civil law jurisdictions and the Shari’a/Saudi law jurisdiction:

Factors that influence the differences:

– Jurisdictional differences
– Approaches to policy interpretation
– How disputes are resolved
Recurring issues that arise due to the differences:
– The impact of different regulations, laws and substantive legal principles
– Terminology, language and precedent
– Claims settlement
Attempts to harmonize and the quest for “back to back” reinsurance
arrangements.
The effect of the differences in practice: approaches to subrogation

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 Jurisdictional differences - London
Some legislation eg Marine Insurance Act 1906 and Insurance Act 2015
Predominantly based on binding judicial precedent
Mature legal system
Court Structure:
– First Instance
– Court of Appeal
– Supreme Court
Senior legal specialists as judges
Specific Commercial Court
sub-division for insurance matters

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 Jurisdictional differences – the GCC’s civil law
states
No doctrine of binding precedent
Codified system
Specific laws (eg UAE Federal
Insurance law)
General laws: Civil and
Commercial Codes
Influence of Shari'a law?
Court system – no specialist
Courts

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 Jurisdictional differences – Middle East common
law courts
Four centres; all slightly different
Common law islands in civil law jurisdictions
Experienced (mainly English) judges
Common law approach to procedure
Enforcement and further remedies

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 Jurisdictional differences – Saudi Arabia
Insurance Law 2003
Insurance Disputes Committee
Limited law on the interpretation of technical insurance and reinsurance
provisions
– “specialist court”
– scope to plead comparative jurisprudence
Insurance Appeal Committee recently introduced

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 Approaches to policy interpretation: England and
common law courts
Courts will give effect to the terms of a contract – commercial parties are
free to agree contracts between themselves
The Court will apply established legal principles to aid its construction of
the written agreement
Evidence of “intention” is not generally admissible
Very narrow scope for giving commercial purpose to agreements where
terms are ambiguous (where one possible interpretation would entirely
defeat business sense)

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 Approaches to policy interpretation: GCC civil
law states
Starting point is specific overrides the general
Insurance recognised by specific insurance laws and commercial codes
Commercial Code (UAE) contains hierarchy:
– Specific provisions of Commercial Code
– Parties’ agreement
– Custom
– Civil Code (provided no mandatory provision of the law)
Only consider if ambiguous
Written agreement is critical

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 Approach to policy interpretation: Saudi Arabia
Arabic to prevail and importance of accurate translation
Interpretation is based on trends and conditions
Ambiguity in favour of the insured
Specific overrides general terms
Intention override wording

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 Resolution of insurance disputes: London and
common law courts
Judge hears oral factual and expert evidence
Expert evidence by party appointed experts
Large amount of argument
Wide disclosure obligations (exceptions)
Evidence on Foreign law (exceptions)
Leave to appeal
Time limitation – 6 years

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 Resolution of insurance disputes: the GCC civil
law states
Virtually no oral evidence/argument
Written pleadings
Predominantly documentary evidence
Categories of documentary evidence
Role of court experts
Proving foreign law
Automatic right of appeal
Difficulties with arbitration

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 Resolution of insurance disputes: Saudi Arabia
Structure and jurisdiction
Recoverability of Costs
Comparative Jurisprudence and International Standards
Time limitation
Use of Hearing
Form of Admissible Evidence
Automatic right of appeal

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 Recurring issues: the impact of local regulations,
law and substantive insurance law principles
Local regulatory requirements e.g. initialling exclusions
Causation (proximate cause)
Late notification defences
Public policy provisions
Non-disclosure defences and basis of contract provisions

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 Recurring issues: terminology, language and
precedent
Arabic language
Issues with terminology & concepts:
– Warranty and condition precedent
– Negligence
– Criminal conduct exclusions
– Co-insureds/joint insureds/loss payees
– Consequential losses
Foreign law clauses

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 Recurring issues: claims settlement
Powers of attorney
‘Without prejudice’ correspondence – exchanges of draft releases
Payments on Account
Gathering admissible evidence

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 Reinsurance – “back to back”
The basic presumption of back-to-back cover
– Vesta v Butcher

Follow the settlements clauses – altering the burden of proof

– "Honest and business-like" test

Exceptions to the rule:

– Wasa v Lexington – narrow exception
– Bound to follow judgments against the Cedant?
– Express warranties in the reinsurance - Princess of the Stars

Back-to back concerns – best addressed by:

– Avoiding express warranties in the reinsurance
– Full back-to-back wording in RI slip

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 Subrogation
Common law approach
Automatic right of subrogation upon payment of policy indemnity (unless
policy contains waiver of subrogation).
Insurer “steps into shoes” of insured.

Civil law approach

Two forms of subrogation ”legal” and “contractual”
Formalities and subrogation forms

Saudi approach
Legal right imposed by the insurance law as a result of payment of claim
Formalities and steps

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 Conclusions / Takeaways
For everybody to consider policy cover with the same set of lenses:
1. Review wordings
• Update international wordings
• Understand the effect of local law
• Insert definitions
2. Choose appropriate dispute forums:
• Consider rules of evidence and procedure
• Consider ability to challenge jurisdiction
• Consider enforcement
3. Carefully consider what is appropriate
• Claims co-operation
• Claims control
4. Develop protocols and local guidelines for claims handling

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 Alfred Thornton
Partner

T: +971 2 494 3502

E: Alfred.Thornton@clydeco.ae

Angela Haylett Saud Alsaab

Senior Associate Senior Associate

T: +44 20 7876 4563 T: +966 11 253 2125

E: Angela.Haylett@clydeco.com E: Saud.Alsaab@clydeco.com

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