Property Insurance Classification PDF - Dubai Court

CLASSIFICATION First: Property Insurance Property insurance is characterized by its compensatory nature, as its primary objective is to safeguard the insured from the harmful consequences affecting their assets due to the occurrence of the insured risk. If the insured property sustains lo...

CLASSIFICATION First: Property Insurance Property insurance is characterized by its compensatory nature, as its primary objective is to safeguard the insured from the harmful consequences affecting their assets due to the occurrence of the insured risk. If the insured property sustains losses due to the realization of the insured risk, the positive elements of the insured's financial estate diminish. In such cases, the insurer is obligated to remedy this reduction by compensating the insured for the incurred losses. CLASSIFICATION First: Property Insurance Since this type of insurance is compensatory, the general principle is that compensation is determined based on the extent of the damage. Consequently, the insured amount depends on the actual damages sustained by the insured as a result of the insured risk. CLASSIFICATION First: Property Insurance For instance, if an individual (the insured) enters into an insurance contract with an insurance company (the insurer) to insure their residence against the risk of fire, with a stipulated maximum insurance amount of AED 100,000, and during the insurance period, the residence sustains fire damage amounting to AED 100,000, the insured is entitled to compensation equivalent to the damages incurred. In this case, the insurer is only obligated to compensate for the damages up to the insured amount. If this amount is specified in the insurance contract (the insurance policy) as a maximum limit—as in the example above—the insurer is required to compensate the insured for the damages incurred to their property, but only within the specified insurance amount, even if the actual damages exceed this limit. CLASSIFICATION First: Property Insurance However, if the value of the damages is less than the insured amount—e.g., if in the previous example, the damages amounted to AED 50,000 instead of AED 100,000—the insurer is only obligated to pay an amount equivalent to the value of the damages Under this type of insurance, the insurer is obligated to compensate the insured or the beneficiary with the lesser of the two values if a maximum insured amount is specified. Property insurance focuses on the insured's financial estate rather than their personal identity. It provides coverage against damages to their financial estate, whether these damages affect its positive aspects (assets) or negative aspects (liabilities). CLASSIFICATION First: Property Insurance Types of Property Insurance: 1- Insurance on Assets (Property Insurance): This type covers damages affecting the positive side of the insured's financial estate, such as loss or damage to physical property. 2- Liability Insurance: This type provides coverage for damages that impact the negative side of the insured's financial estate, typically arising from legal liability to third parties. CLASSIFICATION 1- Insurance on Assets (Property Insurance): This type of insurance aims to compensate the insured for the damage caused to their financial estate due to the insured item being exposed to the insured risk. The contractual relationship under this type of insurance is established between the insurer and the insured.Property insurance varies depending on the risk that may threaten the insured items CLASSIFICATION 1- Insurance on Assets (Property Insurance): For example, if the risk is theft, fire, car damage, or crop destruction due to frost, the insurance is referred to as theft insurance, fire insurance, etc. CLASSIFICATION 1- Insurance on Assets (Property Insurance): The Dubai Court of Cassation has consistently ruled that 1- Fire insurance is a compensatory contract aiming to indemnify the insured—or the beneficiary of the insurance—for damages arising from fire and directly resulting from it, within the limits of the actual damage suffered by the beneficiary. CLASSIFICATION 2- The indemnity does not extend to third-party damages unless the insurance contract explicitly includes coverage for the insured's civil liability. 3- Insurance contracts are time-bound agreements where the duration is critical. Insurance coverage applies only during the specified period, beginning from the effective start date and ending on the final day of coverage. It does not extend to damages from fires occurring after the policy term ends unless otherwise agreed. CLASSIFICATION The Dubai Court of Cassation has consistently established that the purpose of property insurance is to compensate the insured or beneficiary for the damage incurred as a result of the insured risk materializing, strictly within the limits of the actual damage. CLASSIFICATION If the parties to the insurance contract agree on a specific insurance amount, such agreement represents the maximum compensation the insurer is obligated to pay. This predetermined amount serves as a presumption of the damage's value. However, the insurer is permitted to challenge this presumption by proving that the value of the damaged property is less than the maximum compensation agreed upon. In such a case, the insured or beneficiary is compensated only for the actual value of the damaged property. This ensures that they do not unjustly enrich themselves by receiving compensation exceeding the damage they have genuinely incurred. CLASSIFICATION 2- Liability Insurance (Debt Insurance) This harm may arise from: 1.Acts of Others for whom one is responsible (liability for the acts of others) 2.Acts of Objects under one’s control (liability for objects). CLASSIFICATION 2- Liability Insurance (Debt Insurance) Such occurrences lead to the individual's liability and the obligation to compensate for damages. To protect themselves from the risk of compensation claims, individuals resort to liability insurance. When the insured risk of being held liable for compensation materializes, the insurer is obligated to pay the compensation to the person designated in the insurance contract or as determined by law. CLASSIFICATION 2- Liability Insurance (Debt Insurance) Liability insurance protects individuals against financial losses resulting from liability claims. Examples include: Automobile liability insurance Professional liability insurance Environmental liability insurance CLASSIFICATION Federal Decree-Law No. (48) of 2023 Regulating Insurance Activities Article (4) The insurance business shall be divided into the following types: 1. Insurance of Persons and fund accumulation operations; and 2. Property and liability insurance. CLASSIFICATION 2. Property and liability insurance. Fire insurance and the allied perils. Land transport, marine and air cargo insurance and the related liabilities. Marine hull, machinery, and equipment insurance and the related liabilities. Aviation hull insurance and the like and their machineries and equipment and the related liabilities. Satellites, balloons and spaceships insurance, and their machineries and equipment and the related liabilities. Railway locomotives and coaches insurance and the related liabilities. Land vehicles insurance and the related liabilities. Engineering insurance and the related liabilities and insurances normally associated thereto. Oil insurance including the insurances which are normally considered oil insurance. CLASSIFICATION 2. Property and liability insurance Miscellaneous accident insurance including the following types: 1. Personal accident insurance. 2. Guarantee insurance and fidelity guarantee. 3. Money, coins, securities, bonds and the like insurances whether during transport or in safe. 4. Robbery and theft insurance. 5. Glass insurance. 6. Professional indemnity insurance including liabilties of those professionals in the fields of health, engineering, finance, accountancy, law and the other professions. 7. Workman's compensation and employer liability insurance. 8. Agriculture and livestock insurance and insurance of other animals. CLASSIFICATION Key Characteristics of Liability Insurance 1.Compensation Obligation: The insurer in this type of insurance does not compensate the third party (the injured party) directly for their damage. Instead, the insurer fulfills the compensation obligation that falls upon the insured due to the insured risk. While the damage incurred by the injured party triggers the insured's liability, it is not the direct cause of the insurer's obligation to pay compensation. CLASSIFICATION Key Characteristics of Liability Insurance 2.Triangular Relationship: Although liability insurance is a contract between two parties (the insurer and the insured), a third-party beneficiary (the injured party) may arise if: 1. The insurance contract designates the injured party as the beneficiary (stipulation for the benefit of a third party), or 2. The law provides the injured party with a direct lawsuit against the insurer. The injured party (the beneficiary) may bring a direct claim against the insurer for compensation, bypassing the insured’s financial position. CLASSIFICATION Key Characteristics of Liability Insurance 3. Unlimited Coverage: Unlike property insurance, liability insurance does not typically specify a fixed compensation amount in advance. This is because the extent of the insured's liability and the resulting financial impact are unknown until the liability arises.