UAE: Can Insurance Deny Car Repair Coverage After Heavy Rain Damage?

Question: My vehicle sustained minor damage during the heavy rains last week, but my insurance provider has declined to cover the repair costs. Is this legally permissible under UAE insurance regulations?

Answer: In the UAE, the motor vehicle insurance is regulated by the Unified Motor Vehicle Insurance Policy Against Loss and Damage, issued pursuant to the Insurance Authority Board of Directors' Decision No. (25) of 2016, currently administered under the Central Bank of the UAE.

This policy outlines the framework governing an insurer's liability for compensating the insured for damage to their vehicle.

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In principle, damage resulting from external causes is indemnifiable where the insured holds 'comprehensive motor insurance', whereas 'third-party liability' insurance only protects against third-party damage and does not cover loss to the insured's own vehicle.

Accordingly, if the insured vehicle sustains rain-related damage and the policy in place is only a third-party liability policy, the insurer may deny the claim.

When an insured holds comprehensive insurance cover, an insurer's obligation is derived from the Unified Policy, which under Chapter Two - Obligations of the Insurance Company, obliges an insurer to indemnify the insured for loss or damage to the vehicle arising out of accidents unless such loss falls under a legally recognised exclusion.

While rain or water damage is not specifically listed, it is generally treated as an external accidental event and therefore covered unless the policy contains a clause excluding weather-related incidents, flooding, or natural disasters.

Furthermore, insurance is a binding contract, and once an insured pays the premium, an insurer becomes legally obligated to compensate for losses only in accordance with the risks, terms, and conditions expressly agreed in the policy. This is in accordance with Article 1026 of the Federal Law No. (5) of 1985 Concerning the issuance of the Civil Transactions Law of the United Arab Emirates.

“Insurance is a contract whereby the assured and the insurer cooperate in facing the insured risks or events, and whereby the assured pays to the insurer a specified sum or periodical instalments, and if the risk or the event set out in the contract materialises, the insurer pays to the assured or the person stipulated as the beneficiary a sum of money or a regular income or any other pecuniary right.”

Moreover, Chapter Four of the Unified Motor Vehicle Insurance Policy – Exclusions, outlines circumstances in which an insurer may lawfully refuse indemnification. This chapter excludes losses arising from deliberate acts of the insured, intentional damage, or when the vehicle is used for purposes not specified in the policy, such as racing or testing.

It also excludes loss caused when the vehicle is operated by a person without a valid licence, when used beyond permitted geographical limits, or where the insured fails to take reasonable measures to prevent the damage. If an insurer can demonstrate that rain damage occurred under a scenario that meets one of the listed exclusions, or where negligence can be established, refusal of compensation may be permissible.

However, where a policy is comprehensive, and no exclusion under Chapter Four applies, an insurer should honour the claim.

If a claim is rejected, an insured may escalate the matter to the Insurance Dispute Resolution Committee of the Central Bank of the UAE, i.e., Sanad/Sandak platform.

Therefore, refusal to cover rain damage is lawful only where the policy structure, Chapter Four exclusions, or contract terms substantiate such a denial; otherwise, you may have grounds to dispute and seek redress under UAE insurance regulations.

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