Everybody knows that risk is an inherent aspect of Man’s life. It made him develops and takes precautionary measures to protect himself, his family and properties against risks . Despite being quite aware that such measures will not protect him from his fate, Man tends to take such measures to mitigate the adverse consequences of the risks whenever occurred. Among such measures is insurance whether for life or properties which include “Fire Insurance”.
Insurance implies “Safety” and “Security” and legists have defined it as “an agreement that Insurer thereby undertakes to provide insurance against certain risks in consideration of an amount (Premium) to be paid by the Insured”, which is the case in insurance against fire and theft.
A broader definition for it would be “a technical process performed by regulated bodies to collect the biggest number of similar risks and provide insurance against the same through offset as per statistics laws”. Accordingly if the insured risk occurred, the Insured or his representative shall receive a financial compensation paid by the Insurer provided that the Insured has paid the agreed premium under the insurance policy.
Essence of insurance is collaboration. A group of individuals/ companies exposed to the same risk cooperate to mitigate the consequences of risks whenever occurred to any of them by paying the premiums which are collected and distributed to those affected by the risk. Such cooperative insurance is permissible by the Islamic Sharia and legislated in most Laws of Arab countries.
The main features of Insurance Contract is that:
It is a consensual and compensatory contract in the sense that each party thereby receives the amount it contributes;
An Aleatory Contract in which parties or either of them is not certain about the amount he shall receive or pay;
A Bilateral and Successive contract since the obligations thereunder are performed continuously till the expiration of the contract term;
Adhesion Contract as one party (Insurer) sets special contracting conditions that the other party must adhere to if he intends to enter into such contract.;
Fire Insurance coverage is one of the substantial insurance policies. If a fire broke out into a warehouse, factory, residential building, mall, or facility, it causes severe losses to buildings and properties. This is why fire insurance coverage is so important. It covers the properties like buildings, factories, warehouses, hotels, exhibits, hospitals, schools and all kinds of facilities that may be exposed to high temperature risks.
UAE Civil Procedures Law
UAE Civil Procedures Law issued by the Federal Law No. 5 on 15/12/1985 has regulated Fire insurance coverage under Articles from 1037 to 1045.
Article No. (1037) of the said Law stated the liabilities of the Insurer under Fire Insurance coverage, which include the damages arising out of the fires notwithstanding that the fire arose out of earthquake, storm, winds, hurricane, household explosions and disturbances caused by the falling of flying craft or military vessels; damage which is the direct and certain result of the fire; damage sustained by the property insured through measures taken in the course of rescue to prevent the spread of the fire such as breaking a glass front or demolition of a wall to contain the fire. Insurer’s liability also include the loss or disappearance of property insured during the fire, unless it is proved that that was the result of theft.
It must be noted that Fire Insurance covers all fire damages arising through the error of the Insured or the beneficiary unless such damages are deliberately or fraudulently caused by the Insured or the beneficiary, which means that such damages are caused by the free will of the Insured or the beneficiary. Laws and legal precedents established that the insured risk must not be affected by the absolute will of either party notwithstanding any agreement to the contrary as per Article No. (1038) & Article No. (1039) of UAE Civil Code.
Insurer shall be liable for the fire damages caused by any deliberate or undeliberate act of the employees of the Insured unless such fire is made by collusion with the Insured as per Article No. (1040) of the same Law.
Article No. (1041) stipulates that the insurer shall be liable for damage arising out of the fire notwithstanding that such fire arose out of a defect in the property insured or such defect is inherent or incidental.
Finally, Fire Insurance covers only the risks referred to hereinabove, but there are still other risks that can be added to Fire insurance coverage “associated risks” or “Comprehensive Insurances” which include:
Insurance against riots and labor disturbance.
Insurance against water leakage, explosions of water pipes, and water tanks overflow.
Insurance against theft.
Insurance against loss of profits
Legal precedents of Dubai Court of Cessation establish that the insured risk in Fire Insurance must affect the properties of the Insured whether such properties are tangible or intangible. This illustrates why it is a compensatory contract. It compensates the Insured against the damages arising from the occurrence of the insured risk. This entails that the amount of compensation must be according to the extent of the damages suffered irrespective of the insurance sum so as the compensation does not form unreasonable source of wealth to the Insured who should not, after the occurrence of the risk, be in a financial position better than he had before. The Insurance sum is the limit of compensation entitled to the Insured when the Insured Risk occurs.
Khairallah Advocates & Legal Consultants offer advice on all types of insurance protection and claims to corporates and individuals in a wide range of sectors.