BAHRAIN Law and Practice Contributed by: Mohamed Shaban, Mohsin Al Alawi and Qassim Al Fardan, Hassan Radhi & Associates
4.8 Delegated Authority and Claims Responsibility
tigation costs, advancement of defence costs, con- duct exclusions and the point at which an exclusion can be applied before final adjudication of the alleged misconduct. 4.10 Casualty Coverage Trends Casualty claims frequently arise from accidents that are also investigated through traffic, police or criminal proceedings. Although civil liability does not invariably require a prior criminal conviction, the findings in those proceedings may materially affect the assessment of fault, causation and the identity of the responsible party. As a result, insurers may reserve their position or defer a final coverage decision while the underlying responsibility remains unclear. This is particularly relevant in bodily injury, workplace accident, public liability and motor-related cases. The claimant may seek prompt compensation, while the insurer may require clarity regarding the insured’s legal liability, the contribution of other parties and whether the event falls within the policy period and insured activities. Changing risk patterns are also increasing the need for specialist medical, engineering and occupational evidence. Coverage disputes tend to concern causa- tion, the number of occurrences, allocation between multiple defendants, defence costs and whether a criminal or regulatory violation activates an exclusion or a right of recourse. Motor accident and bodily injury claims represent the largest category of claims against insureds by number. However, the more substantial defence-cost expo- sures tend to arise under general liability, construc- tion, engineering, medical malpractice, professional indemnity, D&O and other financial lines policies. Insurers commonly fund or control the defence where the policy expressly covers defence costs and the claim potentially falls within the insured liability. The insurer may appoint counsel, approve the insured’s chosen counsel or issue a reservation of rights while 5. Claims Against Insureds 5.1 Key Exposure Areas for Insureds
Delegation is regulated but not absolutely prohibit- ed in Bahrain. However, outsourcing the core insur- ance business activities and the client-facing activi- ties is not permitted. The CBB recognises licensed insurance managers whose services may include underwriting and claims processing, and it permits outsourcing arrangements subject to regulatory con- trols. The insurer’s board and management neverthe- less remain ultimately responsible for the adequacy of the systems, controls and performance of outsourced activities. Disputes may arise where the third party allegedly exceeded its authority, provided an inaccurate cov- erage confirmation, failed to communicate material information, delayed the claim, mishandled evidence, or applied claims guidelines inconsistently with the policy. A claimant may also dispute whether state- ments made by the delegate bind the insurer. 4.9 Financial Lines Coverage Trends Professional indemnity insurance has become more prominent in Bahrain, partly because legislation and regulatory measures require certain professions and privately performed regulated functions to maintain professional liability cover. This reflects the transfer of functions previously carried out principally by public authorities to licensed private professionals, creating a need to protect the public against professional mis- takes and insolvency risk. Coverage disputes under professional indemnity poli- cies commonly concern claims-made and notification provisions, prior-known circumstances, the distinction between negligent performance and deliberate mis- conduct, aggregation of related claims, defence costs and whether the alleged activity falls within the insured professional services. D&O disputes may similarly involve dishonesty exclusions, insured-versus-insured provisions, regulatory investigations and the allocation of defence costs. Regulatory scrutiny, shareholder disputes and insol- vencies may increase notifications even where no civil judgment has yet been issued. Insurers are therefore focusing more closely on notification wording, inves-
17 I NSURANCE L I T IGATI O N 2026
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