UAE Law and Practice Contributed by: Farida Safwat, Elham Mobini and Ramy George, NHB Legal
ing that technology-related losses were never within the scope of the risk coverage. In addition, systemic technology failure is one of the most challenging issues. A single event of soft- ware failure or cloud service disruption affects many customers of the insured. This raises the question whether the losses of multiple affected policyholders constitute one occurrence or multiple occurrences, testing the aggregation mechanisms. From a commer- cial perspective, if aggregated, the insurer’s exposure will be capped, whereas if each customer’s loss is considered to be a separate occurrence, the insurer’s exposure will multiply and will not be capped by each insured’s policy limit. 4.4 Aggregation and Limits of Liability The interpretation of aggregation clauses and the def- initions of “occurrence” and “event” in policies are becoming a growing area of contention in the UAE, especially when policies governed by UAE law trans- plant the London market’s or internationally drafted aggregation language. In such cases, and when the parties’ common intention is ambiguous, the courts adopt the interpretation against the insurer, applying the contra proferentem principle. The previously mentioned systemic technology fail- ures, along with natural disasters and construction defects are all examples of large-scale or systemic events that question aggregation, by testing whether multiple losses caused by a single event should be treated as one aggregated occurrence or multiple separate occurrences. The outcome depends heavily on the precise poli- cy wording, as different wording produces different results depending on the factual matrix, and while insurers prefer aggregation to limit their liability, insureds seek disaggregation to multiply the insurers’ exposure under the policy. However, in liability lines such as D&O, professional indemnity, and general liability policies, aggregation disputes differ in that they arise when multiple claim- ants assert related claims against the insured. There- fore, the courts’ approach is unpredictable, as wheth- er those claims arise from a common set of facts or
a related series of acts needs to be determined by an expert. 4.5 Sanctions and Illegality Issues The UAE’s position as a global trade, finance and rein- surance hub means that sanctions compliance is a live and practical issue in coverage disputes. Insur- ers operating in the UAE must comply with multiple sanctions regimes – UN Security Council resolutions (directly applicable), the UAE’s autonomous sanctions framework, and (for internationally connected insur- ers) US Office of Foreign Assets Control (OFAC) and EU sanctions. Where a claim has any nexus to a sanc- tioned entity, jurisdiction or activity, insurers routinely invoke sanctions exclusion clauses or argue that pay- ment would expose them to criminal liability. Disputes arise in several recurring scenarios: where the insured or a beneficiary is subsequently desig- nated after policy inception; where goods or vessels transit sanctioned territories without the insured’s knowledge; or where the sanctions nexus is peripheral to the underlying loss. Policyholders argue that sanc- tions clauses should be narrowly construed and that insurers bear the burden of establishing that payment would actually constitute a sanctions violation – not merely that a theoretical risk exists. Public policy and illegality operate as separate but related coverage defences. The UAE courts will not enforce contracts that facilitate unlawful activity, and the concept of insurable interest (codified in the Civ- il Code and restated in the 2025 Civil Transactions Law, effective since June 2026) requires the insured to demonstrate a lawful economic interest in the subject matter. Disputes over illegality most commonly arise in marine cargo insurance (where goods may be sub- ject to import/export controls) and in liability policies where the insured’s underlying conduct is alleged to be criminal or fraudulent. 4.6 Late Payment and Claims Handling Practices In February 2026, the CBUAE issued a guidance note on consumer protection and the responsible AI and machine learning (ML) adoption by licensed financial institutions (including insurers), and while it regulated the AI adoption for handling claims, it provided how
274 I NSURANCE L I T IGATI O N 2026
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