Landmark Judgment on Business Interruption Insurance

The Dubai Court of Cassation (“DCC”) has recently issued a landmark judgment in relation to business interruption insurance claims, especially those arising out of COVID 19.

The Insurer raised the defence that the Claimant failed to prove the application of the 1km radius clause as per LM7 and therefore the claim should be dismissed. However, the appointed expert concluded that the 1km radius is not applicable and the court dismissed the Insurer’s defence and did not apply such a condition because the pandemic resulted in a full lockdown, which affected the whole country. The DCC also held that where the insurance policy concluded between the parties expressly provides for the availability of cover in the event of business interruption following closure as a result of contagious diseases, the insurer cannot deny the coverage on the issue of interpretation of wordings. 

The DCC held that the UAE courts have the full discretionary authority to interpret the contracts and the conditions that are disputed to the benefit of the Insured, without deviating from the apparent meaning of their clear expressions and without identifying the literal meaning of some of the words and what it deems to be more appropriate to the intention of the two parties.