Common Insurances Found in the UAE FIDIC

Contracts Management and Administration (Based on FIDIC Standard) PMI, PMP, PMBOK and the PMI Registered Education Provider logo are registered marks of the Project Management Institute, Inc. © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

CONCEPT OF INSURANCE • INSURANCE is a primarily a means of protection from financial loss. • It is a FORM OF primarily used to hedge against the risk of a contingent, uncertain loss. • An entity which provides known as an INSURER, COMPANY, OR INSURANCE CARRIER. RISK MANAGEMENT insurance INSURANCE is © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

CONCEPT OF INSURANCE What Is the “RISK of Insurance?” • It is a form of risk management primarily used to hedge against contingent, uncertain which provides insurance is known as an INSURER, insurance insurance carrier. A person or entity who buys insurance is known as an INSURED or POLICYHOLDER. the risk An of entity a loss. company, or © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

CONCEPT OF INSURANCE INSURANCE INSTITUTION financial risk from an individual to a POOLED GROUP OF RISKS by means of a two-party contract. • The INSURED PARTY obtains a specified amount of coverage against an uncertain event for a smaller but certain payment. is that also allows an the ECONOMIC transfer of © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

CONCEPT OF INSURANCE Insurers may offer –Fixed, –Specified Coverage, –or Replacement Coverage, which takes into account the increased cost of putting the structure back to its original condition. © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

THE INSURANCE COMPANY • INSURANCE IS NO LESS THAN A LEGAL CONTRACT, represented by a POLICY, in which an individual financial protection against losses from company. • THE COMPANY POOLS CLIENTS' RISKS TO MAKE PAYMENTS FOR THE INSURED. or or entity reimbursement an insurance receives MORE AFFORDABLE © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

INSURANCE CONTRACT • In insurance, THE INSURANCE POLICY is a contract (generally a standard form contract) between the insurer known as the POLICYHOLDER, determines the claims which the insurer is legally required to pay. and the insured, which © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

INSURANCE CONTRACT • Definition: –An arrangement in which one party, the insurer, accepts risk from another POLICYHOLDER, policyholder if a SPECIFIC UNCERTAIN future event impacts the policyholder. INSURANCE CONTRACT is an significant insurance party, compensate the the to © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

INSURANCE CONTRACT What Is “A Consideration In Insurance?” • A contract (an whereby one person, promises and undertakes, in exchange for CONSIDERATION of amount of money (called a "PREMIUM"), to make a payment to either the insured or a third-party if a specified event occurs, also known as "occurrences". insurance contract) INSURER, THE a set or assessed © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

ELEMENTS OF INSURANCE ELEMENTS OF INSURANCE CONTRACT CAN BE CLASSIFIED INTO TWO SECTIONS; 1. The Elements of General Contract, and 2. The Elements of Special Contract relating to Insurance. © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

ELEMENTS OF INSURANCE The Special Contract of Insurance involves principles: Insurable Interest; Utmost Good Faith; Indemnity; Subrogation; Warranties; Proximate Cause; Assignment and Nomination Return of Premium. © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

INSURABLE INTEREST The insurable interest; following are the essentials of • There must be property, rights, interest, life, limb or potential liability devolving upon the insured capable of being covered by a policy of insurance. © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

INSURABLE INTEREST Without Insurable Interest Principle: • Anybody could be allowed to affect a policy of insurance on anybody’s life or property in the absence thereof; Then there could be opportunity created whereby intentional or deliberate losses could be claimed solely for making gains without losing anything at all. • © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

1. UTMOST GOOD FAITH ACCORDING TO THIS PRINCIPLE: 1. Both the parties to the insurance contract must disclose all facts material to the risk voluntarily to each other. 2. Any breach of this duty shall render the contract voidable at aggrieved party, i.e., suffered as a result of this breach. the the option party of the has who © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

1. UTMOST GOOD FAITH ACCORDING TO THIS PRINCIPLE: 3. In other commercial insurance contracts, the rule of “let the buyer beware (Caveat emptor)” applies. contracts, unlike 4. The reason of such a provision of law is this that the goods are tangible and visible. These can be very well examined before purchase. © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

1. UTMOST GOOD FAITH ACCORDING TO THIS PRINCIPLE: • Although insurance commercial contract, but it differs from other commercial contracts with regard to the application of this principle. • In other commercial insurance contracts, the rule of buyer beware (Caveat emptor)” applies. • The reason of such a provision of law is that the goods are tangible and visible. These can be very well examined before purchase. contract is a simple contracts, unlike “let the © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

1. UTMOST GOOD FAITH • Insurance contracts actually stand in a different category nothing visible or tangible here which can be physically examined contracts as explained. Therefore, the law is not of “let the buyer beware”. because there is like other © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

1. UTMOST GOOD FAITH • Unless both disclose voluntarily to the other party all facts relating to the proposed contract it is not possible for the other party to know precisely as to what type of bargain he is entering into. • Therefore, this doctrine requires that both the parties to an insurance contract should disclose all facts material to the risk to the other party. Although this duty applies to both, but in practice it applies more to the insured. the parties to the contract © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

2. PRINCIPLE OF INDEMNITY • The Principle of Indemnity asserts that on the happening of a loss the insured shall be put back into the same financial position as he immediately before the loss. • In other words, the insured shall get neither more nor less than the actual amount of loss sustained. used to occupy © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

2. PRINCIPLE OF INDEMNITY SELECTION OF SUM-INSURED • In a CONTRACT OF INDEMNITY, selection of proper sum insured is important as this is always the limit within which indemnity will be considered. • Therefore, if the sum insured is restricted to a lesser amount than the actual value then in the case of a total loss the insured gets the sum insured which indemnify him. does not actually © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

2. PRINCIPLE OF INDEMNITY • Except insurance, all insurance contracts are contracts of indemnity. for life and personal accident • Life and personal accident insurance are not contracts of because life or limb cannot be valued in terms of money. indemnities simply © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

2. PRINCIPLE OF INDEMNITY NON-LIFE • Apart from life insurances, all other types of insurances are contracts of indemnities. • Therefore, Marine, Fire, Motor, EAR, CAR, Burglary, Fidelity Guarantee, Liability, Public Engineering, Products insurance, Livestock insurance etc. are all contracts of indemnity. and personal accident Employers Aviation, Liability, Liability, Crop © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

3. PRINCIPLE OF SUBROGATION SUBROGATION PRINCIPLE means; • “When insurer (insurance company) pays full compensation for any insured property), the company) holds the legal right (claim) of the insured property.” • SUBROGATION is a right that a person has of standing in the place of another and availing himself of all the rights and remedies of that another, whether already enforced or not. insured insurer loss (insurance (of © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

3. PRINCIPLE OF SUBROGATION • In insurance, after payment of a claim, the insurers shall be entitled to take over the legal right of the insured against the liable third party for the purpose of recovery. • Everybody is entitled to live peacefully and if this peace is disturbed by the wrongdoer of another then the person subjected to this wrong has a legal right of action against the wrongdoer. who has been © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

3. PRINCIPLE OF SUBROGATION • Here comes up the proposition then that if the damage sustained by the wronged is also covered by a policy of insurance then after getting the claim from insurers he gives up his right of recovery against the wrongdoer in favor of his insurers. • Insurers then proceed against the liable third party direct and recover the loss or damage for their own benefit. © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

4. PRINCIPLE OF WARRANTIES INSURANCE POLICY WARRANTY • A WARRANTY IN AN INSURANCE POLICY is a statement attesting that something the insured person says is true. • An insurance contract principle of utmost good faith, meaning each party must trust that completely truthful. • For the contract to be valid, you may have to warrant that an assumption the insurer is making is true. is written on the the other is being © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

4. PRINCIPLE OF WARRANTIES INSURANCE POLICY WARRANTY • For example, if insurance, you must make a warranty that you are not terminally ill. • If the insurer discovers that one of your warranties is untrue, it generally has the power to void the contract and not honor any claims you make. This is the only instance where the term "insurance accurate. you are applying for life warranty" is © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

HOLD HARMLESS DEFINED A "HOLD HARMLESS" OR "LIABILITY WAIVER" PROVISION IN A CONTRACT IS: • An Agreement between the parties whereby one or both parties agree other other party party responsible responsible damage, damage, or or legal legal liability liability that under the agreement. • In other words, the two parties cannot sue each other for any damage they may suffer due to the negligence of the other party. agree not not to for for that may to hold hold the any any may arise the loss, loss, arise © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

UAE FORMS OF INSURANCE PROVIDED BY LOCAL INDUSTRY 1. ALL RISKS INSURANCE 2. PROFESSIONAL INDEMNITY INSURANCE 3. PUBLIC LIABILITY INSURANCE 4. ALL RISKS INSURANCE 5. DELAY IN “START-UP INSURANCE” (DSU) © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

UAE FORMS OF INSURANCE ALL RISKS INSURANCE (CONTRACTORS) • THIS INSURES AGAINST PHYSICAL DAMAGE TO THE WORKS (including materials on site, usually); • All Risks Insurance typically covers the full reinvestment value of the works plus a mark up for any ancillary consultancy and professional fees) that are incurred. costs (such as © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

UAE FORMS OF INSURANCE ALL RISKS INSURANCE (CONTRACTORS) • Contractors generally “Umbrella” All Risks Insurance policies that cover all its projects, so it is generally more cost effective for contractors to maintain this insurance – or at least up to the “Taking Over of Works”. • Once this happens, the risks passes to the Employer. have “global” or © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

UAE FORMS OF INSURANCE ALL RISKS INSURANCE (CONTRACTORS) • Usually – “Defects” are excluded from All Risks Insurance policies. • Wording within the policy, however, can be purchased (generally) that provides cover for damages that a defect causes to other parts of the works. © 2016 3FOLD Education Centre . All rights reserved . online@3foldtraining.com . www.3foldtraining.com . 800 3FOLD

Common Insurances Found in the UAE FIDIC