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Why Insurance Companies Deny Claims: Legal Paths for Victims
When an insurance company refuses to pay compensation, its refusal falls into one of two categories: a lawful refusal grounded in a valid exclusion or condition stated in the policy, or an arbitrary refusal that the injured party can challenge and overturn to recover their entitlement. The Unified Motor Vehicle Insurance Policy obliges the company to hand the injured party a written refusal decision setting out its reasons and the supporting documents, and to settle the claim within fifteen days of the file being completed. The injured party has a clear legal route of objection: a written grievance to the company, then a free complaint to the «Sanadak» unit, then the insurance dispute resolution committees whose decisions are binding, and ultimately the competent court. This article explains when a refusal is lawful and when it is arbitrary, together with the practical steps to recover compensation.
Why Does the Insurance Company Refuse to Pay Compensation? Reasons and Legal Pathways for the Injured Party
When Is a Refusal Lawful?
Not every refusal is unlawful. The company may have a legitimate basis for withholding compensation where a ground for forfeiture of the right or an exclusion applies. The most common lawful grounds relied upon by insurers in the State are:
Driving under the influence
An accident occurring while the vehicle is driven under the influence of alcohol or narcotics is a leading ground for forfeiting cover.
Driving without a valid licence
Driving without a valid licence, or outside the licence category prescribed by law, forfeits the obligation to compensate.
Wilful act and fraud
Causing damage deliberately or staging an accident to defraud the company forfeits the insured's right to compensation.
Concealing a material fact
Deliberately failing to disclose a material fact affecting the validity of the contract is a form of bad faith breaching the principle of utmost good faith.
Use outside the policy scope
Using the vehicle in racing, for an uncovered purpose, or contrary to the agreed use falls outside the scope of cover.
Missing documents or late notice
Failing to submit the required documents, or unjustified delay in reporting the accident, may prevent the claim from being accepted.
When Is a Refusal Arbitrary and Open to Challenge?
In many cases the refusal is arbitrary or contrary to the regulations, and the injured party is then entitled to assert their right. Among the most common forms of refusal that may be challenged is rejecting a claim without providing the injured party with the reasons for refusal in writing, together with copies of the documents supporting the company's decision — an express obligation imposed by the Unified Policy. Likewise, any policy term that contradicts the Unified Policy template or detracts from the insured's rights is void, since the policy may not be amended except in a manner favourable to the insured or the beneficiary.
Refusal without written reasons
Withholding compensation without stating the reasons in writing breaches an express obligation in the Unified Policy.
Undervaluing the vehicle
Assessing compensation below the true market value in a total loss without an expert or the average of three quotations.
Terms contradicting the Unified Policy
Insisting on a term that contradicts the Unified Policy template or detracts from the insured's rights is void and unenforceable.
Stalling and delay
Delaying settlement beyond fifteen days without a convincing justification obliges the company to pay additional compensation for loss of use of the vehicle.
The Insurer's Obligations on Receiving a Claim
The Unified Motor Vehicle Insurance Policy imposes precise obligations on the company upon receiving any claim; breaching them opens the door to accountability and a complaint. The principal obligations are:
Compensation for Delay and Loss of Use of the Vehicle
In the event of a total loss of the vehicle, the company is bound to pay the compensation without delay and within a maximum of fifteen days from the date the claim documents are completed. If the company delays settlement beyond this period without providing convincing justifications to the injured party and to the regulator, it is obliged to compensate the beneficiary for any costs incurred as a result of being unable to use the damaged vehicle. In a total loss, compensation is calculated on the basis of the vehicle's market value, either through an expert or by taking the average of three quotations from licensed vehicle dealers in the State.
The Legal Pathways Available to the Injured Party
If the company refuses to pay compensation, stalls, or undervalues it, the injured party has a clear escalating route that begins with an amicable grievance and ends, where necessary, before the courts:
First: a written grievance to the company
The injured party submits a written objection to the company demanding the written reasons for refusal and copies of the documents supporting the decision, allowing it time to respond. This step is essential and documents the company's position before escalation.
Second: filing a complaint with the «Sanadak» unit
Where internal settlement fails, the injured party files a free complaint with the «Sanadak» banking and insurance dispute resolution unit affiliated to the Central Bank — an independent unit that receives customers' complaints against insurance companies and adjudicates them.
Third: the insurance dispute resolution committees
The dispute is referred to a competent committee chaired by a judge, which issues its decision on the dispute. The committee's decision is binding and enforceable on the insurer, which may not appeal it in disputes whose value does not exceed one hundred thousand dirhams.
Fourth: appeal before the competent Court of Appeal
If the value of the dispute exceeds one hundred thousand dirhams, both the company and the concerned party may appeal the decision before the competent Court of Appeal within thirty days of its issuance or of becoming aware of it; otherwise the appeal is inadmissible.
Sanadak and the Insurance Dispute Resolution Committees
«Sanadak» is an independent unit established by the Central Bank to resolve banking and insurance disputes between consumers and licensed financial institutions and insurance companies, free of charge and in an impartial and independent manner, intervening when the company's internal procedures fail. Federal Decree-Law No. 6 of 2025 requires insurance companies to handle any complaint or claim from customers, to issue a decision thereon, and to state the reasons for any full or partial refusal in writing. Crucially, claims arising from insurance contracts, business and services are not admissible before the courts unless they are first presented to the committees formed for that purpose — so passing through this route is a condition for the action's admissibility.
The conclusiveness of the committee's decision varies according to the value of the dispute: in disputes not exceeding one hundred thousand dirhams the decision is final and enforceable on the company with no right of appeal for it, whereas if the value exceeds this threshold the decision is not final upon issuance, and the parties may appeal it before the competent Court of Appeal within thirty days, in accordance with the jurisdiction rules in the Civil Procedure Law.
Time Limits to Keep in Mind
15 days
The binding maximum period for the company to settle the claim from the date its documents are completed.
Sanadak filing window
Up to three years from the date of the conduct complained of, or two years from the date of becoming aware of it, whichever is longer.
30 days
The period to appeal the committee's decision before the Court of Appeal where the dispute exceeds one hundred thousand dirhams.
Practical Tips for the Injured Party Before Escalating
Keep every document
Retain the policy, the police report, the correspondence and the written refusal decision; they are the foundation of any grievance or complaint.
Demand the reasons in writing
Do not accept an oral refusal; compelling the company to state its reasons in writing is your right and a cornerstone for any later challenge.
Watch the time limits
Track the fifteen-day period, the «Sanadak» filing windows, and the thirty-day appeal deadline.
Engage a lawyer early
Early advice helps assess the lawfulness of the refusal, select the most suitable route, and avoid the loss of rights.
Legal References
Frequently Asked Questions
Legal Disclaimer
The information contained in this article is general and educational in nature; it does not constitute legal advice and is no substitute for consulting a specialised lawyer to examine the facts of each case individually. The rules differ according to the circumstances of the dispute, the type of policy, and the legislation in force at the time of the incident. We recommend contacting AWADH ALMHEIRI LAW FIRM AND LEGAL CONSULTATIONS for advice suited to your situation.
Note: This is a translation of the original Arabic article. In the event of any discrepancy between the two versions, the Arabic text is the authoritative reference.
Our services in Dubai
AWADH ALMHEIRI LAW FIRM AND LEGAL CONSULTATIONS provides its services in insurance disputes and refusal of compensation across the Emirate of Dubai, including reviewing refusal decisions, preparing grievances and complaints before «Sanadak» and the dispute resolution committees, and advocacy before the Dubai courts to recover the full rights of injured parties.
Our services across the other Emirates
Our services in compensation-refusal cases extend to Abu Dhabi, Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah and Fujairah, where we pursue injured parties' complaints before the regulators, the competent committees, and the federal and local courts, to ensure the client obtains fair compensation wherever they are based in the State.