Collecting Garage Dues from Insurance Companies in the UAE

If you operate a garage or a vehicle repair centre in the United Arab Emirates and your receivables with an insurance company have piled up without being paid, your claim is not an insurance claim at all: it is a contractual claim for the price of repair work carried out on the strength of an approval issued by the company. It has three graduated legal tracks: a formal notarised notice to pay, then a regulatory complaint before the Central Bank of the United Arab Emirates as the authority supervising insurance business, and finally a court claim through a payment order where the debt is established in writing, of a fixed amount and due for payment, or through an ordinary action. In every case, written documentation of repair orders, invoices and delivery notes is the decisive element in a successful recovery, and delay in acting remains the single greatest cause of a weakened claim.

The Correct Legal Characterisation of a Garage's Receivables

The starting point in any file of this kind is to identify the legal relationship precisely, because an error in characterisation leads to an error in choosing the defendant, the competent court and the limitation period. A garage is not a party to the insurance policy concluded between the company and the insured, and the effect of a contract does not extend to persons other than its parties. The garage's claim therefore does not rest on the insurance policy itself.

The claim rests instead on a separate relationship that arises when the insurance company issues a repair order or written approval instructing the garage to repair a specific vehicle, the garage carries out the works and delivers the vehicle, and the company becomes bound to pay the consideration. In substance this is a contractual relationship between professionals, governed by the rules of contract and of commercial transactions.

The Documents That Decide the Dispute in the Garage's Favour

The strength of a file is measured by its documents, not by the size of the amount. In disputes over the recovery of garage receivables, the following documents are what a court-appointed expert relies upon when examining the debt:

Track One: The Amicable Demand and the Notarised Notice

Before resorting to the courts, the file is built through a formal written demand setting out an itemised list of the amounts, the invoice numbers and the due dates. The benefit of this step is twofold: it opens the door to settlement, and it creates written evidence of the demand that can be relied upon later before the court.

If the amicable demand produces no result, a notarised notice is served through the Notary Public containing a formal demand for payment within a defined period, together with a warning that legal proceedings will follow if payment is not made. In practice, the notarised notice prompts payment or opens serious negotiations in a considerable proportion of files, because it signals to the company that the matter has moved from administrative follow-up to legal action.

Track Two: The Regulatory Complaint Before the Central Bank

Insurance companies operating in the State are subject to the supervision and oversight of the Central Bank of the United Arab Emirates under the Federal Decree-Law concerning the Central Bank and the Organisation of Financial Institutions and Activities and Insurance Business, which is the legislative framework in force following the repeal of the earlier legislation governing insurance business. This oversight extends to licensing, financial solvency and the soundness of the company's professional practices.

Filing a documented complaint with the regulator is a genuine instrument of institutional pressure, since the company is answerable for the discipline of its dealings before its legislator and licensing authority. There are, however, two important points a garage owner should know in advance:

Track Three: The Payment Order or the Court Action

The Civil Procedure Law affords an abridged route for recovering a debt, namely the payment order. It requires that the creditor's right be established in writing, of a fixed amount and due for payment, and that it be preceded by a formal demand upon the debtor to pay in accordance with the law. Its advantage is that it spares the creditor the lengthy stages of litigation and produces an enforceable instrument in a far shorter period than an ordinary action.

Where the debt is not of a fixed amount, or where the company disputes the works themselves, their value or their quality, the route is a substantive action before the competent court. In such actions the court will usually appoint an accounting or technical expert to examine the repair orders and invoices and determine the amount actually due. This is where the importance of orderly and consistent garage records becomes apparent, since the expert's report is in practice the backbone of the judgment.

At the enforcement stage there is a factor in the garage's favour: insurance companies licensed in the State are subject to regulatory requirements, financial solvency thresholds and continuous supervision, which ordinarily makes enforcement of a judgment against them easier than enforcement against an ordinary commercial debtor.

Claiming Late Payment Interest and Compensation

The claim is not confined to the principal. The Commercial Transactions Law permits a creditor in a commercial debt to claim interest for late payment within the controls and limits laid down in it, whether agreed in the contract or assessed by the court in the absence of agreement. It is therefore always advisable that the approval agreement concluded between the garage and the insurance company contain an express provision on the payment period and on the consequences of delay.

Compensation may also be claimed for established damage arising from the refusal to pay where the conditions of liability are met, in addition to costs and legal fees as assessed by the court.

Branches of Foreign Insurance Companies Operating in the State

Where the debtor insurance company is a branch of a foreign company licensed to carry on the activity in the State, the claim is directed at the licensed branch inside the State as the contracting party, and enforcement is levied against its assets and accounts within the State. Two matters must be verified early in such cases: the capacity of the signatory of the repair orders and the scope of his authority, and the existence of any clause in the agreement fixing territorial jurisdiction or referring the dispute to arbitration, since overlooking such a clause may result in a successful plea of lack of jurisdiction and the loss of considerable time.

Common Mistakes That Weaken the Garage's Position

Periods and Deadlines to Observe

Practical Advice for Garage Owners

Legal References

Frequently Asked Questions