Onshore Energy Conference — Dubai Onshore Energy Conference — Dubai 02 | Page 29

TRANSLATION ISSUES
good underwriting practice, however, in other
instances there are specific instructions
that can significantly impact on the intended
cover. Further instructions relevant to
energy insurance are expected in the not too
distant future, so the direct impact of KSA’s
regulatory regime on energy underwriting
is likely to become even more pronounced.
The indirect impact
of the KSA regulatory regime
Other, more general, KSA insurance
regulations are perhaps better known. By
way of example, an underwriter insuring
risks in KSA is likely to know that all
insurance policies must be issued in Arabic
and that pre-approval is required from
SAMA before a policy can be issued.
Notwithstanding a greater awareness
on the need for an Arabic wording and
policy approval, it still appears there is
very little understanding by underwriters
of the risks and potential difficulties if they
simply seek to rely on literal translations of
standard market wordings. It would appear
for this reason little consideration is given
to whether it would be more appropriate
to prepare bespoke Arabic wordings.
The significant unintended consequences
and the inherent risk in relying on literal
translations will be apparent from the
various examples that we have noted from
past disputes, as highlighted below.
“All risks” indemnity clauses
It is common to see plant and machinery
or construction all risks covers with
an indemnity clause that provides:
“…insures against all risks of direct,
sudden and accidental physical loss or
damage except as hereinafter excluded…”
The terminology “direct, sudden and
accidental” in the context of an “all risks”
policy is well understood in common
law jurisdictions. The indemnity clause
and the individual words making up the
indemnity clause have been considered
in a number of court judgments, which
serves as precedent for future reference.
Underwriters familiar with the approach
in common law jurisdictions will interpret
the indemnity on the basis that each of the
elements referred to needs to be present to
trigger an indemnity for loss or damage (i.e.
the question is not simply whether there has
been loss or damage, as the indemnity for
loss or damage is qualified). The effect of the
phrase direct, sudden and accidental therefore
has the effect of limiting the “all risks” cover
to exclude, for example, inevitable damage.
If translated into Arabic, there is however
a significant risk that the translation of the
terms “direct, sudden and accidental physical
loss” will not narrow the scope of cover in
relation to damage, and that all damage will be
covered irrespective of how it occurred. This
risk exists because a literal Arabic translation
may not qualify the scope of the indemnity in
the same manner as in the original English
indemnity clause. Moreover, it has been
acknowledged by the Insurance Disputes
Committees, on the basis of the wording of “all
risk policies”, that all risks are covered, unless
specifically excluded. A very different outcome
may therefore result in the event of a dispute
before the Insurance Disputes Committee
and cover may consequently be interpreted
to be far broader for “loss or damage” than
likely to be appreciated by underwriters.
Condition precedent
Similar issues arise where a policy contains
reference to a “condition precedent” and this
is translated into Arabic. When translating
the word “condition” into Arabic, the word
“shart” is generally used. The Arabic word
“shart” simply means “condition” or “term”
with no concomitant legal notion of the
importance that attaches to the relevant
“condition” as understood, say, in an English
law insurance context. If the full phrase
“condition precedent” is translated literally
29