Statutory Regime

The insurance sector in Lebanon in governed by Decree No 9812 of 4 May 1968 (“the Law”). This Law outlines the regulations for insurance companies operating within the country, applying to both Lebanese and foreign insurers conducting any of the insurance activities covered under the Law’s listed branches and sub-branches.

In addition, insurance activities in Lebanon are regulated by decisions from the Insurance Control Commission (ICC) which operates under the Lebanese Ministry of Economy and (MOET). The ICC is the authority overseeing the insurance industry in Lebanon. It aims to protect the interests of policyholders and has the authority to enforce regulatory and supervisory frameworks through interventions and sanctions. The ICC issues decisions and directives that insurance companies must adhere to, and that can influence the handling of insurance disputes by setting standards and practices.

Insurance operations are also subject to the provisions of the Code of Obligations and Contracts, specifically Articles 950 to 1023.

Procedural Regime

Article 48 of the Law allows policyholders or the beneficiary to pursue claims against insurance companies before the Insurance Arbitration Council, established within MOET. This Council comprises experienced insurance professionals that can handle financial claims resulting from medication and hospitalisation insurance policies, as well as insurance policies covering vehicles, carriages and traffic accidents. However, its jurisdiction is limited to claims of LBP75 million or less, on condition that the plaintiff has not previously initiated a court action regarding the same matter.

While the laws governing insurance activities in Lebanon do not specify other dispute resolution mechanisms applicable for insurance disputes in Lebanon, the commercial and financial courts remain competent to handle insurance cases. Judges in these courts possess the necessary experience to handle various insurance disputes. Such disputes will follow the standard litigation procedure before Lebanese courts and regulated by the Lebanese Code of Civil Procedure.

Litigation in Lebanon is governed by the Lebanese Code of Civil Procedure, established by Decree-Law No 90/1983 and its subsequent amendments. Lebanon follows a civil legal system that adheres to the inquisitorial model, where the legal process is primarily conducted through written submissions, with a focus on formal documentation and written evidence.

The general rules on limitation concerning claims arising out of or in association with an insurance policy is two years from the event of the occurrence (Article 985 of the Lebanese Code of Obligations and Contracts). However, the two-year limitation period will not begin at the time of the incident in certain cases:

• if there is concealment of an insured risk, omission, incorrect or invalid disclosure, the limitation period will start from the date the insurer becomes aware of the occurrence;
• in emergencies, the limitation period will begin on the day the parties became aware of the occurrence, provided they can demonstrate that they were unaware of it before that time. 

In addition, lawsuits that remain inactive for two years from the last valid procedural step may be dismissed by the court, either upon the request of a party or ex officio, on the court’s own initiative.

In Lebanon, Alternative Dispute Resolution (ADR) is increasingly recognised and encouraged as a viable means of resolving disputes outside the traditional court system. Courts and legal professionals are becoming more open to ADR, particularly as it helps reduce the burden on the judicial system and provides a more flexible and often faster method of dispute resolution.

The most recognised forms of ADR in Lebanon are Arbitration and Mediation. Arbitration proceedings are regulated by the Lebanese Code of Civil Procedure (CCP). The CCP contains a dedicated chapter (Chapter 2) on arbitration, distinguishing between local arbitration (Articles 762 to 808) and international arbitration (Articles 809 to 821).

For instance, the parties to an insurance contract may choose arbitration as an alternative dispute resolution method. However, it is important to note that clauses under an insurance policy issued in Lebanon concerning risks existing in Lebanon and falling under the branches stated in Article 2 of the Law are considered null and void if the chosen arbitrator is not domiciled in Lebanon and does not issue their award within the country.

Mediation was formally recognised in Lebanon in 2005 through the establishment of specialised mediation centres, each with its own rules and procedures. It has been endorsed through the enactment of Law No 82 of 18 October 2028 on Judicial Mediation and Law No 286 of 14 April 2022 regarding Conventional Mediation.

With the Judicial Mediation, the parties have the option to initiate mediation proceedings even after court proceedings have begun.

As previously mentioned, the insurance sector in Lebanon is governed by regulations outlined by the Law. Subsequent amendments to the Law have been limited, with no significant updates since 1999. Insurance law is currently being revised by parliament, and the new regulations might introduce significant changes to the legal framework for insurance companies in Lebanon.

In addition, and as already mentioned, insurance operations in Lebanon are subject to decisions issued by the ICC and its bylaws, and provisions outlined in the Code of Obligations and Contracts (Articles 950 to 1023).

In Lebanon, the enforcement of foreign judgments, including those involving insurers, is governed by the Lebanese Code of Civil Procedure, in particular Articles 982 to 987.

Under such provisions, some conditions should be met in order for Lebanese courts to enforce the foreign decisions in Lebanon. In particular, (i) the foreign judgment should be final and not subject to appeal or further proceedings in the originating jurisdiction; (ii) the foreign country’s legal system should allow the recognition in its jurisdiction of Lebanese judgements; (iii) the foreign court must have had proper jurisdiction over the case, and such court must have complied with Lebanese laws and principles of justice when ruling; and (iv) the foreign judgement should be compliant with the Lebanese public policy or fundamental legal principles.

For insurance disputes, in addition to the above, the judgement to be enforced should align with the relevant insurance laws and regulations in Lebanon.

In addition, Lebanon is a party to various international treaties and conventions that may affect the recognition and enforcement of foreign judgements, such as those relating to arbitration and commercial matters.

As previously mentioned, Article 48 of the Law provides for the establishment of arbitration councils to resolve disputes related to financial claims arising from insurance coverage. This option is available to individuals in addition to the standard litigation procedures before Lebanese courts, as outlined in the Lebanese Code of Civil Procedure.

A notable feature of these councils is that they offer a guaranteed right for individuals. Specifically, any provision in an insurance policy intended to exclude the jurisdiction of the insurance arbitration council is deemed null and void. Furthermore, cases brought before the insurance arbitration council are exempt from judicial taxes and stamp duties, though they are not exempt from costs. Finally, parties can file cases with the council without requiring legal representation, unlike in the courts.

Additionally, awards issued by an insurance arbitration council are only open to limited judicial recourse. The only options available for challenging these awards are opposition; opposition by third parties; and cassation, in accordance with the rules set forth in the Code of Civil Procedure.

Under Lebanese legislation, there are generally no significant restrictions on including arbitration clauses in commercial insurance and reinsurance contracts.

However, the Lebanese Code of Civil Procedure establishes exclusive territorial jurisdiction for specific insurance matters. For instance, disputes related to health insurance are governed by the courts in the insured party’s place of domicile (Article 109), while accidents, including car accidents, are governed by the courts either located where the accident occurred in the insured party’s place of domicile (Article 110). Additionally, disputes related to fire insurance matters fall under the jurisdiction of the courts where the fire occurred (Article 111).

In addition, arbitration clauses included in an insurance policy issued in Lebanon concerning risks located within Lebanon and falling under the branches stated in Article 2 of the Law are deemed null and void if they stipulate that the arbitration will be conducted by an arbitrator who is not domiciled in Lebanon or if the chosen arbitrator does not issue their award within the country (Article 11 of the Law).

Based on the above, parties to an insurance contract may opt for arbitration as an alternative dispute resolution method, as long as the dispute does not pertain to any of the restricted matters outlined above and complies with the above-mentioned limitations.

Lebanon ratified the New York Convention on 9 November 1998, with a reservation based on reciprocity. This means Lebanon will only recognise and enforce arbitral awards issued by other contracting states that are also parties to the convention.

Lebanese courts have enforced several foreign arbitral awards under this convention. A legitimate interest is required for a court to accept jurisdiction over such proceedings. The applicant must produce as evidence: (i) the arbitral award (either the original or a certified copy); and (ii) the arbitration agreement. The proceedings are conducted ex parte, where the judge will only verify: (i) the existence of the award; and (ii) whether the recognition of the award would be manifestly contrary to international public policy.

The competent court for granting exequatur depends on the type of dispute. The president of the Beirut First Instance Court handles civil and commercial matters, while the president of the Council of State deals with administrative matters.

Foreign awards must be translated into Arabic for enforcement, and the court will verify that recognising the award does not breach Lebanese public policy, as per Article 814 of the Lebanese Code of Civil Procedure. Decisions denying recognition or enforcement can be appealed. However, decisions granting recognition or enforcement can only be appealed within 30 days of notification in specific cases, for example, if: (i) the award was made without a valid arbitration agreement; (ii) it was delivered by arbitrators not appointed according to the law; (iii) it exceeded the mission for which the arbitrator or arbitrators were appointed; (iv) it was delivered without due respect for rights of defence; or (v) it violated international public policy. Appeals can be made to the Court of Cassation, but it will only review legal grounds, not factual ones.

Arbitration in Insurance Dispute Resolutions in Lebanon

Lebanon is known for being arbitration-friendly. Under Article 964 of the Lebanese Code of Obligations and Contracts, arbitration is permitted for disputes arising from insurance contracts, reflecting a positive attitude towards arbitration in this field. Consequently, parties may choose arbitration to resolve insurance disputes, with the exception of specific limitations strictly and expressly outlined in applicable laws. Therefore, aside from the limitations mentioned in 3.1 Enforcement of Arbitration Provisions in Commercial Contracts, all other insurance disputes can be resolved through arbitration.

As mentioned, for insurance claims below LBP75 million, and related to medical and hospitalisation insurance, as well as vehicle and traffic accident insurance, disputes are handled by the Insurance Arbitration Council (ICC) within the Ministry of Economy and Trade.

That said, there are no particular areas of insurance that are predominantly resolved through arbitration. However, large-scale insurance contracts are more likely to be settled through arbitration compared to smaller-scale insurance cover.

Applicable Rules and Regulations

Insurance disputes in Lebanon are mostly governed by common law rules and principles under the Lebanese Code of Obligations and Contracts, the Lebanese Code of Civil Procedure, and the provisions of the Law. Unlike public litigation proceedings, these disputes are handled privately and confidentially.

Challenging the Arbitral Awards in Lebanon

In domestic arbitration, awards can be challenged through:

• an ordinary appeal before the Court of Appeal, although this is not available for awards rendered on an ex aequo bono basis unless explicitly reserved in the arbitration agreement;
• a recourse in annulment before the Court of Appeal based on grounds specified in Article 800 of the Lebanese Code of Civil Procedure; or
• a retrial before the Court of Appeal under Article 808 of the above-mentioned code, subject to specific conditions.

For administrative matters, only one level of recourse is available. Objections to decisions denying enforcement can be raised before the judicial section of the Council of State.

In addition to information above applicable to international arbitrations, appeals against decisions granting recognition or enforcement of an international award or recourses in annulment for awards rendered in Lebanon are limited to the grounds specified in Article 817 of the Lebanese Code of Civil Procedure.

Certain terms are inherently included within insurance contracts, as follows.

• The Duty of Information, which requires the insured party to provide all relevant information to the insurer at the time of entering into the agreement. This allows the insurer to accurately assess the risks involved and to be informed of any changes that may subsequently increase these risks.
• The Duty of Good Faith, which requires honest and complete disclosure by both parties, as mandated by general legal principles governing contracts.

Other implied terms may vary depending on the type of insurance contract and the general legal principles of common civil law, specifically the Code of Obligations and Contracts, which outlines rules regarding both the form and substance of the contract.

The insurer is not liable for damage or destruction caused intentionally by the insured party, or for damage resulting from the latter’s omissions or mistakes, even if such damage would otherwise be covered by the policy (Article 966 of the Lebanese Code of Obligations and Contracts).

Additionally, the insurer is not liable for any damage that was not disclosed at the time of the policy agreement.

In Lebanon, recent insurance coverage disputes have centred around several key trends, as follows.

• War riskinsurance: the recent regional tensions, particularly the ongoing conflict between Israel and Palestine, have impacted Lebanon, as a neighbouring country. Insurers now classify southern Lebanon as a war zone, leading to the introduction of cancellation provisions in their policies. These clauses often include limited or no coverage for medical risks, property damage, and other related issues if it occurred in this zone (Article 969 of the Code of Obligations and Contracts).
• Climate change and emerging diseases: there have been disputes over whether insurance policies cover damages from natural events such as floods and fires, particularly during relevant seasons. In addition, as climate change leads also to the emergence of new diseases and viruses in Lebanon, insurers are increasingly negotiating how these evolving risks will affect future insurance cover.
• Pandemics and epidemics: following the COVID-19 pandemic, insurance companies are now offering additional cover for pandemics and epidemics at additional costs, to avoid any conflicts in the future.
• Ambiguity in policy wording: disputes have also increased due to unclear or ambiguous policy terms. Insurers and policyholders have faced legal battles over the interpretation of policy limits and exclusions, highlighting issues with policy drafting and clarity.

Disputes are typically resolved through negotiation between the insurer and the insured party, aiming to settle issues amicably without or before proceeding to court, thus avoiding additional costs. This approach applies equally to both insurance and reinsurance contracts.

The Lebanese legal framework offers several consumer protections for insurance policyholders. The Consumer Protection Law (No 659 of 2005) ensures the provision of high-quality services to consumers. These provisions apply to all contracts between professionals and consumers, provided they do not contradict the legal provisions governing insurance companies.

Moreover, consumers have the right to file complaints before the Consumer Protection Directorate, which is responsible for safeguarding the rights of purchasers of insurance products and services.

Additionally, Article 983 of the Code of Obligations and Contracts describes as null and void: (1) any clause imposing forfeiture penalties on the insured party for violating laws and regulations, unless that violation was an extremely serious; and (2) any clause imposing forfeiture penalties the insured party for failure to directly inform the authorities of emergencies or to present required documents.

Moreover, owners of motorised vehicles must obtain insurance policies covering third-party liability for bodily injury and material damage. Similarly, employers of foreign workers must obtain insurance policies covering death, disability, and medical expenditures for these workers. The insurance companies are bound by the pricing rate of these insurance policies set by the ICC.

Third parties cannot file a direct claim against an insurer unless they have suffered damage and their policy expressly permits this.

Third parties can pursue an indirect claim against the insurer on behalf of the insured party through a subrogation of rights, provided the legal conditions for subrogation are met and the insured party has not already filed a claim.

While Lebanese law does not specifically define the concept of “bad faith”, it places great importance on the principle of good faith in negotiating, concluding, and terminating contracts. However, acts of bad faith are certainly penalised in various areas of Lebanese law. For instance, in insurance contracts, if an insured item has been destroyed at the time the insurance contract is concluded, the contract is deemed null and void. Heavy penalties are imposed on the insured party having acted, as such, in bad faith (Article 981 of the Lebanese Code of Obligations and Contracts). Additionally, any false declaration or concealment of information by the insured party, if carried out in bad faith, will also render a contract null and void (Article 982 of the Lebanese Code of Obligations and Contracts).

If an insurer consistently delays payments or fails to settle claims within a reasonable time limit, the insured party may take legal action. Courts can award damages or impose penalties, in addition to the initially covered amount as stipulated by Article 970 of the Code of Obligations and Contracts.

For example, if an insurer delays payment of a valid claim, they may be required to pay interest on the overdue amount from the time it was due until it is paid, as per Article 265 of the above-mentioned code. Additionally, insurers may be liable for compensating the insured party for any extra costs or losses incurred due to the delay, in accordance with Article 257 of the same code.

Lebanese law also mandates that insurers compensate the insured party for damages if the insurer delays responding to a request or renewing the insurance beyond 15 days of notification, as outlined in Article 984 of the Lebanese Code of Obligations and Contracts.

These penalties are intended to ensure timely fulfilment of obligations by insurers and to protect the rights of policyholders.

In Lebanon, the insured party is typically bound by representations made by their broker, as long as the broker was acting within the scope of their authority. The insured party should carefully review and verify all information provided by the broker to avoid potential issues with the insurance contract.

If a broker makes false representations or omits important information, the insured party might still be bound by these representations. However, if the insured party can prove that the broker acted outside their authority or engaged in fraudulent behaviour, the insured party may have grounds to dispute the validity of the representations.

However, it is worth mentioning that, in Lebanon, there are three types of insurance intermediaries, each serving different roles in the marketplace (Article 38 of the Law).

• Independent insurance brokers: these brokers offer technical advice and work on behalf of the insured party, aiming to represent their interests. They can be either individuals or entities authorised by insurers. They are independent from insurance companies and must disclose any direct or material relationships with insurers that could affect their impartiality. Brokers help clients by presenting options form multiple insurers and guiding them to choose the most suitable policy.
• General insurance agents: these agents are licensed to conduct business on behalf of insurance companies but are not employed by them. They work independently and can be either individuals or entities authorised by insurers. General agents typically work under an agency agreement that is renewed annually and may represent multiple insurance companies.
• Insurance delegates: these are individuals who work exclusively for and under the responsibility of a single insurance company, broker or general agent. They may also work for others in a secondary capacity, provided it does not conflict with their primary role and they have authorisation from their main employer. 

Insurance companies will be held responsible, in the civil field, for any errors committed against the public by the independent broker, if it is proved that they either represent an insurance company or operate for its benefit. Likewise, the insurance companies will be held responsible, in the civil field, for any errors committed against the public by its general agent; and any clauses to the contrary in the agency contracts shall be considered as null and void. Insurance companies, as well as the general insurance agent, and the independent insurance broker, if they are juridical persons, shall be held responsible for the errors of their delegates.

It is common practice in Lebanon for insurance companies to delegate underwriting or claims handling to other parties or entities, such as brokers, or Third Party Administration (TPA), or other intermediaries. This is a form of outsourcing which is not restricted within the country.

The relationship between these parties and insurance companies is governed by the scope of authority granted to them, as detailed 4.9 Representations Made by Brokers.

Professional Liability Insurance primarily protects professionals against legal costs and expenses incurred in their defence if they are alleged to have provided inadequate advice, services, or designs that result in financial loss for their clients. This insurance covers claims related to business or professional practices, including negligence, malpractice, or misrepresentation. The key aspect of this coverage is indemnity for third-party claims.

Additionally, insurance coverage for legal costs in the defence or settlement of claims is available in various types of insurance policies, either as optional coverage or as a standard feature. This includes, but is not limited to: (i) General Liability Insurance (for risks associated to bodily injury, property damage, and personal injury claims); (ii) Directors and Officers Liability Insurance; (iii) Employment Practices Liability Insurance; and (iv) Product Liability Insurance.

It is important to carefully review policy terms to understand what is covered and what is not, as exclusions for certain types of claims or legal costs might apply, as well as any limits on the coverage amount for legal expenses.

The areas where insurers fund the defence of the insured party may evolve (decrease or increase) based on emerging trends in litigation claims that will appear with time. These changes will be influenced by the key themes outlined in 4.3 Significant Trends in Policy Coverage Disputes, as well as other future developments affecting the insurance sector in Lebanon.

In recent years, the Lebanese economic and financial crisis has led to a rise in insurance claims, influenced by inflation and other market factors.

More complex disputes have emerged regarding coverage for business interruptions and financial losses. Policyholders and insurers have often clashed over claims related to the economic downturn and its impact on business operations. Litigation costs, including those for insurance claims, have also increased, reflecting the adaptation of the Lebanese judicial system to current market rates. 

However, the cost and complexity of litigation related to insurance claims may change further based on the significant trends that will affect the insurance sector in the future.

In addition to the above, it is worth mentioning the Beirut Port Explosion on 4 August 2020 that resulted in numerous insurance claims for damages. The complexity of the case and the involvement of various parties indicate that a resolution may be long delayed. Should the explosion be classified as an accident, insurance and reinsurance companies could face significant financial liabilities, potentially leading to a crisis in the insurance sector due to the high volume of claims. On the other hand, if the explosion is classified as an act of war, insured parties will not be covered unless the policy specifically includes coverage for acts of war. This could further destabilise the already unsettled regional politics, adding to the severe crises Lebanon already faces.

Claimants can protect themselves against the risks of litigation costs by purchasing insurance that covers expenses related to disputes and court settlements – ie, legal defence costs as described in 5.1 Main Areas of Claims Where Insurers Fund the Defence of Insured Parties.

Insurers are entitled to recover amounts from third parties responsible for causing an insured loss.

According to Article 972 of the Lebanese Code of Obligations and Contracts, once an insurer has paid an insurance indemnity, it is subrogated by right to all the rights and claims of the insured party against any third parties involved. This means the insurer can pursue recovery from those third parties who are at fault for the loss. However, the same article imposes a limitation to this right. Specifically, the insurer’s right to subrogation is limited to third parties who are not the insured party’s children, successors, ascendants, employees, or individuals living in the same household. Additionally, if the subrogation of rights is impossible due to actions or omissions by the insured party, the insurer may have the right to refrain from providing coverage.

Please see 6.1 Right of Action to Recover Sums from Third Parties.

As mentioned, the insurance sector in Lebanon has been significantly affected by various factors, including ongoing financial and economic challenges. This has led to numerous disputes over the settlement of insurance premiums, with insurance companies hit by a significant drop in the amount of insurance being taken out.

The Lebanese insurance sector was also rocked by the Beirut Port Explosion of 4 August 2020, which caused extensive destruction across Beirut, resulting in over 200 deaths, more than 7,000 injuries, and the displacement of 300,000 people. The explosion inflicted damage exceeding USD15 billion, affecting homes, businesses, and essential services.

Insurance and reinsurance companies have faced a surge in claims related to the incident. However, all litigation concerning coverage for damages from the tragedy has been suspended pending the outcome of the investigation into the cause of the explosion, ie, whether it was an accident, an act of war, or of indeterminate cause. This uncertainty complicates the claims process, particularly since insurance policies often exclude coverage for acts of war or similar events. Political and security issues have repeatedly held up the investigation. A definitive determination by the authorities is crucial for resolving these claims and expediting the process.

Additionally, global developments such as new diseases, climate change, and pandemics have compelled insurance companies to reassess and update their policies to address these new emerging risks, which have not been consistent features of the insurance landscape until now.

The insurance sector, like other sectors in Lebanon, has adapted to economic and financial challenges by adjusting premium pricing, and revising policies to address discrepancies and ambiguities.

With greater clarity added to policies, insurance litigations are expected to decrease in the future. However, we believe that certain protective provisions should be mandated in insurance policies, and this will require changes in the applicable laws.

The developments outlined in 4.3 Significant Trends in Policy Coverage Disputes have urged insurance companies to update their policies to address them more precisely. This includes specifying coverage for war zones using different colour categories, addressing pandemics and epidemics, and detailing coverage for new or emerging diseases, as well as risks emerging from unexpected climate changes.

Please see 7.3 Coverage Issues and Test Cases.

There is no comprehensive global regulatory framework for ESG in Lebanon.

Lebanon does not have comprehensive data-protection legislation, and there are therefore no specific restrictions or requirements governing the transfer of customer data in this field.

However, with awareness around privacy concerns increasing, particularly in connection with Law No 81 of 10 October 2018 related to electronic transaction and personal data, we cannot rule out the possibility that the competent authority will take action in this regard in the near future.

Amendments to current insurance law have been minimal, with no substantive changes since 1999. While there have revisions applicable to the insurance sector, none have specifically addressed insurance coverage of litigation or claims related to the right of defence. A new draft law for the organisation of the insurance sector was introduced in 2004 and later approved by the Council of Ministers, and still awaits the review and approval of Parliament. We anticipate that the new regulations could introduce significant updates to the legal framework for insurance companies in Lebanon.