Insurer compensated 86 workers under UAE scheme; court also awards 5% annual interest.
Dubai: A Dubai court has ordered a company to reimburse Dh1.38 million to an insurance provider after the insurer settled the outstanding labour dues of 86 employees on the company’s behalf under the UAE’s workers’ insurance scheme.
The court further ruled that the company must pay annual legal interest of 5 per cent from the date the case was filed until the amount is fully settled, in addition to covering court expenses and Dh2,000 in legal fees.
According to court documents, the insurance company filed a lawsuit seeking to recover Dh1,380,299, representing labour-related compensation it had paid to workers after the employer failed to fulfil its obligations toward its employees.
The case stems from the workers’ insurance scheme introduced by the UAE Cabinet in 2018 as an alternative to the employer bank guarantee system. Administered by the Ministry of Human Resources and Emiratisation, the scheme is designed to safeguard workers’ rights by ensuring key employment benefits are paid when an employer fails to meet its obligations.
Under the policy, coverage includes end-of-service gratuity, unpaid salaries, leave entitlements, repatriation costs, transportation of a deceased worker’s remains, and expenses arising from occupational injuries or diseases, with compensation capped at Dh20,000 per worker.
Court records showed that a Labour Disputes Settlement Committee had earlier ordered the company to pay more than Dh4.09 million in outstanding labour dues to 86 workers.
Following the ruling, the Enforcement Department of Dubai Courts instructed the insurance provider to activate and liquidate the workers’ insurance coverage. Based on the terms of the policy, the insurer determined that Dh1.38 million was payable within the limits of the available coverage.
The insurer subsequently transferred the amount to Dubai Courts in October 2025 for distribution to the affected workers.
However, despite repeated requests for reimbursement, the employer failed to repay the insurer for the amount settled on its behalf, leading the insurance company to pursue legal action.
The court noted that the insurance certificates issued to the workers explicitly incorporated the terms of the insurance policy, which give the insurer the right to recover from the employer any compensation paid on behalf of workers.
In its judgment, the court stressed that contractual obligations are legally binding and must be fulfilled in accordance with their agreed terms. It also referred to established legal principles stating that clear and unambiguous contract provisions must be applied and enforced as written.
The court found that the insurer had fulfilled its obligations under the policy after receiving an enforcement order to settle the workers’ claims. As a result, it ruled that the insurer had acquired a legal right to recover the amount paid from the employer, who remained ultimately responsible for the outstanding labour dues.
The court further ruled that the employer’s obligation to reimburse the insurer arose once the insurance coverage had been activated and the workers’ entitlements were paid, regardless of whether the underlying labour judgment had become final.
As the company failed to appear before the court or challenge the claim despite being legally notified, the judgment was issued in absentia.
The court ultimately ordered the company to repay Dh1,380,299 to the insurance provider, along with annual legal interest of 5 per cent from the date the lawsuit was filed until full payment is made. The company was also ordered to cover court fees, related expenses and legal costs.
