Insurance in Jordanian Law — Its Types and the Legal Framework Governing It
When a person or a company runs into an insurance dispute, whether it is the rejection of a claim, a disagreement over the scope of coverage, the surprise of the company coming after them under its "right of recourse," or a notice that the policy is void from the outset, they find themselves facing a complex legal system that cannot be understood by reading the insurance policy alone. The reference that governs this system in Jordan is the Jordanian Insurance Business Regulation Law and the regulations and instructions issued under it, alongside the supervisory role entrusted to the Central Bank of Jordan after supervision of the insurance sector was transferred to it. And because assessing whether the dispute is a "rejection of a compensable claim," a "void policy that produces no effect at all," or a "regulatory violation that calls for a complaint to the supervisory authority" depends on a specialized reading of the policy's terms in light of the legal text, the first hour after receiving the rejection letter or the notice is the lawyer's hour, not the hour for direct correspondence with the insurance company.
1. What Insurance Is in Jordanian Law
Insurance is a contract under which the insurer (the insurance company) undertakes to pay the insured, or the person for whose benefit the insurance was stipulated, a sum of money, an income or any other financial consideration if the accident occurs or the risk specified in the contract materializes, in return for a premium or any other financial payment made by the insured. This definition, despite its apparent simplicity, involves precise legal elements that are often the entry point of a dispute: the insured risk, the premium, the subject matter of the insurance, the insurable interest, and the dates on which coverage starts and ends.
Among the first things the lawyer examines when reviewing an insurance file is whether the elements of the insurance contract were present from the start, and whether there is anything that voids the contract retroactively, such as concealment or the provision of incorrect information at underwriting. A disagreement that appears on the surface to be a "rejection of a claim" may turn out, after reading the file, to be in reality a plea that the contract is void from its foundation, a plea whose logic and course of handling differ fundamentally from those of a "dispute over coverage."
2. The Legislative and Supervisory Framework of the Insurance Sector
The insurance sector in Jordan is regulated through an integrated system that includes the Insurance Business Regulation Law, the implementing regulations and instructions, and the general rules of the Jordanian Civil Code relating to contracts and liability. The task of supervising the insurance sector has been transferred to the Central Bank of Jordan, which exercises the powers of licensing, oversight and supervision over insurance companies operating in the Kingdom, over brokers and insurance experts, and over the insurance products offered on the market.
In practice, this arrangement means that those dealing with insurance companies have two paths in the event of a disagreement: a civil judicial path to claim compensation under the contract and the law, and a regulatory complaint path before the supervisory authority concerning practices that violate the rules of insurance business. Choosing the most suitable path, combining the two, or moving from one to the other according to the nature of the disagreement is a tactical point the lawyer settles after reviewing the insurance policy, the rejection letter and the prior correspondence.
3. Distinguishing Between Compulsory Insurance, Optional Insurance and Reinsurance
Among the first decisions the lawyer settles in an insurance file is determining the nature of the policy and its relationship to the legal system: is it compulsory insurance imposed by the State, optional insurance arising from the will of the parties, or a reinsurance contract between the primary company and a reinsurance company? Each of these types has its own legal logic, parties, rules of interpretation, relevant supervisory authority and limits on the available defenses.
| Aspect | Compulsory insurance | Optional insurance | Reinsurance |
|---|---|---|---|
| Source | Imposed by law by force of the text | Arises from the will of the parties | Arises between a primary insurance company and a reinsurance company |
| Principal parties | The insurer, the insured, the injured third party | The insurer and the insured | Two insurance companies, with no direct relationship with the insured |
| Scope of coverage | Defined by the limits of the legal text | Defined by the terms of the contract | Defined by the terms of the reinsurance agreement |
| Supervisory authority | The body regulating the insurance sector | The regulating body + the terms of the contract | A regulatory framework specific to reinsurance |
| Nature of disputes | Legal, with an applied character | Primarily contractual | Specialized commercial |
Among the matters the lawyer is keen to verify early: does the insurance in the file fall within the scope of compulsory insurance governed by specific legal texts (such as compulsory vehicle insurance), or is it optional insurance governed primarily by the terms of the policy and the general rules of contracts? This distinction later determines the type of defenses permitted and the limits of judicial interpretation of the policy. For a closer look at the framework specific to compulsory vehicle insurance and its compensation for bodily injuries, see Compulsory Insurance Coverage for Bodily Injuries.
4. The Elements of the Insurance Contract and the Areas of Proof
The insurance contract, like any civil contract, rests on general elements (consent, subject matter and cause), but it has particular features that make some elements more prone to dispute:
The insured risk: this is the possible event whose effect the insurer undertakes to cover. The risk must be possible rather than certain, it must be in the future, and it must not be contrary to public policy or public morals. Among the most prominent points of dispute is whether the claimed event falls within the scope of the risk defined in the policy or outside it, which requires a precise textual reading of the definition of the risk in the policy.
The premium: this is the amount the insured undertakes to pay in return for the coverage. Late payment or non-payment of premiums may open the door for the insurer to plead that the policy is not in force, a matter whose outcome differs according to the contractual terms and the prior dealings between the two parties.
The insurable interest: this is the legal relationship between the insured and the subject matter of the insurance that makes the insured economically harmed if the risk materializes. The absence or disappearance of this interest may deprive the policy of its legal basis.
Good faith and disclosure: the law requires the insured to disclose to the insurer everything that affects the assessment of the risk at underwriting. Concealing material information or providing incorrect information opens the door to the policy being voided or the coverage being modified, and this is among the things most exploited by the lawyer acting for the company in rejection disputes, and most defended against by the lawyer acting for the insured.
5. Insurance Policy Disputes: Their Essential Types
Insurance disputes vary, and many of those involved make the mistake of lumping them all together under the label "rejection of a claim," when each type of dispute has its own distinct legal logic:
A dispute over the voidness of the policy from the outset: the insurer pleads that the contract is void because of concealment, fraud or the absence of its elements. Here the matter does not reach the stage of examining coverage; the dispute is over the existence of the contract itself.
A dispute over the scope of coverage: the two parties agree that the contract exists but disagree over whether a particular accident falls within the insured risks or not. This type of dispute revolves around the interpretation of contractual texts, and in it the lawyer draws on the rules for interpreting insurance contracts adopted by the courts.
A dispute over the amount of compensation: the two parties agree that coverage exists but disagree over the amount due, and here the lawyer enters into negotiation based on technical reports, expert examinations and the calculation instructions adopted in the insurance policy.
A dispute over the right of recourse: the insurance company claims from the insured or a third party the recovery of what it paid after settling the claim, a legal situation that is independent in its elements, conditions and limits.
A regulatory dispute: the insured or a third party alleges that the company's practice violates the legally regulated rules of insurance business, and therefore resorts to a complaint before the supervisory authority instead of the courts, or alongside them.
The most important thing the lawyer settles at the beginning of the file is this: under which of these types of dispute does the disagreement actually fall? The dispute may in reality be a mixture (partial voidness together with a coverage dispute), which in turn calls for a compound strategy.
6. The Limits of Coverage and Its Exclusions
Every insurance policy includes exclusions that remove certain situations from the scope of coverage, even if they appear on the surface to be covered. The most prominent of these exclusions include: accidents resulting from an intentional act of the insured, damage resulting from use contrary to the law or to the policy's conditions, damage arising from force majeure as characterized by the policy, and damage that falls outside the scope of the insured risks altogether.
Exclusions are by nature interpretive terms, and in case of ambiguity they are interpreted in favor of the insured, according to a settled judicial rule in reading adhesion contracts. Assessing whether the exclusion actually applies, and whether its wording is clear enough to be interpreted in favor of the insurer, is a technical matter the lawyer settles after reading the entire policy and comparing its terms with one another, not by merely reading the text on which the company relies in the rejection letter.
Practical note: Because the system of the Insurance Business Regulation Law and the regulations issued under it is subject to periodic amendments, the lawyer, when assessing the dispute, relies on the latest version of the law as published on the website of the Jordanian Legislation and Legal Information Database, and on the supervisory authority's instructions in force, before determining the best path for the client, a point on which general information alone should not be relied upon without consulting a specialist lawyer.
7. The Paths Available in an Insurance Dispute
If an insurance dispute arises, the lawyer has several paths, which do not have an equal effect on the client:
The direct negotiation path: this begins with formal correspondence with the insurance company, which the lawyer drafts in a way that preserves the client's rights and prepares the evidentiary file for later if recourse to the courts becomes necessary. Negotiation that the company conducts alone with the client before a lawyer is engaged may fall into traps such as disclosing information that is later used against the client, or tacitly accepting unequal settlements.
A complaint before the supervisory authority: if the practice in dispute violates the legally regulated rules of insurance business, recourse to the supervisory authority is a course parallel to, or prior to, the courts, and it is effective in certain cases.
Recourse to the courts: if an amicable solution proves impossible, the lawyer files a civil lawsuit before the competent court, precisely defining the type of claim (compensation, performance of a contractual obligation, defeating a plea that the policy is void, responding to a recourse action) according to the characterization settled at the initial assessment stage.
Arbitration: if the insurance policy contains an arbitration clause, the dispute enters a different procedural area, in which the lawyer examines the enforceability and validity of the arbitration clause and the consequences of that for choosing the competent body.
And because each of these paths has its own effects on limitation periods and on the binding force of later procedures, choosing the wrong path early may close the door to other paths that were available. This is itself a legal point that merits consulting a specialist lawyer before any correspondence with the insurance company.
8. Frequently Asked Questions
What is the difference between compulsory insurance and optional insurance?
Compulsory insurance is imposed by law by force of an explicit text (such as compulsory vehicle insurance covering bodily injuries to third parties), and the limits of its coverage are set by the legal text, so the parties cannot expand or narrow them outside this framework. Optional insurance, by contrast, arises from the will of the parties and is defined entirely by the terms of the policy, subject to the general rules of the Civil Code and the Insurance Business Regulation Law.
Who is the supervisory authority over insurance companies in Jordan?
The task of supervising the insurance sector has been transferred to the Central Bank of Jordan, which exercises the powers of licensing, oversight and supervision over insurance companies operating in the Kingdom, over brokers and insurance experts, and over the insurance products offered.
Can the insurer void the policy on the grounds of non-disclosure?
Non-disclosure, or the provision of incorrect information by the insured at underwriting, opens the door to a plea of voidness or to modification of the coverage, provided that the concealed information is material to the assessment of the risk, and that the insurer did not know of it or later waive it. Examining whether the information is "material" in the legal sense, and whether waiver or silence has any effect on the plea, are technical matters the lawyer settles.
What is meant by the right of recourse and how is it used?
The right of recourse means that the insurance company, after paying the compensation, claims against whoever caused the accident or breached the policy's conditions to recover what it paid, in whole or in part. It has conditions and limits that may not be exceeded, and it is a dispute independent in its elements that needs an independent defense.
Is it permissible to negotiate with the insurance company without a lawyer?
Negotiation is legally permissible, but in practice it involves risks; statements and settlements at this stage may be used in any later dispute, and the negotiator may miss procedural rights they are unaware of (such as interrupting the limitation period or preserving the claim). Among the matters the lawyer is keen to manage early is drafting correspondence in a way that does not cost the client future options.
When is recourse to the supervisory authority more suitable than filing a lawsuit?
When the disagreement concerns a regulatory practice or professional conduct by the insurance company or its broker, or an insurance product that does not comply with the controls in force. If, however, the dispute is purely financial and concerns compensation, the courts or arbitration (depending on the policy) are the primary paths.
Legal Consultation
Insurance disputes are among the disputes most affected by the precision of the legal characterization of the nature of the disagreement; mixing up a coverage dispute with a voidness dispute or a recourse dispute complicates the position and weakens the defense, and may deprive the insured of compensation they are entitled to, or expose the insurer to liability it could have avoided through professional handling. The strategy differs according to the type of policy (compulsory or optional), the nature of the disagreement and the position of the supervisory authority, elements that a specialist lawyer settles after reading the policy, the rejection letter and the prior correspondence. For those seeking a professional assessment of the file and of the most suitable paths available, the firm offers specialist legal consultation in civil cases and labor law, drawing on a connected understanding of related topics such as Compulsory Insurance Coverage for Bodily Injuries and Civil Compensation Under Jordanian Law. You can contact Alabwini Law Firm & Legal Consultancy to review the policy and discuss the available options.
