APA Insurance v PCM (Suing as the Mother and Next Friend to JHSL) (Civil Appeal E166 of 2024) [2026] KEHC 9879 (KLR) (3 July 2026) (Judgment)

APA Insurance v PCM (Suing as the Mother and Next Friend to JHSL) (Civil Appeal E166 of 2024) [2026] KEHC 9879 (KLR) (3 July 2026) (Judgment) Neutral citation: [2026] KEHC 9879 (KLR) Republic of Kenya In the High Court at Eldoret Civil Appeal E166 of 2024 JRA Wananda, J July 3, 2026 Between APA Insurance Appellant and PCM (Suing as the Mother and Next Friend to JHSL) Respondent (Appeal from the Judgment dated 26/07/2024 delivered in Eldoret Small Claims Court No. E114 of 2024 by Hon. T.W. Wambugu - Adjudicator) Judgment 1.This Appeal arises from the Judgment delivered in the said Small Claims Court case in which the Respondent sought and obtained a declaration that the Appellant, an insurer, is statutory bound to pay to the Respondent a sum of Kshs 101,500/- in satisfaction of a Court decree. 2.In his Statement of Claim dated 7/02/2024 filed through Messrs Mathai Maina & Co. Advocates, the Respondent pleaded that the Appellant was the insurer of the motor vehicle registration number KCU 750B, which was involved in an accident on 24/05/2023 in respect to which the Respondent sued one Dickson Liboi as owner of the motor vehicle, in Eldoret Small Claims Court Claim No. E573 of 2023 claiming loss and damages. It was pleaded further that Judgment was entered therein on 17/02/2023 in favour of the Respondent for the aggregate sum of Kshs 101,510/- but the Appellant, as such insurer, has failed to settle the decree. The Respondent therefore brought the subsequent suit the subject hereof by virtue of Section 10(2) of the Insurance (Motor Vehicle Third Parry) Risks Act, Cap. 405. 3.The Appellant then filed the Statement of Response dated 13/03/2024, through Messrs Onyinkwa & Co. Advocates, which was later amended on 22/03/2024. The Appellant basically denied the above allegations, including being the insurer of the motor vehicle. It was also pleaded, inter alia, that the Respondent had no capacity to sue, that the Respondent was never served with a Statutory Notice, and that, in the alternative, the Respondent was not a “third party” as the cover did not include or extend to passengers who are family members of the insured, and that therefore, the Respondent is not bound to satisfy the decree. 4.The matter then proceeded to trial in which the Respondent is recorded to have adopted her Witness Statements, and produced her bundle of documents. On its side, the Appellant called one witness who testified, but whose testimony was basically a restatement of the denials and allegations made in the Amended Statement of Response as aforesaid. 5.After the trial, as aforesaid, by its Judgment delivered on 26/07/2024, the Adjudicator entered Judgment for the Respondent as prayed. The main basis for the Judgment was that the Appellant did not take out proceedings under Section 10(4) of the Act to avoid the claim, which ought to have been done before filing of the suit, or within 3 months of such filing. 6.Aggrieved by the Judgment, the Appellant filed this Appeal by way of the Memorandum of Appeal dated 23/08/2023. The grounds listed are as follows:a.That the Learned Magistrate erred in law and in fact in holding that the Appellant was liable to satisfy the decree obtained in Eldoret SCCC E573 of 2023 by failing to realize that the Respondent was not a third party and could not make a claim and/or sustain a claim within the purview of the Insurance (Motor Vehicle Third Party Risks) Act.b.That the Learned Magistrate erred in law and in fact by ordering the Appellant to satisfy the said decree in total disregard to the provisions of section 5 (b) and Section 10 (1) of the Insurance (Motor Vehicle Third Party Risks) Act upon which the claim was based and under the insurance policy.c.That the Learned Magistrate erred in law and fact in failing to make a finding that the Respondent herein was a second party and not covered under the insurance policyd.That the Learned Magistrate erred in law and in fact in holding that the Appellant's denial of liability came late and outside the statutory periods set out in the Insurance (Motor Vehicle Third Party Risks) Acte.That the Learned Magistrate erred in law and in fact in wholly disregarding the evidence adduced on behalf of the Appellant and/or properly analyse the evidence on record thereby arriving at an erroneous decision.f.That the Learned Magistrate erred in law and in fact by totally failing to consider submissions filed by the Appellant's Advocates and authorities cited therein 7.This Appeal was then canvassed by way of written Submissions. The Appellant’s Submissions is dated 12/03/2025, while the Respondent’s is dated 4/11/2025. Appellant’s Submissions 8.Counsel for the Appellant submitted that the the Insurance (Motor Vehicle Third Parry) Risks Act does not define a “third party” but it however identifies the people who do not qualify as “third parties”. He submitted that Section 5(b) provides that employees and passengers (except passengers who are carried for hire and reward) are not covered under an Insurance Policy. He pointed out that the minor in this case was neither carried for hire nor reward as she is the daughter of the insured, and was therefore not a “third party” as she did not fall under the category of persons covered under Section 5(b). He submitted that the insured had the option of contracting for an insurance policy that covered specific people such as his immediate family members, which he did not. He faulted the trial Magistrate for failing to analyze that issue, which was the main issue, and only focusing on service of the statutory notice. Counsel also cited several authorities in support of the various limbs of his Submissions. Respondents’ Submissions 9.Counsel for the Respondent, on his part, basically submitted that Section 5(b) does not apply in this case since the insurance of the motor vehicle was for social/domestic purposes and for the insured’s business, not for racing competition, rallies or trials, or use for practice, or for carriage of passengers for hire or reward. He therefore submitted that the comprehensive Policy herein was not the same as the one envisaged under Section 5(b). He then strayed into arguing the issue whether the Small Claims Court has jurisdiction to entertain declaratory suits, which issue I will however not engage in as it is not one of the grounds in this Appeal. He, too, cited several authorities to support the various limbs of his submissions. Determination 10.The question placed before this Court is to determine “whether the Small Claims Court erred in allowing the declaratory suit filed against the insurer”. 11.Since this is an Appeal from a decision of the Small Claims Court, as stipulated under Section 38 thereof, the same can only be entertained on points of law. Looking at the issues raised herein, I am satisfied that they are proper points of law, and thus properly before this Court. 12.As aforesaid, the action was anchored on the provisions of Section 10 of the Insurance Motor Vehicle (Third Party Risks) Act. 13.As for duty of an insurer to satisfy or settle decrees obtained against its insured, the same is a statutory duty which emanates from the provisions of Sections 10(1) of the Insurance (Motor Vehicle Third Party Risks) Act, which provides as follows:“ 10.Duty of insurer to satisfy judgments against persons insured1.If, after a policy of insurance has been effected, judgment in respect of any such liability as is required to be covered by a policy under paragraph (b) of Section 5 (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy, the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability, including any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments.”. 14.However, Section 10(4) of the Act provides as follows:“(4)No sum shall be payable by an insurer under the foregoing provisions of this section if in an action commenced before, or within three months after, the commencement of the proceedings in which the judgment was given, he has obtained a declaration that, apart from any provision contained in the policy he is entitled to avoid it on the ground that it was obtained by the non-disclosure of a material fact, or by a representation of fact which was false in some material particular, or, if he has avoided the policy on that ground, that he was entitled so to do apart from any provision contained in it:Provided that an insurer who has obtained such a declaration as aforesaid in an action shall not thereby become entitled to the benefit of this subsection as respects any judgment obtained in proceedings commenced before the commencement of that action, unless before or within fourteen days after the commencement of that action he has given notice thereof to the person who is the plaintiff in the said proceedings specifying the non-disclosure or false representation on which he proposes to rely, and any person to whom notice of such action is so given shall be entitled, if he thinks fit, to be made a party thereto. 15.While therefore Section 10(1) compels an insurer to satisfy a judgment against the person insured, that burden is removed under Section 10(4) from the insurer if it obtains a declaration that it is entitled to avoid the policy of insurance. To benefit from this exception however, the insurer must have served a Notice of Repudiation and also successfully filed a declaratory suit seeking confirmation of such repudiation, before a personal injury suit against the insured person has been commenced by, or on behalf of a third party injured or killed in an accident contemplated in the insurance policy. If, however, the personal injury suit has already been commenced, then the insurer must have served the Notice of Repudiation within 14 days after the filing of such personal injury suit, and also filed the declaratory suit within 3 months after the filing of such personal injury suit. 16.My understanding of the Adjudicator’s finding is that the Appellant’s refusal to settle the decree is a non-starter in view of Section 10(4) because the Appellant having neither served a Notice of Repudiation, nor filed a declaratory suit seeking confirmation of such repudiation, before or after the personal injury suit against its insured was commenced, the escape window provided in Section 10(4) is not available to it. I disagree because what Section 10(4) addresses is repudiation by the insurer on the basis that the policy was either “obtained by the non-disclosure of a material fact”, or “by a representation of fact which was false in some material particular”. The Appellant’s contention in this case is not that it has repudiated liability, but that that the Judgment in question does not affect it at all because it was not in favour of a person “insured by the policy, but one excluded in law. To this extent, Section 10(4) does not bar apply and cannot therefore be invoked to defeat the Appellant’s defence. Section 10(4) only applies in cases of repudiation, which this one is not. 17.On the above issue therefore, my finding is that the Adjudicator fell into error when she rejected the Appellant’s defence on the sole ground that the Appellant did not file a declaratory suit before the first suit was commenced, or 3 months after its commencement. 18.That, however, is not the end of the matter. The Appellant’s contention is basically that it cannot be called upon to satisfy the decree because the Judgment was not in favour of a person “insured by the policy”. I note however that the Appellant, in so arguing, is not relying on any exclusion term contained in the Insurance Policy, but on Section 5(b) of the Insurance (Motor Vehicle Third Party Risks) Act, which it claims, contains such exclusion. Indeed, I have perused the Policy and I have not found any clause therein excluding family members of the insured from the cover. This Appeal is therefore dependent on the finding whether, as argued by the Appellant, Section 5(b) above generally excludes family members from the insurance cover contemplated under the Insurance Motor Vehicle (Third Party Risks) Act. 19.On the issue of “third party risks” insurance cover, Section 4(1) of the Insurance (Motor Vehicles Third Party Risks) Act, Cap 405 provides as follows:“Subject to this Act, no person shall use, or cause or permit any other person to use, a motor vehicle on a road unless there is in force in relation to the user of the vehicle by that person or that other person, as the case may be, such a policy of insurance or such a security in respect of third party risks as complies with the requirements of this Act.” 20.Section 4(1) therefore stipulates that every motor vehicle operated on a public road in Kenya must have valid insurance coverage against third-party risks. Section 4(2) then provides that driving or permitting someone else to drive an uninsured vehicle on Kenyan roads is a criminal offence, Section 4(3) however excludes government-owned motor vehicles, and those used solely for agricultural use from the above requirement. 21.Under insurance law and practice, ordinarily “first party” is the vehicle-owner or policy-holder, the “second party” is the insurance company underwriting the risk, and the “third party” is generally, any other person who suffers bodily injury, death, or property damage due to the vehicle such as, inter alia, pedestrians, cyclists, motorists, and passengers. The Insurance (Motor Vehicles Third Party Risks) Act does not however explicitly define the term “third party” in its interpretation section. The Act only implicitly outlines who a “third party” is through Section 5(b) by simply defining the required scope of the insurance policy. 22.While a literal definition is missing from Section 3 (interpretation provision), Section 5(b) provides that a valid policy must insure against:“....... any liability which may be incurred by him or them in respect of the death of, or bodily injury to, any person caused by or arising out of the use of the vehicle on a road.” 23.Section 5 then excludes certain categories of people from mandatory third-party liability coverage. Unless specifically added as an extra commercial premium, a policy is therefore not required by law to cover any person employed by the insured if the injury or death occurs during the course of their employment, or passengers carried in a private vehicle, unless they are being carried for hire or reward, or due to an employment contract. The Act does not therefore “prohibit” this category of people from being covered as alleged by the Appellant, but only makes it optional for the insurer to choose whether or not to cover or not to cover. 24.Since the Act does not therefore contain any specific clause excluding immediate family members from being covered under mandatory third-party liability, in practice, insurance companies normally include “household” or “family exclusion clauses” in their standard policy contracts to minimize collusion and financial fraud risks. Needless to state, this, they generally do at an extra premium fee. 25.Having therefore found that the Insurance Motor Vehicle (Third Party Risks) Act does not anywhere expressly “prohibit” insurers from covering immediate family members of the insured travelling as passengers in the insured motor vehicle as “third parties”, and the Insurance Policy issued by the Appellant also did not contain any clause excluding immediate family members of the insured from the “third party” insurance cover, the fact of the person seeking compensation herein being the insured’s daughter does not therefore in any way absolve the Appellant from it’s liability to satisfy the decree. Final Orders 26.Under the above circumstances, this Appeal therefore fails, and is accordingly dismissed with costs to the Respondent. DELIVERED, DATED AND SIGNED AT NAIROBI THIS 3RD DAY OF JULY 2026………………..……..WANANDA JOHN R. ANUROJUDGEDelivered in the presence of:Ms. Muresia for the AppellantMr. Rotich h/b for Mr. Mathai for the RespondentCourt Assistant: Brian Kimathi