https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/10344

Chester Insurance Brokers Ltd v Sibed Transporters Ltd (Civil Appeal E528 of 2025) [2026] KEHC 10344 (KLR) (Civ) (2 July 2026) (Judgment) Neutral citation: [2026] KEHC 10344 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Law Courts) Civil Civil Appeal E528 of 2025 D Mburu, J July 2, 2026 Between Chester Insurance Brokers Limited Appellant and Sibed Transporters Limited Respondent (Being an appeal from the Judgment and Decree of the learned trial Magistrate, Hon D Ole Keiuwa, Chief Magistrate, dated and delivered on 17th April 2025 in Nairobi CMCC No. 9389 of 2019) Judgment 1.Before this Court is a Memorandum of Appeal dated 14th May 2025 seeking the following orders:i.That the appeal be allowed.ii.That the respondent’s counterclaim be dismissed with costs.iii.That the appellant be allowed costs of this appeal and the costs in the lower court. 2.The appeal is premised on the following grounds, as set out in the memorandum of appeal:i.That the magistrate erred in law and in fact by allowing the respondent’s counterclaim and set off against the appellant, despite there being no contractual or legal basis to impose such liability.ii.That the learned magistrate fundamentally misapprehended the legal distinction between an insurance broker and an insurer, thereby wrongly holding that the appellant is liable for an alleged indemnity arising from an insurance relationship to which the appellant was not liable.iii.That the magistrate failed to appreciate that the appellant’s role was limited to that of an intermediary in the placement of an insurance cover and not as an underwriter of risk or a principal in the insurance relationship.iv.That the magistrate failed to appreciate that the issues raised in the respondent’s counterclaim and set off were different causes of action from the one raised by the appellant in the plaint.v.That the magistrate erred by awarding a judgment of Kshs 10,000,000 to the respondent against the appellant based on the counterclaim, yet the respondent did not prove the counterclaim on a balance of probabilities.vi.That the magistrate erred in imposing liability on the appellant without any pleading or proof that the appellant had undertaken to be personally liable in the event of the loss.vii.That the magistrate erred by failing to evaluate the appellant’s uncontroverted evidence that it acted strictly as a broker and had no capacity to admit or process claims on behalf of the 3rd party insurer.viii.That the magistrate misapplied the principles of agency law by imposing liability on an agent (appellant) in the absence of any express or implied assumption of liability for the principal’s obligation.ix.That the magistrate’s judgment in the counterclaim and the setoff was against the evidence adduced and resulted in a miscarriage of justice.x.That the magistrate erred by failing to address the legal issues raised by the appellant, including the lack of statutory or contractual responsibility to compensate the respondent.xi.That the magistrate erred by awarding reliefs that were neither pleaded nor proved in the counterclaim and the set off. Background Of The Appeal 3.The appellant instituted a suit against the respondent vide a plaint dated 16th December 2019 seeking special damages of Kshs 4,691,883.00, general damages, costs of the suit, and interest against the respondent. The appellant averred that it had issued the respondent with various insurance policies, but the respondent had failed to make any payments whatsoever. The appellant averred that the insurance policies remained unsettled despite issuing various reminders to the respondent. The appellant stated that it had suffered massive financial loss and damage as a result of the breach of the contract. 4.In response to the claim, the respondent filed a statement of defence dated 14th February 2020, denying having taken out any insurance policies from the appellant. The respondent stated that there was no contract between the two parties and that no contractual breach existed as alleged by the appellant. 5.The appellant filed a reply to the defence dated 15th July 2021, reiterating its initial position in the plaint. 6.The respondent filed a notice of motion application dated 20th September 2021 seeking leave to amend their statement of defence, and the same was allowed by the court. In the amended statement of defence, the respondent stated that the appellant owed them Kshs 10,000,000/= arising from the loss of motor vehicle KBJ 125X ZE 6958 insured with the appellant. The respondent prayed for judgment against the appellant for the sum of Kshs 10,000,000/= and a setoff of the appellant’s claim from the same in the event the appellant’s claim is successful. 7.The appellant then filed an amended reply to the amended statement of defence dated 12th September 2022, denying the contents of the amended statement of defence and the counterclaim and set off. 8.The parties filed written submissions. The appellant filed written submissions dated 5th December 2024. The appellant submitted that there was no written agreement on the insurance policies between the parties, but the respondents held the insurance policy in question by having accepted and received the same from the appellant. The appellant submitted that there was a valid oral agreement between the parties. 9.The appellant submitted that there was a binding contract between the parties in relation to the insurance policies. The plaintiff submitted that the respondent had failed to pay the premium of Kshs 4,691,883/= and that non-payment does not invalidate an insurance contract. 10.The appellant urged the court to enter judgment in its favour and dismiss the respondent’s counterclaim with costs. 11.The respondent filed written submissions dated 5th February 2025. The respondent submitted that there existed a contractual relationship between the two parties, but that the appellant had failed to prove the specific claim for Kshs 4,691,883/=. The respondent submitted that the appellant had an obligation to compensate for the loss of Kshs 10,000,000/=. The respondent submitted that the appellant’s claim was made out of bad faith to intimidate the respondent from asking for compensation of Kshs 10,000,000/=. 12.Upon hearing the parties and considering the evidence before the court, the learned magistrate entered judgment dated 17th April 2025 in favour of the respondent as per the counterclaim and the set off in the sum of Kshs 10,000,000/= less the amount claimed by the appellant in the sum of Kshs 4,691,883/= plus costs of the suit and the interest from the date of filing of the suit until settlement in full. 13.Dissatisfied with the said judgment, the appellant filed an application for a stay of execution under Order 42 of the Civil Procedure Rules and this appeal. Proceedings At The High Court 14.The appeal was canvassed by way of written submissions. Both parties filed written submissions that are in the record of this court. 15.The appellant filed written submissions dated 13th November 2025. The appellant submitted that it was an agent of the respondent and that, as a broker, it could not assume the responsibilities of an insurer. The appellant submitted that the trial court misdirected itself by finding the appellant liable in respect of an indemnity cover under an insurance cover that it was not a party to. The appellant submitted that the respondent’s claim for the loss of motor vehicle registration number KBJ 125X and ZE 6958 ought to have been directed to the insurance company and not the brokers. 16.The appellant submitted that the trial magistrate failed to draw the legal distinction between an insurance broker and an insurer. The appellant submitted that a broker is not liable for the insurer’s liability. The appellant submitted that its role was only limited to the placement of insurance cover (intermediary role). 17.The appellant submitted that the trial magistrate failed to appreciate that the insurance policy in question was a third party only motor insurance cover and that it was only limited to indemnify the insured against liability to third parties arising from death, bodily injury or property damage. The appellant submitted that the insurance cover could not extend to cover the insured’s own loss. 18.The appellant submitted that the respondent failed to prove its counterclaim and set off on a balance of probabilities. The appellant submitted that the judgment issued was against the weight of the evidence presented. 19.The respondent filed written submissions dated 17th November 2025. The respondent submitted that the respondent held the appellant liable for the consequences of its professional failure to diligently discharge its mandate as the respondent’s insurance broker, which failure caused the respondent loss. 20.The respondent submitted that the insurer’s liability arises from the contract of insurance itself whereas the broker’s liability arises from the breach of its professional and contractual duty of care owed to the insured as the insurer’s agent and is founded on the law of tort. The respondent submitted that if the appellant had acted properly to lodge and pursue the insurance claim, the respondent would not have suffered the loss it did. 21.The respondent outlined the following trial court’s findings of fact:i.That there existed a valid insurance cover in favour of the respondent arranged through the appellant.ii.That the respondent’s motor vehicles were destroyed by fire, constituting an insured event.iii.That the respondent terminated the relationship with the appellant because the appellant failed to settle the sum claimed for the burnt motor vehicles.iv.That the appellant’s failure to secure the settlement of the loss occasioned the respondent a quantifiable loss. 22.The appellant submitted that the insurer was not a necessary party to this claim. The respondent submitted that the relationship between the respondent and the appellant was one founded on the law of tort whereas the one subsisting between the respondent and the insurance company was one founded on the law of contract. 23.The respondent submitted that the trial court’s applicability of the principle of set off was not only legally correct but also equitable and just. The respondent urged the court to uphold the judgment and dismiss the present appeal with costs. 24.The appellant filed supplementary submissions dated 28th November 2025. In the supplementary submissions, the appellant urged the court to disregard issues that were not raised in the trial court. The appellant listed the following issues:i.Allegation of material non-disclosure by the appellant.ii.Claim that the appellant owed contractual obligations beyond those of a broker.iii.The issue of insurable interest. 25.The appellant urged the court to allow the appeal as prayed. Analysis And Determination 26.I have carefully considered this memorandum of appeal, the record of proceedings before the lower court, as well as the written submissions filed by the appellant. 27.This is a first appeal. It is settled law that the duty of the first appellate court is to re-evaluate the evidence which was adduced in the subordinate court, both on points of law and fact and come up with its findings and conclusions. 28.In the matter of Gitobu Imanyara v Attorney General (2016) eKLR, it was held as follows:‘’An appeal to this court is by way of a retrial, and the principles upon which this court acts in such an appeal are well settled. This court must reconsider the evidence, evaluate it itself and draw its own conclusions, though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect.’’ 29.The issue arising for determination before this court is:a.Whether an insurance broker should be held liable in respect of an indemnity cover under an insurance contract when the insured suffers loss?b.What is the legal distinction between an insurance broker and an insurer?c.What is the scope of a third party insurance policy?d.Whether the appellant is entitled to the reliefs sought? 30.From the trial court’s record and the submissions filed at the High Court, it is clear that both parties admit that the appellant rendered insurance policy services to the respondent. The central controversy raised by the parties is on the extent of a broker’s liability in insurance law. 31.Section 2 of the Insurance Act defines a broker as a person who not being an employee of an insurer, in consideration of a commission arranges or places insurance business with an insurer on behalf of a proposer or insured. 32.Section 191 (2) of the Insurance Act provides that no person licensed under the Act as an insurer, reinsurer or broker shall carry on in Kenya any business other than the business in respect of which he is licensed. As such, the section outlines the scope of brokerage and provides that no broker shall engage in the business of an insurance agent. 33.In the case of Britam Insurance Company versus Njoki (2024) eKLR, the court held as follows:‘’An agent for the purposes of insurance is an agent for the insured. Any representation by an agent is not representation by the insurance company.’’ 34.Furthermore, the court in Insurance of East Africa Limited v Ndambuki Kisau (2004) eKLR, Wendoh J restated the position adopted in Anglo African Merchants Case (1969) ALL ER that a broker is at all times an agent of the insured and not the insurer. 35.Flowing from the above jurisprudence, the relationship subsisting between a broker and an insured is one built on a duty of care, and it is only after the breach of that duty, as is the norm in the law of tort, that a broker can be held liable for losses suffered by the insured. 36.The respondent submitted that the appellant failed to secure settlement of the claim with the insurer. The respondent in paragraph 15 of the counterclaim and set off (page 77 of the record of appeal) avers that the appellant has failed to settle the claim of Kshs 10,000,000/= suffered upon the loss of the insured motor vehicles. 37.In light of the above, it is the duty of this court to answer the question ‘’Who is responsible for settling insurance claims in insurance contracts?’’ 38.An insurance contract is between the insured and the insurer. The terms of such a contract are binding upon the two. As such, in the event an insured suffers loss, it is their responsibility to pursue the insurer for compensation. An insurance broker is not bound by the terms of the contract entered between the insured and the insurer since an insured makes independent judgment before getting into the contract. 39.In the case of National Bank of Kenya Limited v Pipeplastic Samkolit, Civil Appeal No 95 of 1999, the court held that a court of law cannot rewrite a contract between the parties. The parties are bound by the terms of their contract unless coercion, fraud or undue influence is established. 40.Guided by the above jurisprudence, this court cannot rewrite the insurance contract between the respondent and the insurer who is not a party to this suit to impose liability on the appellant. None of the vitiating factors has been established by the evidence on record. 41.The scope of a third party motor vehicle insurance policy is to protect victims who suffer death, bodily injury or property rather than the policyholder (insured). 42.I find that the trial magistrate misdirected himself by holding that the appellant herein, being a broker was liable to compensate the insured. 43.In the upshot, I find that the appeal is merited and allow it in the following terms:i.The Judgment and Decree of the learned trial Magistrate, Hon D Ole Keiuwa, Chief Magistrate, dated and delivered on 17th April 2025 in Nairobi CMCC No. 9389 of 2019 is hereby set aside.ii.Judgment is entered in favour of the appellant for the sum of Kenya Shillings 4,691,883.00/= with interest at court rate from the date of filing suit in the lower court until payment in full;iii.The respondent's counterclaim is hereby dismissed with costs.iv.The appellant shall have the costs of the appeal and in the lower court. DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 2ND DAY OF JULY 2026.DAVID MBURUJUDGE