[2023] KEHC 18897 (KLR)

Heritage Insurance Company Limited v Karuri; William (Interested Party) (Civil Suit 6B of 2021) [2023] KEHC 18897 (KLR) (15 June 2023) (Judgment)

Neutral citation: [2023] KEHC 18897 (KLR)

Republic of Kenya

In the High Court at Meru

Civil Suit 6B of 2021

EM Muriithi, J

June 15, 2023

Between

Heritage Insurance Company Limited

Plaintiff

and

Ibrahim Ntongai Karuri

Defendant

and

Charles Ikamati William

Interested Party

Judgment

1. By a plaint dated 23/3/2021, the Plaintiff sued the Defendant seeking a declaration that the Defendant has breached the insurance contract, Policy number 101978070582 in respect to Motor Vehicle Registration Number KCD 627 X, a declaration that the Plaintiff do avoid all claims of liability and satisfaction of all decrees that may result or be issued against the insurance contract, Policy number 101978070582 in respect to the subject accident which occurred on 6th January 2020 and in respect to Motor Vehicle Registration Number KCD 627 X and costs of the suit. The Plaintiff pleaded that by an insurance contract, Policy number 101978070582 made between it and the Defendant, it agreed to insure Motor Vehicle Registration Number KCD 627 X in respect of any liability which might be incurred in respect of any damage, liability to third parties, bodily injury or death to any person caused or arising out of the use on a road of the said motor vehicle during the currency of the policy. It was an express term and condition of the Policy schedule forming part of the contract of insurance contained in the Policy number 101978070582 that the Defendant’s motor vehicle will remain insured when the Defendant is the registered owner. On 6/1/2020, the Defendant’s said motor vehicle was involved in an accident along Nkamathi area allegedly killing 1 person. The Defendant thus filled a motor accident claim form dated 27/5/2020 requiring the Plaintiff to meet the liability arising as a result of the accident. On carrying out its investigations, the Plaintiff found out that the Defendant’s motor vehicle had been sold on 28/7/2017 to a 3rd party hence breaching the insurance contract. Since the sale occurred on 28/7/2017, the Defendant had no insurable interest as at the time of the accident on 27/5/2020, and thus it is not liable to settle any claim arising after such cancellation of the policy. It was pleaded that the Defendant is liable for his acts and omissions as he breached the material terms and conditions of the insurance contract, Policy number 101978070582.

2. The Defendant denied the claim vide his statement of defence dated 2/7/2021 and prayed for the Plaintiff’s suit to be dismissed.

3. The Interested Party denied the claim vide his statement of defence dated 6/12/2021 and prayed for its dismissal with costs.

4. On 3/11/2021, the court (P.J.O Otieno J) ordered by consent that, “i) Application dated 10. 8.2021 is allowed as prayed. Let the said interested party file and serve any pleadings within 15 days from today. ii) Let the lower court matter proceed to hearing but if there shall be a judgment before this matter is determined, let the decree be stayed pending the outcome of this matter. iii) This matter shall proceed by way of case stated. The parties shall agree on issue(s) for determination and file such issue(s) within 30 days from today. iv) Parties shall within 30 days of filing issues for determination file and exchange written submissions on the said issues. v) Mention on 21. 3.2022 to confirm compliance and further directions.”

5. The parties filed a list of agreed issues on 3/12/2021 and their respective written submissions on 3/12/2021, 1/3/2022 and 18/3/2022.

Submissions 6. The Plaintiff urges that the Defendant indeed sold the subject vehicle to a 3rd party, and therefore he had no insurable interest, and cites Lion of Kenya Insurance Company Limited v Edwin Kibuba Kihonge (2018) eKLR and Kenya Orient Insurance Limited v Kelvin Macharia Karanja (2017) eKLR. It faults the Defendant for failing to disclose to it the change of ownership to a 3rd party, and therefore it was entitled to avoid the policy, and cites Co-operative Insurance Company Ltd v David Wachira Wambugu (2010) eKLR and British American Insurance Co. Limited & another v Isaac Njenga Ngugi (2019) eKLR. It urges the court to allow the claim with costs.

7. The Defendant faults the Plaintiff for failing to file a declaratory suit under section 10 (4) of the third party risk Act within 3 months of commencement of the primary suit, and cites Kenya Orient Insurance v Senenerro Ole Kurraro & 7 others(2016) eKLR. He urges that the suit is time barred and it ought to be dismissed with costs. He urges that the insurance contract was entered into 2 years after the sale agreement was made, and thus his insurable interests are intact and the Plaintiff is estopped from declining the liability having accepted the premiums which gave forth the contested contract, and cites Francis Nzioka Ngau v Silas Thiani Nkunga (1998) eKLR and Lion of Kenya Insurance Company Limited v Edwin Kibuba Kihonge (2018) eKLR. He faults the Plaintiff for filing this case out of time on 9/4/2021, as the same ought to have been commenced within 3 months, and prays for its dismissal.

8. The Interested Party urges that by coming on record to defend the Defendant in the trial suit, the Plaintiff was aware and acquiesced to the transfer of ownership of the motor vehicle as it continued to receive regular payments of premiums without any objections. He urges that it is trite law that a legal registered owner has insurable interest that is protected by the insurance company as espoused in Lucena v Crawford 1806 2 BOS PNR 269. He accuses the Plaintiff of approaching this court with unclean hands and offending the principle of insurance of good faith, as espoused in Kenya Orient Insurance Limited v Kelvin Macharia Karanja (2017) eKLR. He urges the court to dismiss the suit with costs, and cites Fran Investment Ltd v G4S Security Services Ltd (2015) eKLR.

Analysis and Determination 9. Having duly analyzed the pleadings, the annextures thereto and the submissions on record together with the authorities relied on, the issue for determination is whether the Plaintiff has proved its case on a balance of probabilities.

10. Section 10 of the Insurance (Motor Vehicle Third Party Risks) Act provides for duty of insurer to satisfy judgments against persons insured as follows, “(1) 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. Provided that the sum payable under a judgment for a liability pursuant to this section shall not exceed the maximum percentage of the sum specified in section 5(b) prescribed in respect thereof in the Schedule. (1A) The Minister may, in consultation with the Director of Medical Services and the Insurance Regulatory Authority, prescribe compensation for other categories of disablement not provided for in the Schedule. (1B) The percentage of the sum specified in section 5(b) and prescribed in the Schedule under this Act shall include but not limited to the medical expenses on the judgment or claim. (2) No sum shall be payable by an insurer under the foregoing provisions of this section— (a) in respect of any judgment, unless before or within thirty days after the commencement of the proceedings in which the judgment was given, the insurer had notice of the bringing of the proceedings; or (b) in respect of any judgment, so long as execution thereon is stayed pending an appeal; or (c) in connexion with any liability if, before the happening of the event which was the cause of the death or bodily injury giving rise to the liability, the policy was cancelled by mutual consent or by virtue of any provision contained therein, and either— (i) before the happening of the event the certificate was surrendered to the insurer, or the person to whom the certificate was issued made a statutory declaration stating that the certificate had been lost or destroyed; or (ii) after the happening of the event, but before the expiration of a period of fourteen days from the taking effect of the cancellation of the policy, the certificate was surrendered to the insurer, or the person to whom the certificate was issued made such a statutory declaration as aforesaid; or (iii) either before or after the happening of the event, but within a period of twenty-eight days from the taking effect of the cancellation of the policy, the insurer has notified the Registrar of Motor Vehicles and the Commissioner of Police in writing of the failure to surrender the certificate. (3) It shall be the duty of a person who makes a statutory declaration, as provided in subparagraphs (i) and (ii) of paragraph (c) of subsection (2), to cause such statutory declaration to be duly served upon the insurer together with a disclosure under oath of all the documents intended to be used to prove the claim whether in or out of court. (3A) No judgment or claim shall be payable by an insurer unless the claimant had, before determination of liability at the request of the insurer, subjected themselves to medical examination by a certified medical practitioner. (3B) An insurer shall have a right to obtain or verify information from the institution which issued the documents intended to be used to prove the claim and this right shall be enforceable before judgment is passed. Provided that such verification shall be done within a month. (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.”

11. According to the agreement for sale dated 28/7/2017, it was mutually agreed between the parties at clauses 2, 3 and 5 that, “There is arrears of Kshs. 419,000 in bank, the buyer shall pay for the same Kshs. 250,000 shall be received in January 2018, and the buyer shall continue paying Kshs. 139,343 monthly in bank until the year 2020. The buyer takes possession of the motor vehicle after clearing the balance in Kenya commercial bank meru branch. Log book shall be received by the buyer upon clearing the balance.”

12. The Plaintiff accuses the Defendant of breach of the insurance contract by selling the subject motor vehicle to a 3rd party, thereby leading to the cancellation of the insurance policy. According to the sale agreement, the title to the subject motor vehicle was to pass to the 3rd party in 2020 after the debt at the bank had been fully paid. That essentially means that the subject vehicle, although sold to a 3rd party was still duly registered in the name of the Defendant. That is evidenced by the copy of records exhibited by the Defendant showing that as at 7/7/2021, the subject motor vehicle was still registered in the name of the Defendant and the Kenya Commercial Bank Ltd. Besides, the sale happened on 28/7/2017 way before the insurance contract was entered into on 19/11/2019. As at the time of the accident on 6/1/2020, the Defendant had a valid insurance policy with the Plaintiff and therefore he had an insurable interest.

13. The Defendant had taken out a comprehensive insurance policy from the Plaintiff which according to the certificate of insurance on record was valid from 18/12/2019 to 18/11/2020.

14. This court finds that the Plaintiff has failed to prove that the Defendant breached the terms of the insurance contract, to justify grant of the orders sought in the plaint.

Orders 15. Accordingly, for the reasons out above, this court finds that the Plaintiff’s suit is without merit and it is dismissed.

16. The Defendant and the Interested Party shall have the costs of the suit.Order accordingly.

DATED AND DELIVERED THIS 15TH DAY OF JUNE, 2023. EDWARD M. MURIITHIJUDGEAPPEARANCES:M/S Kiruki & Kayika Advocates for the Plaintiff.M/S Kaibunga Kaberi & Co. Advocates for the Defendant.M/S Mutembei & Kimathi Advocates for the Interested Party.