[2005] KEHC 1201 (KLR)
The court held that the insured (judgment debtor) remains primarily liable to satisfy the decree, notwithstanding the collapse of the insurance company. The contract of insurance is between the insured and the insurer, and the risk of insurer insolvency is borne by the insured. The state, by licensing and...
Source-derived case information.
- Citation
- [2005] KEHC 1201 (KLR)
- Parties
- Plaintiff: Kenney Jaden Kwaji; Defendant: The Minister for Finance & 3 Others
- Court
- High Court
- Court Station
- High Court at Nairobi (Milimani Law Courts)
- Jurisdiction
- Kenya
- Case Number
- Miscellaneous Application 1385 of 2005
- Procedural Posture
- Miscellaneous Application / Ruling on Interlocutory Application for Stay of Execution and Related Orders
- Outcome
- Partial grant; stay of execution refused, other procedural orders granted.
- Legal Topics
- Fundamental Rights Enforcement, Insurance Liquidation, Stay of Execution, State Liability
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Kenney Jaden Kwaji
Plaintiff
The Minister for Finance & 3 Others
Defendant
Procedural Posture
Miscellaneous Application / Ruling on Interlocutory Application for Stay of Execution and Related Orders
Legal Issues
- 1 Whether a judgment debtor insured by a collapsed insurance company can be compelled to satisfy a decree when the insurer is under statutory management.
- 2 Whether the state bears liability for losses arising from the collapse of a licensed insurance company.
- 3 Whether the applicant is entitled to a stay of execution pending determination of constitutional issues.
Ratio Decidendi
The court held that the insured (judgment debtor) remains primarily liable to satisfy the decree, notwithstanding the collapse of the insurance company. The contract of insurance is between the insured and the insurer, and the risk of insurer insolvency is borne by the insured. The state, by licensing and supervising insurance companies, does not assume liability for their financial failure. The applicant's only recourse is to prove the debt with the statutory manager, receiver, or liquidator. Consequently, the court declined to grant a stay of execution as sought but allowed other procedural prayers to facilitate service and response by the intended respondents and interested parties.
Court Disposition
Partial grant; stay of execution refused, other procedural orders granted.
Orders
- Prayer for stay of execution is refused.
- Prayers Nos. 1, 2, and 4 of the application are granted.
Full Case Text
Judgment text and source record
19 paragraphs
REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI
Misc Application 1385 of 2005
KENNEY JADEN KWAJI……………………………………………….PLAINTIFF
VERSUS
THE MINISTER FOR FINANCE & 3 OTHERS……………………DEFENDANT
RULING
This Ruling relates to an application dated and filed on 20. 09. 2005.
The application raises important Constitutional issues arising directly from the collapse of the United Insurance company Ltd (now under statutory management). The issues concern the fundamental rights and freedoms of the individual.
For the creditor, he has a fundamental right to be paid and enjoy the fruits of his judgment accruing from the injuries or damage suffered by him as a result of the accident he may have suffered while being a passenger in the insured motor vehicle, or merely being a third party injured by the insured motor vehicle.
On the flip side of this coin, is the debtor, or the judgment debtor who says or admits that he insured his motor vehicle with the collapsed Insurance Company who by law is bound to satisfy any judgment entered against the debtor under circumstances covered by the insurance policy. He says that the insurance company should meet the liability if the Insurance Company has collapsed and is unable to meet the liability then the state should do so, because it is the state which has caused him to insure with the collapsed company by allowing or licensing it to carry out insurance business. More so because, the state has created a supervisory agency called the Commissioner of Insurance who is by law required to ensure that every insurance company is managed and operated in a financially viable manner. He cannot be subjected to arrest and committal to civil jail for errors which are essentially those of the state.
So this too is a fundamental right equally protected under the Constitution. So where do we draw the line?
It is a balancing act. The primary liability in my view is that of the insured. There is a valid decree of court against him or it, and so long as that decree subsists he is liable to satisfy it. The contract of insurance is between him (the insured) and the Insurer( the Insurance company). If the insurance company has collapsed he must carry that risk in a free enterprise system such as ours, the insurer was a company of his choice. If he had insured with a better managed Insurance Company, the risk he took could have been absorbed. He probably insured in good faith, believing that since the insurer was licensed by the state, it was a good bet to insure with. He lost. His only right is to prove the loss or debt (represented by the decree against him) with the statutory manager, receiver or liquidator.
With this background therefore I am unable to grant an order for stay of execution as prayed in paragraph 3 of the Applicants Chamber Summons firs referred to above.
I do however grant prayers Nos. 1, 2, and 4 sought in the said application and direct that the intended Respondents ( I prefer to call them such, as I am not sure that they are proper parties to this action) and the Interested Party be served with the application, and this Ruling within (7) days of today’s order.
I further direct that the Intended Respondents and the Interested Parties file their response to the application within ten (10) days of the date of service, and further direct that the matter be mentioned on 11. 10. 2005 for further directions.
Dated and Delivered at Nairobi this 22nd day of September, 2005
ANYARA EMUKULE
JUDGE