[2023] KEHC 27235 (KLR)

Kenya Orient Insurance Limited v Okuku (Civil Appeal E039 of 2022) [2023] KEHC 27235 (KLR) (14 December 2023) (Judgment)

Neutral citation: [2023] KEHC 27235 (KLR)

Republic of Kenya

In the High Court at Mombasa

Civil Appeal E039 of 2022

DKN Magare, J

December 14, 2023

Between

Kenya Orient Insurance Limited

Appellant

and

Josephat Otieno Okuku

Respondent

Judgment

1. This Appeal arises from the Judgement and Decree of Trial Court delivered on 17th March 2023 in Mombasa CMCC No. 140 of 2019.

2. The Trial Court entered Judgement for the Respondents for a Declaration that the Defendant is bound to indemnify the Plaintiff in the sum of Kshs. 1,649,697 as per the Judgement in PMCC No. 1148 of 2017.

3. The Appellant being aggrieved by the Award filed this Appeal and preferred 6 grounds in the Memorandum of Appeal amended on 13th February 2023. a.The Trial Court misapprehended the law under Section 5 and 10 of the Insurance (Motor Vehicle Third Party Risks) Act Cap 405 Laws of Kenya.b.The Trial Court misapprehended the issues before her for determination.c.The Trial Court erred in law and fact in finding that the Respondent had proved her case on a balance of probabilities.

4. The suit from which the impugned Judgement arose is a declaratory suit. It arose from the Judgment in PMCC No. 1148 of 2017 which is the primary suit.

5. This Appeal thus challenges the award in the Declaratory suit.

Submissions 6. The Appellant submitted that the court erred in finding that the Respondent had proved his case on a balance of probabilities.

7. It was the submission of the Appellant that the Trial Court erred in finding that the Respondent had proved the case on a balance of probabilities when the Plaintiff failed to prove that the commercial insurance cover in the subject suit did not cover the persons aboard the accident Motor Vehicle Registration No. KAL 732X because it was admitted that the motor vehicle was used for carrying goods and not passengers and the injured person was an employee of the of the insured. It was thus submitted that the claim fall under the work injury claims and not Insurance Third Party risk claims.

8. Counsel therefore relied on Corporate Insurance Company Limited v Elias Okinyi Ofire (1999) eKLR to canvas the point that a commercial cover did not make the Appellant statutorily liable under Chapter 405 of the Laws of Kenya.

9. It was thus submitted further that the Respondent was an employee being transported and ought to have claimed under Section 10 of the Work Injury Benefits Act and employees were covered under the Section 5 of Chapter 405 of the Laws of Kenya.

10. On the part of the Respondent, it was submitted that the Trial Court was correct in its determination and the issue was whether the Appellant was liable to satisfy the judgement in the primary suit.

11. Counsel submitted further that the issued on the applicability of the cover were determined in the primary suit and had no place in the declaratory as no appeal had been preferred from the judgement in the primary suit.

Analysis 12. This Court has considered the pleadings, evidence, submissions and authorities relied on by the parties in support and opposition to the Appeal.

13. The issue that fall for this Court’s determination is therefore as follows:Whether the Trial Court misapprehended the applicability of Section 5 and 10 of the Insurance (Motor Vehicle Third Party Risks) Act Cap 405 Laws of Kenya to the suit.

14. This being a first Appeal, the Court should with judicious alertness re-evaluate the evidence, and consider arguments by parties and apply the law thereto, and, make its own determination of the issues in controversy.

15. Except however, that it should give allowance to the fact that it neither saw nor heard the witnesses’ testimonies.

16. In the case of Selle & Another vs. Associated Motor Board Company Ltd. [1968] EA 123, the Court stated as follows:“The appellate court is not bound necessarily to accept the findings of fact by the court below. An appeal to the Court of Appeal form a trial by the High Court is by way of a retrial and the principles upon the Court of Appeal acts are that the 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, in particular the court is not bound necessarily to follow the trial Judge’s findings of fact if it appears either that he has clearly failed on some point to take account of particular circumstances or probabilities materially to estimate the evidence or if the impression based on the demeanour of a witness is inconsistent with the evidence in the case generally.”

17. The Appellant contends that pursuant to the provisions of Section 5 (b) (i) 7(ii) of the Insurance (Motor Vehicle Third Party Risks) Act as read together with Section 10 (1) of the Act, the Respondent was not entitled to claim under this statute since employees are not covered herein. I wish to reproduce in extenso the entire provisions of this section of the law which stipulates as follows: -5. Requirements in respect of insurance policiesIn order to comply with the requirements of Section 4, the policy of insurance must be a policy which –(a)Is issued by a company which is required under the Insurance Act, 1984 (Cap 487) to carry on motor vehicle insurance business; and(b)Insures such person, persons or classes of persons as may be specified in the policy in respect of 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:Provided that a policy in terms of this section shall not be required to cover–i)Liability in respect of the death arising out of and in the course of his employment of a person in the employment of a person insured by the policy or of bodily injury sustained by such a person arising out of and in the course of his employment; orii)Except in the case of a vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment, liability in respect of the death of or bodily injury to persons being carried in or upon or entering or getting on to or alighting from the vehicle at the time of the occurrence of the event out of which the claims arose; oriii)Any contractual liability.iv)Liability of any sum in excess of three million shillings, arising out of a claim by one person

18. On the other hand turning to the provisions of Section 10 (1) of the Insurance (Motor Third Party Risks) Act, Cap 405, the same provides as follows: -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.

19. Section 10(2) of the Insurance (Motor Third Party Risks) Act, Cap 405 provides:“10(2). No sum shall be payable by an insurer under the foregoing provisions of the section.(a)in respect of any judgment, unless before or within 14 days after the commencement of the proceedings in which the judgment was given, the insurer had notice of the bringing of the proceedings…..”

20. I understand the import of the above provision of the law to be that for liability to accrue under Section 10 of the Insurance (Motor Vehicle Third Party Risks) Act CAP 405, there is a 4-fold test to be met. Firstly, that the motor vehicle in question was insured by the Appellant; Secondly, that the Respondent has a judgement in his favour against the insured; Thirdly, that statutory notice was issued to the insurer either at least 14 days before the filing of the suit wherein judgement has been obtained or within 30 days of filing the suit where judgement has been obtained and finally the Respondent was a person covered by the insurance policy.

21. In the case of Kenya Alliance Insurance Co. Ltd v Thomas Ochieng Apopa (suing as Administrator of the Estate of Pamela Agola Apopa) deceased [2020] eKLR where the court held as follows:98. The above statutory provision is clear that before the insurance company can pay or be obligated to pay the judgment sum decreed in the primary suit, the insurance company must have had Notice of the bringing or institution of the proceedings or suit, before such suit was filed or 14 days after such suit was filed.

22. In this case, it is not in dispute that the Respondent, Josephat Otieno Okuku was in the course of duty with his employer at the material time. At the time of the accident, the deceased was travelling in the Appellant’s insured Motor Vehicle Registration Number KAL 732X Canter and he was employed as a loader tasked to load and offload goods from the motor vehicle.

23. It is therefore clear that the Respondent was not such a person who could benefit from the cover entered into between the owner of the Accident Motor Vehicle and the Appellant.

24. Turning to the provisions of Section 10 (1) of the Act, the same provides as follows: -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.

25. This Court finds that the requirement that the insurer settles the decretal amount following entry of Judgment is only applicable for such Judgments involving liability which is required to be covered both under the Act and under the insurance policy. The Act uses the following terms to describe the type of Judgment which ought to be settled: -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)

26. In the premises, it would be wrong to compel an insurance company to settle a Judgment which arises from liability not contemplated by the law makers and even then which is not the subject of an insurance policy between the parties involved.

27. In fact, in this case, the liability has been expressly excluded by virtue of the proviso to Section 5 of the Insurance (Third Party Risks) Act. Should the insurer be obligated to settle any such Judgment, this would not only have the effect of ascribing on parties that which they did not contract, but also to find against the provisions of law. The end result would be to confer an unnecessary benefit on an undeserving party while punishing the insurer for that which it did not contract and/or acquiesce to.

28. In this regard, it was clearly enunciated in the case of The Great Insurance Company of India Ltd –vs- Lilian Everlyn Cross and Another [1966] E.A 90, 97, where Newbold V.P sitting at the Court of Appeal held as follows with respect to the applicability of Section 10 of the Act: -“It is submitted on behalf of the insurer that this section only applies where the liability is covered by the terms of the policy and that in this case no liability arose under the policy for any injury caused by a disqualified driver. I accept that this section only applies where both the liability is required under Section 5(b) to be covered by a policy and the liability is in fact covered by the terms of the policy.”

29. In my view, the foregoing provisions would entitle the Appellant to avoid the liability. The Respondent argues that the Appellant ought to have appealed the Decision in the primary suit on liability and therefore cannot avoid liability at this stage.

30. The real bone of contention in this Appeal is not whether or not the Respondent was an employee of the insured and therefore not eligible to benefit from the said cover, but rather whether there was a duty on the Appellant to repudiate liability on the ground that the cover did not include claims such like the Respondent’s claim in the primary suit.

31. The Appellants case is that the obligation of an insurer to settle any liability arising out of a Judgment only arises if the Judgment was entered with respect to such liability that is required to be covered. Since in the instant case, liability with respect to an employee of an insured is not such that can be covered, then the insurer was not liable.

32. The Appellant is firm that the liability that accrued was neither covered under the Act nor in the policy since it was founded on Section 10 of the Work Injury Benefits Act.

33. This Court has analyzed the provisions of Section 10 (4) of the Act. According to this Court, the said section requires of an insured who wants to deny liability among others to obtain a declaration either before or not more than three (3) months following commencement of the primary suit. The way to obtain such declaration is by filing a declaratory suit in Court. Furthermore, this action would only be valid if the said insured had within fourteen (14) days of the filing of the primary suit, had given notice to the Plaintiff in that matter that it was not liable.

34. In essence therefore, as submitted by the Respondent, repudiation of liability is two-fold: first, by way of giving notice to the Plaintiff in the primary suit, and secondly, by way of filing a declaratory suit. However, the said repudiation is not a blanket one, requiring to be done whenever an insurer has been served with a notice.

35. This Court finds that the requirement for an insurer to file a declaratory suit is intended for only those liabilities for which the insurer is entitled to repudiate and/or avoid for reasons beyond the express provisions of the policy, specifically being that the Respondent was an employee and the accident motor vehicle for use in carrying goods and not passengers. The liability in issue in this case is not one such contemplated by the said Section.

36. In the case of The Great Insurance Company of India Ltd –vs- Lilian Everlyn Cross and Another [1966] E.A 90 while expounding further on the instances when Section 10 is applicable, Newbold V. P held as follows: -A liability may be required under Section 5(b) to be covered by a policy and yet the liability may not in fact be covered by the particular policy. An example of this is where a policy is taken out relating to the use of the vehicle by the insured only but in fact the vehicle is used by another person. Another example would be where the insured obtained the policy by non-disclosure of a material fact. This would enable the insurer to take action in accordance with the appropriate provisions of Section 10 and to obtain a declaration that although the policy apparently covered the liability, never the less in fact it did not do so as there was never in existence a contract of insurance.”

37. The above implies that the entitlement for repudiation must be for reasons beyond the express provisions of the policy. That is not the case herein.

38. This Court further observes that pursuant to Section 12 (1A) of the Act the insurer has an obligation to respond to a statutory notice. It states as follows:(1 A) The insurer shall, upon being served with the statutory notice and documents, admit or deny liability for the claim or judgment by a notice in writing to the person or persons presenting the claim or judgment.

39. Notably, under Section 12 (2), failure to respond to the statutory notice attracts liability for an offence. However, this Section does not say that failure to do so would make one automatically liable for settlement of Judgments entered against their insureds. Had the drafters of this law intended so, they would have expressly provided for the same.

40. This Court therefore finds that there was no obligation to file a declaratory suit as per Section 10 (4) of the Act, in view of the fact that the liability in question is not one covered by the Act and further that the avoidance of liability was on account of an express provision of the policy.

41. The Appellant’s case is that the Trial Court erred in failing to find the Chapter 405 of the Laws of Kenya was not applicable to this case and the Respondent ought to have sought recourse under Section 10 of the Work Injury Benefits Act. The Respondent maintains on the other hand that the court was correct because the issue as to the nature of the policy cover had been determined in the primary suit and the declaratory suit was merely for enforcement of the Judgement of the primary suit.

42. I have perused the sum total of the primary suit, the declaratory suit and this Appeal. It is contended that the Respondents did not prove their case on a balance of probabilities as required under Section 107(1) of the Evidence Act, Cap 80 Laws of Kenya which provides that:Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.

43. The legal burden of prove under Section 107 of the Evidence Act lies upon a party who asserts the affirmative of the issue. In Anne Wambui Ndiritu –vs- Joseph Kiprono Ropkoi & Another [2005] 1 EA 334, the Court of Appeal held that:“As a general proposition under Section 107 (1) of the Evidence Act, Cap 80, the legal burden of proof lies upon the party who invokes the aid of the law and substantially asserts the affirmative of the issue. There is however the evidential burden that is case upon any party the burden of proving any particular fact which he desires the court to believe in its existence which is captured in Sections 109 and 112 of the Act.”

44. The initial burden of proof lies on the Plaintiffs, but the same may shift to the Defendant, depending on the circumstances of the case. For instance, in Evans Nyakwana –vs- Cleophas Bwana Ongaro [2015] eKLR it was held that:“As a general preposition the legal burden of proof lies upon the party who invokes the aid of the law and substantially asserts the affirmative of the issue. That is the purport of Section 107 (i) of the Evidence Act, Chapter 80 Laws of Kenya. Furthermore, the evidential burden…is cast upon any party, the burden of proving any particular fact which he desires the court to believe in its existence. That is captured in Section 109 and 112 of law that proof of that fact shall lie on any particular person…The appellant did not discharge that burden and as Section 108 of the Evidence Act provides the burden lies in that person who would fail fi no evidence at all were given as either side.”

45. This is called the legal burden of proof. There is however evidential burden of proof which is captured in sections 109 and 112 of the same Act as follows:109. The burden of proof as to any particular fact lies on the person who wishes the court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person.112. In civil proceedings, when any fact is especially within the knowledge of any party to those proceedings, the burden of proving or disproving that fact is upon him.

46. In applying the burden of prove, the Trial Court appear to have limited the issues in the declaratory suit to whether: (i) the motor vehicle in question was insured by the Appellant, (ii) the Respondent has a judgement in his favour against the insured, (iii) the statutory notice was issued to the insurer either at least 14 days before the filing of the suit wherein judgement has been obtained or within 30 days of filing the suit where judgement has been obtained and (iv) the Respondent was a person covered by the insurance policy.

47. Whereas in my view the Trial Court was not entitled to deliberate on the whether the claim was founded on the Work Injury Claim or the Insurance (Third Party Risks) Act, the Learned Trial Magistrate erred in law in taking the position that the only way the Appellant herein could avoid liability against the judgment in the primary suit was by quashing or setting-aside the judgment in the primary suit and that herself was not sitting to review or appeal a decision of the court of concurrent jurisdiction. One wonders how the Appellant would do so given that it was not a party in the primary suit.

48. While an insurer could truly apply to quash or set-aside the judgment in the primary suit through the insured in a case where the insurance policy is not repudiated, that is not the only way out for an insurer. The obtaining position in law is that even in the pendency of a judgment in a primary suit against an insured an insurer can still avoid liability upon satisfying the conditions in Section 10 of the Act without necessarily quashing or setting-aside the judgment in the primary suit.

49. In this case, it was not in dispute that the Respondent was injured in the course of his duty as employee and the accident motor vehicle registration number KAL 732X Canter was insured under a commercial cover to carry goods. The proviso to Section 5 of the Insurance Third Party Risks Act provided as follows:Provided that a policy in terms of this section shall not be required to cover –i)Liability in respect of the death arising out of and in the course of his employment of a person in the employment of a person insured by the policy or of bodily injury sustained by such a person arising out of and in the course of his employment; orii)Except in the case of a vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment, liability in respect of the death of or bodily injury to persons being carried in or upon or entering or getting on to or alighting from the vehicle at the time of the occurrence of the event out of which the claims arose

50. Clearly therefore, the Appellant was not covered. It was entitled to avoid liability. I therefore find reason to interfere with the finding of the Trial Court.

Determination 51. In the circumstances, I make the following Orders.i.The Appellants Appeal herein succeeds.ii.The Judgment entered in favour of the Respondent and against the Appellant in Mombasa CMCC No. 140 of 2019 is hereby set aside.iii.The Respondent’s Suit against the Appellant in Mombasa CMCC No.140 of 2019 is dismissed with costs.iv.Each party shall bear its own costs of the Appeal.

52. Orders accordingly.

DELIVERED, DATED AND SIGNED AT MOMBASA ON THIS 14TH DAY OF DECEMBER, 2023. JUDGMENT DELIVERED THROUGH MICROSOFT TEAMS ONLINE PLATFORM.KIZITO MAGAREJUDGEIn the presence of:-Mr. Hamisi for the AppellantMr. Mwakireti for the Respondent