https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/12926

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT NAIROBI** **COMMERCIAL AND TAX DIVISION** **HCCOMM NO. 283 OF 2014** MOMBASA CEMENT LIMITED………………………...……….…..PLAINTIFF -VERSUS- KENINDIA ASSURANCE COMPANY LIMITED………..………DEFENDANT **JUDGMENT** **Background and pleadings.** 1. The background giving rise to this case as gleaned from the Plaint dated 26th June 2014, is that the plaintiff, a cement manufacturing company, vide a letter dated 31st December 2010 through AUM Insurance Brokers Limited, applied to the defendant for an insurance cover in respect to *inter alia*, all the plaintiff’s machines and equipment, machinery breakdown, loss of profits and various other insurance covers for its plant in Mombasa. The plaintiff averred that the defendant acceded to the request and after agreeing to pay the premiums, the defendant issued a Machinery Insurance Policy No. P/107/021/0223/2010/2/12 and a Loss of Profits following Machinery Breakdown Insurance Policy No. P/107/021/0226/2010/1/12, which were valid from 31st December 2010 to 31st December 2011. 2. The plaintiff’s case is that by virtue of the said Policies, the defendant undertook to indemnify and pay the plaintiff up to a maximum sum of Kshs.3 Billion under the Machinery Insurance Policy for machinery damage and Kshs.1.062 Billion for loss of profits following machinery breakdown Policy. The plaintiff averred that it was a term of the Machinery Insurance Policy that if at any time during the validity of the term of the said Policy, any of the items covered under that Policy suffered any unforeseen and sudden physical loss or damage from any cause including, but not limited to, defects in casting and material, faulty design, or from any other causes not specifically excluded, in a manner necessitating repair or replacement, the defendant would indemnify the plaintiff in respect of such loss and damage, by payment of the sum insured. 3. The plaintiff further averred that by a letter dated 24th March 2011, through its Brokers, it notified the defendant that the schedule of plant, machinery and equipment supplied to it was not all inclusive due to the expansive nature of the plant and requested the defendant to undertake a periodical risk survey to ensure that the risk was properly monitored and covered. 4. The plaintiff asserted that the Machinery Insurance Policy contained a description of the plant, machinery and equipment covered under the said Policy, wherein the first item contained equipment described as 3000 TPD clinker grinding plant + accessories (dry process clinkerisation) plant to include raw mill, separator, blending silo, pre-heater, precalciner, rotary kiln, coller (sic), coal mill, separator and all other equipment and accessories associated with the clinker grinding plant. The said equipment was indicated to have been supplied by Thyssenkrupp India Pvt Ltd and the cost was Kshs.1,599,897,750.00. 5. The plaintiff averred that it was an express term of the provisions of the Machinery Insurance Policy that the sum insured was equal to the cost of replacement of the insured machinery by new machinery of the same kind and capacity, which meant that the cost of replacement, including freight, dues and custom duties and the cost of erection. 6. The plaintiff stated that it was also a term of the Machinery Insurance Policy that in the event that its property was destroyed, the defendant would pay the actual value for them immediately before the occurrence of the loss, including charges of ordinary freight, cost of erection and custom duties. The plaintiff asserted that the defendant further agreed to pay for any normal charges for dismounting of the machinery destroyed, but the value of the salvage would be taken into account. 7. The plaintiff averred that it was a further term of the Machinery Insurance Policy that the plaintiff would immediately notify the defendant either by teletype or telephone confirmed in writing within fourteen (14) days, of any occurrence giving rise to a claim, giving indication as to the nature, and extent of the loss or damage. It also averred that the plaintiff was to preserve the affected parts and make them available for inspection to the defendant’s representatives and to furnish all information and documentary evidence as the defendant may require. 8. The plaintiff stated that on 1st August 2011, its blending silo collapsed at its premises in Mombasa, and by a letter of the same day, through its Insurance Brokers, it notified the defendant of the industrial accident, indicating that the silo had collapsed and the damage was significant. The said Brokers requested the defendant to appoint Loss Adjusters to assess the damage. 9. The plaintiff averred that following the incident, it was made to pay additional premiums of Kshs.9,040,500/= under Machinery Insurance Policy and in the sum of Kshs.3,733,727.00 under the Loss of Profits Policy. The plaintiff emphasized that it was made to pay additional premium after the actual list of machines was submitted to the defendants and also after the actual loss occurred. 10. The plaintiff averred that submitting a more comprehensive schedule of machinery and equipment, confirmed that the blending silo was insured and covered appropriately. It stated that subsequently, on 31st December 2011, the Broker lodged a claim with the defendant for the loss in the sum of USD 15,446,757.00 (Kshs.1,213,974,345.00), which included a claim for the cost of the silo equipment, local fabrication at site, blending silo construction, strengthening of other structures, cost of clearing debris and other civil foundations, excluding the loss of profits claim. The plaintiff stated that an independent valuation of the total losses by Toplis & Harding International Limited, assessed its loss for Machinery as Kshs.664,765,843.00 and Loss of Profits as Kshs.982,434,033.00, giving a total loss of Kshs.1,647,199,876.00. 11. The plaintiff asserted that the aforesaid claim was within the insuring clause as the loss occurred during the period of insurance, on the plaintiff’s premises and in a manner necessitating repair and replacement of the damaged plant, machinery and equipment, and as a result of a cause which was included in the insuring clause. The plaintiff contended that the defendant was liable to indemnify it against the said loss. 12. The plaintiff averred that upon being notified of the claim, the defendant appointed Loss Adjusters, including Milind Bhatawadekar and McLarens Young International Ltd, to conduct loss assessment. The plaintiff averred that by an email dated 9th November 2012, Milind Bhatawadekar issued an interim Report, and undertook to give a final assessment within fifteen (15) days. The plaintiff stated that in the said interim assessment, material damage was assessed at Kshs.506,104,904.00 and business interruption loss was assessed at Kshs.221,337,175.00, giving a gross assessment of Kshs.727,442,079.00. 13. The plaintiff claimed that despite repeated requests for an interim payment and assurance of payment from the defendant’s CEO in the year 2012, in order to assist in reconstruction of the damaged blending silo, the defendant failed to honour its promises, despite various reminders. The plaintiff further claimed that it was aware that the defendant in 2012 made *“cash calls”* from its various Re-insurers and on account of the claim and received the same as interim payments, but did not remit the money to the plaintiff as required. 14. The plaintiff stated that it instructed Construction Diagnostic Centre and Development Consultants International Limited to conduct non-destructive testing and investigations of the blending silo’s failure, and both of them confirmed that the collapse of the silo’s and the loss ensuing therefrom was occasioned by a combination of factors, including defects due to faulty design and erection, poor materials and bad workmanship. The plaintiff asserted that the said causes were expressly covered under the insuring clauses and that its claim was fully covered. 15. The plaintiff’s position is that despite several promises to honour its claim from August 2011, it was not until 20th September 2013, when the defendant forwarded a Discharge Voucher of Ksh.393,018,965.00, which Voucher failed to include the amount claimed for the blending silo and the loss of profits. The plaintiff stated that both Loss Adjusters, Milind Bhatawadekar and McLaurens Young International Limited, held several meetings with the plaintiff during the loss adjustment process and never indicated to it that the blending silo and the loss of profits claim were not payable, as Milind Bhatawadekar in its interim Report had concluded that the blending silo claim and the loss of profits claim were payable. 16. The plaintiff averred that the defendant’s Discharge Voucher for the net assessed loss in the sums of Kshs.393,018,965.00 was allegedly based on the findings of the defendant’s Loss Adjuster and also a Report prepared by McLarens Young International Limited dated 10th July 2013. 17. The plaintiff contended that the said Reports were incorrect and that they were procured by the defendant for the sole purpose of justifying an unlawful reduction in the amount payable or a refusal to cover the losses suffered by the plaintiff. It alleged that based on the impugned Reports, the defendant purported to disclaim the plaintiff’s claim in respect to the blending silo on the ground that it was not covered under the Machinery Insurance Policy and consequently, the loss of profits claim was not payable. 18. The plaintiff asserted that the blending silo was fully covered and its claim payable as it was listed as one of the items of the plant, machinery and equipment in respect of which the defendant accepted premiums from the plaintiff; the blending silo was a plant as it was an integral part of the clinkerisation process, hence a tool of trade; the blending silo was a machine as it was used together and was fully integrated with other machines with which it worked in unison to ensure a feed of homogenous mix of material to produce clinker. The plaintiff further asserted that the blending silo was not expressly excluded in the cover and the aforesaid Policies were drafted exclusively by the defendant who classified the blending silo as a plant, machinery and equipment listed in the schedule. 19. The plaintiff maintained that based on the two Policies issued by the defendant, the entire blending silo was duly covered and the plaintiff was entitled to be fully indemnified for the loss incurred following the collapse of the said silo, to the extent of the full amount assessed by Toplis & Harding International Limited. 20. In addition to the foregoing, the plaintiff claimed that the defendant breached the insurance contracts by failing to indemnify the plaintiff in respect of the loss sustained following the collapse of the blending silo, failing to honour the claim for indemnity in the sum of Kshs.1,647,199,876.00, breaching the terms of the Machinery Insurance Policy and the Loss of Profits Policy, failing to honour the plaintiff’s claim within a reasonable period of time, attempting to repudiate the blending silo and loss of profits claims without reasonable basis and by clogging the fair assessment of the loss by colluding with the Loss Adjusters. 21. The plaintiff stated thatn following the delay occasioned by the defendant in processing its claim, it lodged a complaint with the Insurance Regulatory Authority and the Commissioner of Insurance vide a letter dated 1st July 2013, and after hearing representations from the parties, it was recommended that the defendant ought to settle the claim, but despite those recommendations and demands, the defendant failed to make payment. 22. Based on the foregoing circumstances, the plaintiff instituted this suit on allegations of breach of insurance contracts vide a Plaint dated 26th June 2014, against the defendant, an insurance company, seeking indemnity under a Machinery Insurance Policy and a Loss of Profits Policy issued for its cement plant in Mombasa. 23. In the plaint, the plaintiff seeks entry of judgment against the defendant in terms of a declaration that the blending silo was covered by the Machinery Insurance Policy, the sum of Kshs.664,767,843.00 under the Machinery Insurance Policy arising from the loss occasioned to the blending silo, Kshs.982,434,033.00 under the Loss of Profits following Machinery Breakdown Insurance Policy being the loss of profits, interest on the above amounts at 18% from 31st December 2012, until payment in full and costs of the suit, and any other relief that the Court may deem just to grant. 24. In opposition to the plaintiff’s case, the defendant filed a statement of defence dated 1st September 2014, wherein it denied all the averments contained in the plaintiff’s plaint. While admitting that it issued to the plaintiff various insurance policies following a proposal made in a letter dated 31st December 2010, by its Agent, AUM Insurance Brokers Limited, which included Machinery Breakdown Policy and the Loss of Profits Policy, the defendant contended that the said letter did not provide the description of the machines or plant nor the schedule for which the Policies were being effected. It stated that it issued the Policies predicated upon reliance on the accuracy of information contained in the plaintiff’s letter. It averred that the Policies were issued based on information supplied by the plaintiff and were subject to strict terms, conditions, exclusions, and the duty of utmost good faith. 25. The defendant averred that it issued the Policies referred to in paragraph 4 of the plaint, but the said Policies were issued against payment of provisional premium pending receipt of guidelines on rates from the Insurance Regulatory Authority, and that it was only after receipt of the said guidelines that the full premium was computed and thereafter collected. The defendant also stated that the payment of full premium is a condition precedent to the assessment of any claim under the Policies. 26. The defendant averred that the Machinery Insurance Policy contained several exclusions, including loss or damage for which a supplier, contractor, or repairer was either legally or contractually responsible, as well as loss or damage arising out the plaintiff’s or its representative’s wilful acts or gross negligence. The defendant further averred that it agreed to indemnify the plaintiff solely in accordance with the terms and conditions of the said Policies, which included the plaintiff’s obligation to provide truthful statements and answers to the Questionnaire; that the defendant’s representatives would at any reasonable time have the right to inspect and examine the risk and the plaintiff would provide all details and information necessary for risk assessment; the plaintiff would at its own expense take all reasonable precautions and comply with all reasonable recommendations of the defendant to prevent loss or damage and comply with statutory requirements and manufacturer’s recommendations; give accurate information regarding the insured machinery and notify the defendant of any material changes in risk and cause at its own expense. 27. The defendant contended that it was entitled to withhold indemnification if there were doubts regarding the plaintiff’s right to receive the indemnity pending receipt of the necessary proof and if the proposal or declaration by the plaintiff was untrue in any material respect, or if any claim made was fraudulent or substantially exaggerated, or if any false statement was made in support thereof, then the Policy would be voided and the defendant would not be liable to make any payment under the Policy. 28. In regard to the Loss of Profits Policy Following Machinery Breakdown Policy, the defendant stated that it would not cover any loss resulting from business interruption of, or interference with the business directly or indirectly attributable to causes which included collapse of building and loss of, or damage to foundations and masonry, unless specifically included and described in the list of machinery and plant insured, and loss of, or damage to machinery, mechanical installations and their additional installations or other items which were not listed in the list of machinery and plant insured, even if the consequence of material damage to an item indicated in the list of machinery and plant insured were involved. 29. The defendant emphasized that the Machinery Insurance Policy provided for the indemnification of the plaintiff in respect of defects of material used in the assembly and construction of the machinery itself as well as the design of such machinery and any faults that arise therefrom, but only to the extent that the item was insured under the Policy and within its terms and conditions. 30. The defendant stated that through a letter dated 24th March 2011, the plaintiff for the first time and through its agents provided what it purported to be a list and schedule of equipment which had been insured following its proposal dated 3rd December 2010. The defendant further stated that the said list included for the first time the phrase *“blending silo”*, which the plaintiff claimed had been supplied by Thyssenkrupp India Pvt Ltd. The defendant averred that the plaintiff costed the said machinery with accessories at Kshs.1,599,897,750.00, and that the said letter purported to ask the defendant to undertake a *“periodical risk survey to ensure that the risk was properly monitored and covered.”* 31. The defendant contended that the description to plant, machinery and equipment was introduced by the plaintiff on 24th March 2011, well after the Policy had been effected on 31st December 2010, and even then, with the representation that the blending silo had been supplied by ThysseKrupp India Pvt Ltd. The defendant averred that it relied on the plaintiff’s utmost good faith and its observance and fulfilment of the terms of the Policy to issue and continue to provide cover under the Policy. 32. The defendant stated that by the Questionnaire and Proposal Form filled by the plaintiff dated 5th January 2011, it was required to give full and exact description of all machines, including the name of the manufacturer, type, output, capacity, speed, load, weight, voltage, amperage, cycles, fuel, pressure, temperature etc., in response to which the plaintiff stated that all machines, hoists, equipment related in the manufacture of cement and related products, and that no further details were provided. 33. The defendant further stated that the Form also specifically required the plaintiff to give particulars of any part of the machinery to be insured which has had a breakdown or failure during the last three years, which showed any signs or repair (sic), or which was exposed to any special risk, to which the plaintiff responded, *“N/A. None - new plant being erected”.* 34. In respect to the replacement value, the defendant averred that the said Proposal Form required the plaintiff to state current costs of replacing the machine by new machinery of the same kind and capacity, plus freight charges, customs duties, costs or erection (sic) and also value of foundations, if the latter were to be insured, and the plaintiff responded – *“same as replacement cost as machines are brand new”.* 35. The defendant denied paragraph 9 of the Plaint and contended that the Machinery Insurance Policy expressly insured all machines and equipment to a total sum of Kshs.3,000,000,000/= 36. The defendant emphasized that the Policy included various exclusions amongst them, loss or damage caused by any faults or defects existing at the time of the commencement of the Policy within the knowledge of the plaintiff or his representatives, whether such faults or defects were known to the defendant or not, and loss or damage arising out of wilful act or gross negligence of the plaintiff or its representatives. 37. The defendant stated that upon issuance of the Policies, the plaintiff made provisional payment of the premium pending the receipt of guidelines on applicable rates from the Insurance Regulatory Authority, and upon the said receipt, the defendant issued a demand for the balance of the premium, but denied that by so doing, it acknowledged the loss. 38. The defendant further stated that although by a letter dated 1st August 2011, the plaintiff had generally informed it of the loss, it was not until December 2011 that the plaintiff submitted its claim form, in which it stated that its blending silo had been constructed and that costs had been incurred on *“local fabrication at site”*, contrary to the representation it made in its proposal dated 31st December 2011, and later upon issuance of the schedule of the list of the machinery insured through the letter from its agent dated 24th March 2011. 39. The defendant averred that the amount claimed by the plaintiff was USD 15,446,757.00, and that the assessment of loss by Toplis & Harding International Limited, was made well after the Reports by the Loss Adjusters referred to in the Plaint on 12th February 2014. 40. The defendant contended that contrary to the conditions of the Policy requiring the plaintiff to provide the truth to the statements in the Questionnaire and Proposal made to the defendant, the plaintiff represented statements which were untrue in the material respects. 41. The defendant listed in its statement of defence particulars of misrepresentation. It claimed that the plaintiff failed to disclose material facts concerning the silo’s design, construction, supervision, and supply of materials. It contended that these omissions amounted to material misrepresentation and non-disclosure, thereby entitling the defendant to avoid liability under the Policy. 42. It averred that the collapse of the blending silo was caused by faulty design, poor workmanship, inadequate supervision and substandard construction materials supplied or controlled by the plaintiff and its agents. Relying on the plaintiff’s own expert findings, the defendant contended that the damage of the blending silo was attributable to parties responsible for the silo’s design and construction, and therefore fell within Policy exclusions. 43. It also alleged gross negligence on the part of the plaintiff, citing failures in design, supervision, testing, material selection and construction procedures, and stated that such negligence independently excluded the loss from coverage. 44. With regard to the quantum of loss, the defendant maintained that the assessment conducted by the Loss Adjusters was the proper measure of indemnity under the Policy. It stated that it offered to pay the amount assessed by the Loss Adjusters but the plaintiff rejected the offer. The defendant denied any collusion with the Loss Adjusters and asserted that the said Adjusters acted strictly in accordance with the terms of the insurance contracts. 45. It also denied allegations that it improperly retained funds received from Re-insurers and stated that the funds received were placed in a fixed deposit and refunded to them with interest earned, pending determination of the claim. 46. The defendant additionally denied liability for the loss of profits claim, asserting that the Loss of Profits Policy expressly excluded losses arising from causes such as collapse of buildings, losses attributable to suppliers or contractors, damage to foundations and masonry, and damage to items not specifically listed as insured machinery. 47. The defendant contended that since the blending silo was not covered under the Machinery Insurance Policy and the loss claimed arose from excluded causes, the claim for loss of profits is not payable. 48. The defendant maintained that any payments offered were consistent with the Policy terms. It denied the plaintiff’s cause of action in its entirety and prayed for dismissal of the suit with costs. 49. The plaintiff filed a Reply to defence on 18th September 2014. It averred that the defendant did not seek the description of the machine, plant or a schedule before issuance of the Policies. It denied that the premium made as consideration for issuance of the said Policies was accepted as provisional premium pending receipt of guidelines from the Insurance Regulatory Authority, and put the defendant to strict proof thereof. 50. The plaintiff averred that the letter dated 24th March 2011 was issued in utmost good faith as a reminder to the defendant as it was its obligation to obtain full particulars of the plant, machinery and equipment covered under the said Policies. 51. The plaintiff contended that in the event that the description given by it was not sufficient, the defendant ought to have rejected the plaintiff’s application for cover or sought further and better particulars, and having accepted particulars furnished by the plaintiff, the defendant is estopped from contending that the details provided were not all encompassing of the machines, plant and equipment, including the blending silo. 52. The plaintiff denied making representations to the defendant of statements which were untrue in material respects or in any other respects at all and put the defendant to strict proof thereof. The plaintiff denied the particulars of misrepresentation set out in the statement of defence. 53. It also denied that the contents of paragraph 18 of the plaint was an admission and reiterated that the said damage and resultant loss was insured loss within the terms of the Machinery Insurance Policy. 54. The plaintiff denied that the loss or damage occurred out of gross negligence of the plaintiff, its servants or agencies (sic) contrary to the conditions of the Policy. It denied the particulars of gross negligence as set out in paragraph 22 of the statement of defence. 55. The plaintiff denied that it failed to disclose to the defendant that the civil structure of the blending silo was constructed by the defendant using various means including procuring and design, supervising the same and appointing of Engineers and supplying part of the materials, as alleged. 56. The plaintiff denied the averments in paragraph 27(4) of the statement of defence and making the false representations as alleged in the said paragraph. It further denied the defendant’s assertion that the blending silo was only civil works not capable of being covered under the Machinery Insurance Policy and that it was loss caused by gross negligence of the plaintiff. 57. In response to paragraph 27(6) of the statement of defence, the plaintiff averred that the defendant had failed and/or refused to comply with the Insurance Regulatory Authority’s directions for the defendant to settle on account to the tune of Kshs.393,018,965.00, as per the Loss Adjuster’s Report. 58. In further response to paragraph 27(6) of the statement of defence, the plaintiff stated that the loss of profits which was as a result of the collapse of the blending silo was fully covered under the Loss of Profits Policy and was therefore payable by the defendant. The plaintiff put the defendant to strict proof of any allegations to the contrary. 59. This matter proceeded to main hearing. The case was partly heard by Hon. Lady Justice M. Kasango (Retired) and by myself. The plaintiff called three witnesses and the defendant called two witnesses to support their cases. **Plaintiff’s case.** 1. Mr. Hasmukh K. Patel, a Director of the plaintiff company testified as PW1. He adopted his witness statement dated 26th June 2014 as his evidence-in-chief and produced the documents in the plaintiff’s lists and bundles of documents dated 25th June 2014 and 9th February 2016, as plaintiff exhibit Nos. 1 & 2. He testified that the plaintiff’s case is founded on two Insurance Policies issued by the defendant in respect of its clinkerisation plant at Vipingo, Mombasa, namely a Machinery Insurance Policy at an insured sum of Kshs.3 Billion and a Loss of Profits following Machinery Breakdown Policy, at an insured sum of Kshs.1.062 Billion. He stated that through the plaintiff’s Insurance Broker, Aum Insurance Brokers Limited, the plaintiff procured the said insurance covers in December 2010, to insure the plant, machinery and equipment used in its cement manufacturing operations. 2. PW1 stated that the clinkerisation process involved blending limestone, iron ore and other additives before the mixture was fed into a kiln to produce clinker, the principal ingredient in cement manufacture. He testified that the Insurance Policies were intended to cover all machinery, equipment, accessories and associated structures forming part of the 3000 TPD clinkerisation plant, including the blending silo, which was specifically listed in the policy schedule. 3. PW1 testified that the plaintiff had maintained an insurance relationship with the defendant for approximately forty (40) years and that prior to commencement of operations, the plaintiff had obtained an erection all-risks cover from the defendant. He stated that thereafter, upon completion and commissioning of the clinkerisation plant, the plaintiff procured the Machinery Insurance Policy and Loss of Profits Policy that are the subject of this dispute. 4. He stated that the Machinery Insurance Policy covered sudden and unforeseen physical loss or damage arising from causes such as faulty design, defects in materials, bad workmanship, erection faults and other non-excluded causes requiring repair or replacement. He maintained that the said Policy provided indemnity based on replacement costs, including freight, customs duties, erection and dismantling expenses. He asserted that the said provisions demonstrated that the Policy extended beyond movable machinery components and encompassed structures necessary for the operation of the insured plant. He testified that construction of the clinkerisation plant commenced in 2009 and took approximately three (3) years to complete. He stated that after commissioning, the plant operated for about eight (8) months before the blending silo developed cracks and collapsed on 1st August 2011. 5. PW1 described the blending silo as a critical component of the clinkerisation process, used to mechanically blend limestone, iron ore and other additives through compressors, screws and hoppers to produce a homogeneous mixture for feeding into the kiln. He maintained that the blending silo was an integral part of the plant and machinery and described it as the *“mother”* of the clinkerisation process because it was the stage at which the raw materials were blended before clinker production. 6. It was the evidence of PW1 that following the collapse, the plaintiff immediately notified the defendant through its Broker and requested for the appointment of Loss Adjusters. He testified that he personally informed the defendant’s management and that formal notification was also made to the police and other relevant parties, and thereafter, the plaintiff lodged a claim amounting to USD 15,446,757 (approximately Kshs.1.313 Billion), comprising the cost of replacing the silo, reconstruction works, strengthening of associated structures, debris removal and related losses. 7. PW1 testified that the collapse resulted from causes expressly covered under the Machinery Insurance Policy and that the resulting interruption of operations also triggered entitlement under the Loss of Profits Policy. He relied on investigations conducted by Construction Diagnostic Centre and Development Consultants International Limited, both of whom concluded that the collapse was likely caused by a combination of factors including faulty design, poor materials, erection defects and bad workmanship. He maintained that these causes fell squarely within the insured perils contemplated by the Policy and the plaintiff was entitled to indemnification for both material damage and consequential loss of profits. PW1 stated that upon notification of the loss, the defendant appointed Loss Adjusters, including Milind Bhatawadekar and McLarens Young International Ltd, to assess the claim. 8. He pointed to an interim assessment by Milind Bhatawadekar, who valued the material damage loss at Kshs.506,104,904.00 and the business interruption loss at Kshs.221,337,175.00, giving a combined assessment of Kshs.727,442,079.00. PW1 contended that none of the Loss Adjusters indicated during the adjustment process that the blending silo or loss of profits claims fell outside the Policy covers. 9. He testified that the defendant subsequently demanded and received additional premiums after a complete list of machinery had been submitted, which confirmed that the blending silo formed part of the insured property. He alleged that although the defendant initially assessed and quantified portions of the claim, it ultimately failed to compensate the plaintiff for the blending silo and the associated loss of profits. He stated that in September 2013, the defendant offered a Discharge Voucher for Kshs.393,018,965.00, which excluded compensation for those claims. 10. PW1 contended that the Final Reports prepared by McLarens Young International Ltd and Milind Bhatawadekar, were influenced by the defendant and improperly used by it to justify the rejection of the silo claim. He stated that by letters dated 14th October 2013 and 16th December 2013, the defendant formally disclaimed liability for the blending silo and consequential loss of profits on the ground that the blending silo was not insured under the Machinery Insurance Policy. He disputed that position and maintained that the blending silo was expressly listed in the policy schedule, formed an integral component of the clinkerisation process, was part of the insured plant and machinery, and was not excluded by any provision of the Policy. He referred to the witness statement of Irene Owiti and various Reports prepared by the defendant’s own Assessors, which he contended recognized the blending silo as part of the clinkerisation plant. 11. PW1 testified that to support its position, the plaintiff commissioned an independent review by Toplis & Harding International Limited, whose resulting Report concluded that the claim was payable and assessed the plaintiff’s loss at Kshs.1,647,199,876.00, comprising Kshs.664,765,843.00 for machinery and plant damage and Kshs.982,434,033.00 for loss of profits, which he adopted as the proper measure of the plaintiff’s loss. 12. PW1 further testified that following the defendant’s disclaimer, the plaintiff lodged a complaint with the Insurance Regulatory Authority and the Commissioner of Insurance, and after reviewing the dispute and convening meetings involving the parties, the Regulator recommended that the defendant ought to honour the claim. The plaintiff maintained that the defendant breached the terms of both the Machinery Insurance Policy and the Loss of Profits Policy by refusing to indemnify it for losses arising from the collapse of the blending silo. 13. In cross-examination, PW1 stated that as the Chief Executive Officer of the company (plaintiff), he was responsible for directing the company’s insurance arrangements through its Broker. He indicated that he instructed the Broker to apply for the insurance cover sought from the defendant and confirmed that the Broker’s letter dated 31st December 2010, reflected the plaintiff’s intention to obtain insurance for the clinkerisation plant. He explained that in the ordinary course of constructing a cement plant, an erection policy is first procured during construction, after which an operational all-risks policy is obtained upon commissioning. He contended that although the letter of 31st December 2010, did not specifically refer to an erection policy, it formed the basis upon which the insurance cover was sought and issued. 14. PW1 stated that the plaintiff was involved in the construction of the clinkerisation plant from inception. He also stated that the plant was developed with the involvement of Indian and German companies, including Thyssenkrupp, which supplied machinery, engineering designs and technical supervision. He asserted that Thyssenkrupp was the supplier of the clinkerisation system and that the blending silo formed part of the equipment supplied under that arrangement. He confirmed that there was only one blending silo constructed, although other silos had been contemplated but were never built. 15. PW1 testified that the plaintiff had entered into contracts with various contractors and consultants responsible for different aspects of the project. He distinguished the plaintiff’s insurance arrangements from those of its contractors, explaining that some contractors had obtained contractor’s all-risks cover from other insurers, while the plaintiff itself maintained insurance with the defendant. 16. PW1 confirmed that the contracts provided for the supply of machinery, equipment and designs by Thyssenkrupp, while local contractors undertook aspects of the civil works under the supervision of Consultants and Engineers. When referred to contractual documents and technical specifications, PW1 maintained that the blending silo formed part of the clinkerisation system supplied by Thyssenkrupp. He acknowledged that certain schedules contained exclusions but disagreed with the proposition that the blending silo was excluded from the insurance cover. He claimed that the silo was a civil structure constructed in Kenya with the assistance of local contractors, but it remained an integral component of the insured plant. PW1 confirmed that a Proposal Form and Questionnaire had been submitted in connection with the insurance cover, although he had not personally completed or signed the Questionnaire and did not know who had filled it. 17. He confirmed that the plaintiff had engaged consultants to investigate the collapse and referred to Reports prepared by Development Consultants International and other experts. 18. He explained that the blending silo was not merely a concrete structure within which machinery was house, but rather an integrated system in which mechanical components and structural elements worked together as part of the clinkerisation process. 19. Referring to the Consultants’ Reports, he agreed that the investigations identified a number of defects and contributing factors relating to the collapse. He also agreed with the Consultants’ findings that the failure resulted from a combination of factors involving design, construction and structural issues. PW1 acknowledged that the Reports identified concerns relating to concrete quality, reinforcement and design but maintained that no single cause had been conclusively established. He contended that it was virtually impossible to attribute the collapse to one factor alone and the Consultants had not identified any single party as being solely responsible. 20. He stated that as the owner of the plant, the plaintiff had obtained comprehensive insurance cover specifically to protect against such losses. He stated that whether the collapse resulted from design defects, construction shortcomings or a combination of factors was immaterial to the plaintiff, because the Insurance Policy was intended to respond to such risks. He rejected the suggestion that the plaintiff should pursue contractors or consultants directly, maintaining that the plaintiff’s primary claim lay against the defendant insurer, which had accepted premiums and undertaken to indemnify the plaintiff against insured losses. 21. He confirmed that the plaintiff’s claim included costs associated with local fabrication works, reconstruction of the blending silo and related construction expenses. He acknowledged that the civil works for the silo had been undertaken by Mulji Devji & Brothers Limited and that the claim included compensation for the blending silo structure. 22. PW1 agreed that the physical collapse of the blending silo involved the blending silo itself rather than the internal machinery. He maintained that the blending silo was expressly listed in the insurance schedule and formed an integral part of the insured clinkerisation plant. 23. He referred to documents relating to the erection phase of the project, including contracts identifying contractors, consultants, suppliers and the property to be erected and testified that Thyssenkrupp provided the engineering drawings and technical specifications, while the plaintiff supplied certain construction materials such as cement, ballast, water and electricity. PW1 stated that the civil works were carried out by contractors under technical supervision and included slip-form construction methods commonly used for cylindrical silos. He claimed that although the plaintiff contributed construction materials and logistical support, the blending silo remained part of the integrated clinkerisation system for which insurance cover had been obtained. He reiterated that the collapse resulted from factors identified by the Consultants and that those risks fell within the scope of the insurance cover issued by the defendant. 24. In re-examination, PW1 was referred to paragraph 18 of the Plaint and he maintained that the causes of the collapse identified by the Consultants, which included faults in design, workmanship and construction, were among the risks expressly covered under the Machinery Insurance Policy. Referring to the Policy document, he stated that it covered losses arising from defects in design, faulty erection, bad workmanship and other unforeseen causes resulting in damage to insured property. He maintained that the circumstances surrounding the collapse of the blending silo fell within the scope of the insurance cover issued by the defendant. 25. He indicated that the clinkerisation system supplied by Thyssenkrupp included various mechanical components such as compressors, motors, feeders and associated equipment required for the operation of the blending silo. He asserted that the blending silo itself was expressly included in the list of insured equipment and referred to technical specifications relating to the silo and kiln-feed system. He indicated that the silo and the machinery installed within and upon it, functioned as an integrated unit and could not operate independently of one another. He emphasized that the machinery was mounted on and supported by the silo structure, making the structure an essential component of the overall clinkerisation process. 26. In regard to the construction of the silo, PW1 stated that the plaintiff supplied construction materials, including steel, ballast and other inputs. He maintained that the materials supplied were of high quality and noted that the plaintiff was a major supplier of steel products in Kenya. He further stated that the civil works for the blending silo were undertaken by Mulji Devji & Brothers Ltd, while the testing and quality control of the concrete used in construction were the responsibility of the contractor in accordance with normal construction practice. He maintained that the blending silo formed an integral part of the insured plant and machinery and was properly covered under the Insurance Policy. 27. Mr. Ajesh Agravat, a Director of AUM Insurance Brokers Limited, formerly Agravat Insurance Agencies testified as PW2. He adopted his witness statements dated 26th June 2014 and 11th February 2016, as his evidence-in-chief. He testified that he had worked in the insurance industry for approximately thirty-three (33) years and had acted as the plaintiff’s Insurance Broker since 2008. He stated that the plaintiff and its related companies had maintained insurance arrangements with the defendant for many years and that upon instructions received in December 2010, he applied for insurance cover in respect of the plaintiff’s clinkerisation plant, machinery, equipment, machinery breakdown and loss of profits. He indicated that the plaintiff had initially obtained an Erection All Risks Policy from the defendant in 2008 to cover the erection, testing and commissioning phases of the clinkerisation plant, which covered contract works, erection costs and debris removal with a total insured value of approximately Kshs.2.897 Billion. He also indicated that the said Policy covered equipment supplied by Thyssenkrupp, including the blending silo. 28. He testified that contractors involved in the project included Mulji Devraj & Brothers Limited, which undertook the civil and structural works associated with the blending silo installation. He stated that upon completion and commissioning of the plant in December 2010, he advised the plaintiff to obtain operational insurance covers, including an Industrial All Risks Policy, Machinery Breakdown Policy, Loss of Profits Policy, Public Liability Policy, Work Injury Benefits Cover, Employer’s Liability Policy, Fidelity Guarantee Policy, Money Policy and Goods in Transit Policy. 29. He further stated that following his letter dated 31st December 2010, the defendant issued among others, a Machinery Insurance Policy with a sum insured of Kshs.3 Billion and a Loss of Profits Following Machinery Breakdown Policy with a sum insured of Kshs.1.062 Billion. He explained that the request for insurance expressly covered the plaintiff’s clinkerisation plant and associated machinery and equipment, and that in insurance practice, a request to *“hold covered”* signified acceptance of the risk, pending finalization of supporting documentation and premium payments. 30. PW2 testified that the defendant accepted the risk and issued the relevant Policies on the basis of information already provided during the erection phase. He testified that the Machinery Insurance Policy covered sudden and unforeseen physical loss or damage arising from causes including defects in materials, faulty design, erection faults, bad workmanship, lack of skill and other causes not specifically excluded. He referred to the policy schedule and stated that it expressly listed the 3000 TPD clinkerisation plant supplied by Thyssenkrupp and specifically included the blending silo together with other components such as the raw mill, pre-heater, precalciner, rotary kiln, coal mill and associated equipment. 31. He stated that the Policy provided indemnity based on replacement costs, including erection costs, freight, customs duties, dismantling charges and related expenses. He asserted that the plant operated until 1st August 2011 when the blending silo collapsed, causing extensive physical damage and interruption of production. 32. It was PW2’s evidence that upon being notified of the incident, he immediately informed the defendant by telephone and subsequently through a formal letter dated 1st August 2011, requesting for the appointment of Loss Adjusters. He testified that thereafter, a claim of approximately USD 15.4 Million, equivalent to Kshs.1.313 Billion, was lodged on behalf of the plaintiff, covering the cost of the silo equipment, local fabrication works, reconstruction of the blending silo, strengthening of related structures, debris removal and associated losses. He maintained that the collapse occurred during the currency of the Policy and resulted from causes expressly covered under the insuring clause. 33. He stated that the plaintiff commissioned investigations by Development Consultants International Limited and Construction Diagnostic Centre, while the defendant also engaged a Structural Engineer, I.B. Manga, to investigate the cause of the collapse. He indicated that all three investigations identified a combination of factors, including defects in design, materials, casting, erection and workmanship, as contributing causes of the collapse. 34. PW2 maintained that these causes fell squarely within the risks insured under the Machinery Insurance Policy and rejected suggestions that the loss resulted from gross negligence. It was his evidence that following notification of the claim, the defendant appointed McLarens Young International and Milind Bhatawadekar as Loss Adjusters. He claimed that extensive communication took place between the plaintiff, the Adjusters and the defendant during the assessment process. He referred to Milind Bhatawadekar’s interim report dated 9th November 2012, which assessed material damage at Kshs.506,104,904.00 and business interruption loss at Kshs.221,337,175.00, giving a combined assessment of Kshs. 727,442,079.00. He testified that the Adjusters recommended an interim payment of Kshs.200 Million to facilitate reconstruction of the plant pending final determination of the claim, but the defendant failed to make the payment despite indicating that it would do so. 35. He testified that after the collapse, the defendant required the plaintiff to pay additional premiums under both the Machinery Insurance Policy and the Loss of Profits Policy, following submission of a complete list of machinery. He expressed the view that acceptance of those additional premiums reinforced the understanding that the blending silo formed part of the insured property. 36. He stated that the plaintiff repeatedly sought interim payments and that the defendant’s Managing Director gave assurance that payment would be forthcoming, although no payments were ultimately made. He testified that McLarens Young International and Milind Bhatawadekar issued their Final Reports in May 2013 and while they recommended settlement of substantial sums under the Machinery Insurance Policy, they concluded that the loss of profits claim was not admissible. 37. He indicated that the defendant subsequently issued a Discharge Voucher dated 20th September 2013 offering Kshs.393,018,965.00 under the Machinery Breakdown Policy, but excluding compensation for the blending silo and the associated loss of profits. He referred to the correspondence between the defendant and the Adjusters and asserted that the defendant improperly influenced the preparation of the final adjustment reports. 38. PW2 testified that by letters dated 14th October 2013 and 16th December 2013, the defendant formally disclaimed liability for the blending silo and loss of profits claims, on the ground that the blending silo was not insured under the Machinery Insurance Policy. He however maintained that the blending silo was expressly listed in the policy schedule, formed an integral component of the clinkerisation process and comprised both the structural housing and the machinery installed within it, functioning together as a single integrated unit. He asserted that the blending silo could not properly be divided into insured and uninsured components and any ambiguity in the Policy wording ought to be construed against the defendant, which drafted the Policy. 39. PW2 referred to a review conducted by Toplis & Harding International Ltd, which concluded that the claim was payable and assessed the plaintiff’s total loss at Kshs.1,647,199,876.00, comprising Kshs.664,765,843.00 for machinery and plant damage and Kshs.982,434,033.00 for loss of profits. He adopted that assessment and maintained that the plaintiff was entitled to full indemnity under the Policies. 40. He stated that following the defendant’s disclaimer he lodged a complaint with the Insurance Regulatory Authority and the Commissioner of Insurance, following which he attended meetings convened by the Regulator involving the parties and the Regulator ultimately recommended that the defendant honours the plaintiff’s claim, expressing the view that the blending silo was covered under the Policy. 41. In cross-examination, PW2 acknowledged that he did not possess a university degree specifically relating to insurance policy drafting and accepted that liability under an insurance contract depended upon the wording of the Policy. He confirmed that no detailed schedule accompanied his initial letter of 31st December 2010, but maintained that sufficient information had been provided to enable the defendant to assess and accept the risk. He further stated that the detailed machinery schedule was subsequently submitted upon the defendant’s request and that the blending silo formed part of the listed machinery. He acknowledged that the civil works associated with the blending silo were constructed on site and that Thyssenkrupp supplied machinery rather than undertaking the civil construction works. 42. PW2 confirmed that the plaintiff had separately obtained Erection All Risks insurance during construction of the plant and that the said Policy remained in force until commissioning of the facility in December 2010. He stated that the Erection All Risks Policy covered the erection of the blending silo and associated works and that once the plant was commissioned, the Machinery Breakdown and Loss of Profits Policies were intended to continue coverage for the operational phase of the plant. He maintained that the defendant had full knowledge of the project, the contractors involved, the nature of the civil works and the integrated nature of the blending silo. He stated that although the Policy contained various exclusion clauses, the causes identified by the Investigators and Loss Adjusters fell within the insured perils rather than the exclusions. 43. He stated that the Insurance Regulatory Authority and the Commissioner of Insurance subsequently considered the dispute after receiving the plaintiff’s complaint and recommended that the defendant honours the claim. He acknowledged that the Regulator’s role was advisory and that it did not possess authority to finally determine the parties’ contractual rights. He nevertheless maintained that the blending silo and the resulting business interruption losses were covered under the Policies and urged this Court to uphold the plaintiff’s claim, with interest and costs. 44. In re-examination, PW2 indicated that the machinery schedule appearing at page 11 of the plaintiff’s documents was supplied to the defendant after it requested for a list of machinery to be insured. He stated that the schedule originated from the plaintiff and was forwarded through him as a Broker. He claimed that the defendant required a list of the machinery and the values to be insured, but did not require the identity of every supplier. He explained that although Thyssenkrupp was identified as one of the suppliers, it was not the only supplier involved in the project. PW2 maintained that the blending silo was included within the machinery schedule and that the description *“complete blending silo”* was intended to cover the entire blending silo installation. He acknowledged that the schedule did not contain a detailed technical description of the blending silo, but asserted that the wording used was sufficient to encompass the complete structure and its integrated mechanical components. 45. He stated that the insured value of approximately Kshs.3 Billion represented the total value of the machinery and equipment insured under the Machinery Breakdown Policy. He also stated that detailed invoices and supporting documentation showing the value of each item were subsequently supplied to the Loss Adjusters during the assessment process. He reiterated that the civil works associated with the blending silo formed part of the blending silo installation and were therefore included within the claim. 46. He referred to the Erection All Risks Policy and stated that it had been procured by the plaintiff to cover the erection works during construction of the clinkerisation plant. He maintained that the plaintiff did not obtain any other separate policy in respect of those works. 47. PW2 emphasized that the premiums charged under the Machinery Breakdown Policy were provisional because the risk had been accepted before all final information was supplied. He explained that the risk was classified as a listed industrial risk and that premium rates were regulated within the insurance industry. He asserted that despite his request that a risk survey be conducted before cover was issued, the defendant accepted the risk and issued the Policy without undertaking any site inspection, only visiting the plant after the collapse of the blending silo. He maintained that the Machinery Breakdown Policy was intended to provide broad cover and expressly included risks such as poor workmanship, defects in materials and faulty design. He explained that these were among the causes identified by the Experts who investigated the collapse and therefore fell within the Policy Cover. He referred to the defendant’s own assessment reports, which quantified the material damage claim at approximately Kshs.533.8 Million, as evidence that the defendant initially treated the loss as falling within the Policy. 48. Regarding the application of the Average Clause, PW2 referred to the 85% condition contained in the Policy and explained that average would only apply where the sum insured fell below 85% of the actual value at risk. He contended that the said Clause had been incorrectly applied in the assessment of the plaintiff’s claim. He indicated that the Loss Adjusters had expressed the view that the Average Clause was not applicable in the circumstances of the loss and stated that the reduction made on that basis was therefore unjustified. 49. Mr. David Spencer Russell, a Fellow of the Chartered Institute of Loss Adjusters, a Chartered Insurance Practitioner, Associate at the Chartered Insurance Institute, a Fellow at the International Federation of Adjusting Associations and a European Loss Adjusting Expert, adduced evidence as PW3. He stated that he is a highly experienced Loss Adjuster with approximately 45 years of experience and holds several professional qualifications in loss adjusting and insurance. He also stated that he worked for Toplis & Harding International Ltd between 2005 and 2014 before establishing Mardee Loss Adjusters and Insurance Surveyors Limited in 2014. 50. It was his evidence that when working at Toplis & Harding International Ltd, he was approached by AUM Insurance Brokers on behalf of the plaintiff company to provide an independent assessment of the insurance claim arising from the collapse of the blending silo at the plaintiff’s Vipingo plant. He testified that in carrying out his assignment, he visited the site, met with the insured’s personnel, reviewed extensive documentation, including Insurance Policies, correspondence, Engineering Reports, and Reports prepared by other Loss Adjusters, and thereafter prepared a Report dated 12th February 2014. 51. Regarding the cause of the collapse, PW3 testified that after reviewing Reports prepared by Development Consultancy Limited International, Construction Diagnostic Centre, and a Survey Report commissioned by the defendant’s Loss Adjusters, no single specific cause of failure could be identified, as the collapse appeared to have resulted from a combination of contributory factors. He stated that he examined the Machinery Breakdown Insurance Policy and noted that it covered unforeseen and accidental physical loss or damage arising from causes such as faulty design, defective materials, poor workmanship, lack of skill, negligence, and other causes not specifically excluded. 52. He testified that he also considered two policy exclusions, namely defects existing at the commencement of the Policy and loss arising from wilful acts or gross negligence of the insured, and based on discussions with the defendant’s Engineers and the Reports he reviewed, he concluded that no known defects existed when the plant became operational and that there was no evidence of wilful misconduct or gross negligence on the part of the plaintiff. He opined that the loss was recoverable under the Machinery Breakdown Policy. 53. Mr. Russell disagreed with the conclusions reached by McLarens Young International and Milland Bhatawadekar who had stated that the blending silo was not insured. He maintained that the Policy wording expressly included the blending silo, which was specifically mentioned under the description of the insured property. He rejected their conclusion that the blending silo fell outside the scope of cover. 54. On the assessment of the material damage claim, PW3 testified that he reviewed the plaintiff’s original claim and the assessments prepared by the defendant’s Adjusters, and noted that the Adjusters had initially assessed the loss at approximately USD 9.3 Million before reducing it to about USD 6.3 Million after excluding the blending silo construction. While he largely agreed with the Adjusters’ treatment of most items, he considered the exclusion of the blending silo construction to be erroneous. He also disagreed with the exclusion of certain costs relating to local fabrication at site, strengthening of structures, debris removal and foundations. 55. Mr. Russel stated that the Adjusters had included local fabrication costs in calculating the value at risk but had excluded the corresponding claim item, which he considered inequitable. He noted that the Adjusters had used an exchange rate of Kshs.75/= to the US Dollar, whereas the applicable exchange rate at the time of the loss was Kshs.85/= to the Dollar. He stated that after making the necessary adjustments, he assessed the total reinstatement cost at Kshs. 796,654,992.00. He further stated that he then deducted 10% for depreciation and Kshs.53,121,650.00 for salvage value, resulting in a net material damage claim of Kshs.664,767,843.00. 56. In regard to the Loss of Profits Policy, PW3 testified that cover under the said Policy was triggered because the material damage claim was indemnifiable under the Machinery Breakdown Policy. He explained that the indemnity period under the Policy was twelve (12) months from the date of loss, namely from 1st August 2011 to 31st July 2012. 57. PW3 testified that he established that the plant was not rebuilt and operational until August 2013 and therefore the insured suffered interruption throughout the entire indemnity period. Using the insured’s production records and accounts, he calculated the average monthly production based on the figures for May, June and July 2011, when production had reached anticipated levels. Applying the selling value of clinker and a gross profit rate of 38%, he calculated a gross profit loss of approximately Kshs.2.2 Billion. He explained that because the Policy limit was Kshs.1 Billion, he adjusted the claim and arrived at a loss of gross profit figure of Kshs.972,591,821.00 after accounting for savings. He also assessed a loss of wages claim of approximately Kshs.9.8 Million, bringing the total loss of profits claim to Kshs.982,434,033.00. PW3 testified that the total amount payable under the Machinery Breakdown and Loss of Profits Policies was Kshs. 1,647,199,876.00. He confirmed that the calculations supporting his conclusions were contained in the appendices attached to his Report and were based on the documentation provided by the plaintiff’s and the defendant’s Adjusters. 58. Upon cross-examination, PW3 acknowledged that his assessment was based primarily on the Insurance Policies as issued and not on the proposal documents, negotiations, or disclosures that preceded the formation of the insurance contract. He accepted that he had not investigated what information was provided to the defendant before the Policy was issued and agreed that the detailed list of machinery was first submitted on 24th March 2011, several months after the Policy commenced on 1st January 2011. Although he maintained that the blending silo was included within the insured assets under the policy wording, he conceded that neither the initial request for insurance nor the proposal documents contained a specific schedule listing the machinery to be insured at the inception of the Policy. 59. PW3 admitted that the schedule eventually submitted to the defendant identified machinery descriptions, suppliers, and costs, with ThyssenKrupp named as the supplier. He accepted that the schedule did not mention Mulji Devraj, the contractor responsible for constructing the silo frame and associated civil works. While he insisted that the *“complete blending silo”* was covered under the Machinery Policy, he conceded that he did not know how the value of the civil works had been incorporated into the insured values or whether the civil works had been specifically insured under the Machinery Policy. He also acknowledged that the policy schedule only expressly identified equipment supplied by ThyssenKrupp. 60. When questioned about the collapse of the blending silo, PW3 accepted that the Engineering Reports prepared by Construction Diagnostic Centre and Development Consultants did not state that any machinery had collapsed. He conceded that the Reports focused on the structural failure of the said silo and identified factors such as inadequate concrete strength, untreated construction joints, and other construction and design deficiencies as causes of the collapse. 61. He expressed that he believed that the machinery would have fallen when the supporting structure collapsed, and admitted that none of the Reports expressly stated that machinery had collapsed. He further agreed that the silo frame had been constructed by Mulji Devraj and that the Reports attributed the collapse to defects associated with the construction of the structure. PW3 acknowledged that he was not an engineer and had relied entirely on the findings of the Consulting Engineers. He accepted that he could not independently determine the precise cause of the collapse or identify what role, if any, Mombasa Cement played in the construction defects. 62. He admitted that he had not reviewed key contractual documents governing the supply of equipment by ThyssenKrupp before preparing his Report and only became aware during cross-examination that ThyssenKrupp’s contract excluded civil engineering and civil works, while providing technical specifications and machinery. He accepted that these documents appeared to distinguish the blending silo’s civil structure from the equipment supplied by ThyssenKrupp. 63. On the issue of Policy interpretation, PW3 maintained that the words *“complete blending silo”* in the Machinery Policy indicated that both the supporting structure and the machinery formed one insured unit. He stated that was his interpretation and that the matter ultimately depended on how the Court interpreted the said Policy. 64. He accepted that the Policy exclusions referred to the collapse of buildings and gross negligence, although he disagreed that the blending silo should be classified as a building. Nevertheless, he acknowledged that the structural frame of the silo had collapsed and that the Reports did not specifically attribute the collapse to machinery failure. 65. Regarding quantum, PW3 admitted that his calculations differed significantly from those of the Loss Adjusters appointed by the defendant. He agreed that these differences arose from professional judgment and interpretation, particularly concerning the inclusion of the blending silo frame, underinsurance calculations, exchange-rate adjustments, and certain loss-of-profit items. 66. He agreed that he had relied on some documents that were not before the Court and that he had not considered certain figures used by the defendant’s Adjusters. He acknowledged that the competing assessments reflected differing interpretations of the Policy and the loss, leaving it to the Court to determine which interpretation was correct. 67. In re-examination, PW3 confirmed that he had not been involved in the placement or negotiation of the insurance cover, as the Policy had been arranged long before his involvement. He reiterated that what collapsed was the complete blending silo, which in his assessment comprised the internal machinery and equipment, with the supporting framework. He explained that the machinery supplied by ThyssenKrupp could not stand or operate independently without the supporting structure, emphasizing that the blending silo would neither function nor remain standing without the framework because the process required the silo to be elevated and fed from the top. 68. Referring to the McLarens’ Report dated 29th May 2013, PW3 acknowledged passages describing *“builder’s works”* as constituting almost a third of the sum insured. His understanding was that these *“builder’s works”* refer to the civil works carried out by Mulji Devraj. 69. PW3 agreed that the Report prepared by the Loss Adjusters appointed by the defendant indicated that the cost of construction and civil works had been included in the sum insured, notwithstanding that the builder’s name did not appear in the schedule. In his view, the works undertaken by Mulji Devraj formed part of the complete blending silo that was identified in the insured schedule. 70. On the cause of the collapse, PW3 indicated that neither the Milland Battawadekar’s Report nor the other Experts’ Reports had identified a single definitive cause of failure. Instead, the Reports pointed to a combination of factors. 71. He was then taken through the Machinery Insurance Policy and confirmed that the detailed list of insured items had been supplied approximately three (3) months after inception of the Policy. He opined that the wording of the Policy contemplated coverage of items entered into the schedule during the currency of the insurance, provided premiums were accepted by the defendant. 72. PW3 stated that the combination of factors identified by the Experts fell within the broad range of insured perils under the Machinery Breakdown Policy, which covered unforeseen and sudden physical loss or damage arising from various causes not specifically excluded. Addressing Policy exclusions, he maintained that the collapse did not involve a building and in his opinion, the exclusion relating to collapse of buildings did not apply. 73. Regarding the exclusion for gross negligence, he stated that it was not possible to conclusively determine gross negligence and confirmed that none of the Expert Reports expressly found that the plaintiff had been grossly negligent, although they suggested circumstances that could point in that direction. 74. On indemnity and valuation, Mr. Russel stated that the Machinery Breakdown Policy was not written on a reinstatement basis but rather on an indemnity basis. He referred to the indemnity clause, explaining that where an insured item is destroyed, the insurer is required to pay the actual value of the item immediately before the loss, with associated charges such as erection costs and customs duties, subject to deductions for usage. He explained that since the blending silo and its internal equipment had been totally destroyed, he considered the indemnity provisions as being applicable. 75. He confirmed that both his evaluation and the McLarens’ assessment accounted for salvage. He stated that after the collapse, there was a large area covered with scrap metal consisting of the framework and internal machinery of the blending silo, which was later assigned a salvage value of approximately Kshs.5 Million. He added that such salvage would not have existed if the machinery and equipment had remained intact and stated that he had never encountered a situation where the framework of a blending silo collapsed while leaving the machinery standing. **Defendant’s case.** 1. Ms Irene Owiti, the defendant’s Chief Operating Officer adduced evidence as DW1. She adopted her witness statement dated 1st September 2014 as her evidence-in-chief. She testified that the plaintiff through its Broker, sought various insurance covers in December 2010, including Industrial All Risks, Machinery Breakdown and Loss of Profit following Machinery Breakdown Policies. She referred to the Proposal Form dated 28th December 2010, which required a full description of the plant and machinery, including details of manufacturer, spare parts and replacement periods. She stated that although the plaintiff initially sought cover for machinery and equipment valued at approximately Kshs.3 Billion, it did not provide a detailed schedule of the machinery to be insured. DW1 stated that a comprehensive list was only supplied later through correspondence dated 24th March 2011, in which the plaintiff explained that it was impractical to list every machine and piece of equipment located across its 50-acre site and suggested periodic risk surveys instead. She stated that the defendant still issued the Policies on the basis of the plaintiff’s representations and the principle of utmost good faith. 2. DW1 testified that the defendant’s position was that the Machinery Breakdown Policy covered machinery and equipment only, while buildings, foundations and other structures were insured separately under the plaintiff’s Industrial All Risks Policy. She stated that on 1st August 2011, the plaintiff’s Broker, AUM Insurance Brokers Limited, notified the defendant that a cement silo had collapsed, following which the plaintiff lodged a claim in December 2011 for approximately USD 15.4 Million (approximately Kshs. 1.2 Billion). She indicated that the claim included costs relating to electrical instruments, local fabrication works and reconstruction of the blending silo. 3. DW1 stated that investigations revealed that the blending silo was a large reinforced concrete structure constructed on site and therefore constituted civil works rather than machinery. She claimed that although the term *“blending silo”* appeared in documents later supplied by the plaintiff, the defendant maintained that the policy schedule identified machinery suppliers but did not identify the civil works contractor, Mulji Devraj & Brothers Ltd, which constructed the silo. 4. DW1 testified that if the plaintiff intended to insure civil works valued at over Kshs.545 Million, those works ought to have been expressly described and scheduled. She opined that the omission demonstrated that the plaintiff intended to insure only machinery supplied by manufacturers such as Thyssenkrupp India Pvt. Limited. 5. She further testified that the defendant considered the plaintiff to have failed to make full and accurate disclosure regarding the blending silo. DW1 contended that the plaintiff represented that the silo had been supplied by Thyssenkrupp India Pvt. Limited, whereas investigations revealed that it had been designed, fabricated and constructed locally with the plaintiff’s involvement and under the supervision of local contractors and consultants. She stated that these facts were material to underwriting the risk because the identity of the supplier, manufacturer or constructor directly affected risk assessment and premium calculation. 6. DW1 acknowledged that she had not personally reviewed the machinery supply documents when the machinery list was submitted and only saw them later, during the Court proceedings. 7. She stated that it had not been disclosed during underwriting that the blending silo had been designed by Development Consultants International Ltd. She testified that the defendant obtained several Expert Reports concerning both the cause of the collapse and the admissibility of the claim. She stated that Development Consultants International Limited, which had been engaged to investigate the failure, identified possible causes including inadequate concrete cover at lap splicing points, insufficient bond stress development, poor concrete quality and deficient quality control during construction. She stated that similar concerns were identified by consultants retained by the General Insurance Corporation of India. 8. It was the evidence of DW1 that the defendant also appointed Loss Adjusters and Consultants to assess coverage under the Policy. She indicated that the Loss Adjuster Milind Bhatawadekar concluded that the blending silo was not insured because it had not been specifically described in the policy schedule, and that Crawford Young International likewise observed that while the insured schedule carefully identified machinery and suppliers, it did not include the contractor responsible for the civil works, namely Mulji Devraj & Brothers Ltd. DW1 stated that the defendant relied on these findings as professional assessments directly addressing policy coverage and maintained that Reports obtained by the plaintiff focused only on the cause of the collapse and extent of damage rather than whether the silo was insured. She further stated that the defendant relied on various policy terms and exclusions contained in both the Machinery Breakdown Policy and the Machinery Breakdown Loss of Profit Policy. 9. According to DW1, the Policies excluded losses arising from defects or liabilities attributable to suppliers, contractors or repairers, losses caused by the insured’s gross negligence, and losses involving foundations, masonry or items not specifically listed in the schedule of insured machinery. She asserted that the defendant’s position was that the collapse of the blending silo fell within those exclusions because the said silo was neither properly described in the schedule nor covered as machinery under the Policy. 10. It was DW1’s evidence that any claim for loss of profits was excluded because the interruption resulted from damage to an uninsured structure and because the Policy expressly excluded losses arising from the collapse of buildings and structures. She indicated that the Policy provided an indemnity period of one year, whereas the plaintiff took more than two (2) years to reconstruct the silo. 11. It was stated by DW1 that following the loss adjustment exercise, the defendant assessed the recoverable loss at 81.76%, amounting to Kshs. 393,018,965.00. She further stated that the defendant accepted liability to that extent in respect of damage to the clinker plant and associated machinery, and issued a Discharge Voucher for the admitted amount, but the defendant declined liability for the blending silo itself and maintained that the structure was not insured under the Machinery Breakdown Policy. DW1 testified that the defendant communicated its assessment to the plaintiff and explained the basis of the settlement offer. She indicated that although the plaintiff disputed the defendant’s position regarding coverage of the silo, it indicated willingness to accept the admitted amount. 12. She confirmed that the matter was subsequently referred to the Insurance Regulatory Authority, which convened meetings between the parties and directed the defendant to issue a Discharge Voucher for the admitted sum, while leaving the disputed aspects of the claim for determination through the Courts, and that the plaintiff thereafter requested for the Discharge Voucher to be amended to reflect payment *“on account”* rather than in full and final settlement. 13. DW1 maintained that neither the claim for damage to the blending silo nor the consequential claim for loss of profits was recoverable under the Policies and that the defendant had fully discharged its contractual obligations by admitting and assessing the claim only to the extent of Kshs.393,018,965.00. 14. Upon cross-examination, DW1 acknowledged that the plaintiff’s cement plant was located in Vipingo and that Mulji Devraj & Brothers Limited was the main contractor responsible for the plant’s construction. She further confirmed that the earlier Erection Policy covered the erection, testing, and maintenance phases of the plant and that the defendant had the right to inspect and examine the project during construction. She admitted that the proposal documents and schedules contained references to silos and machinery used in cement manufacture. She agreed that a blending silo is a structure used for storing and homogenizing cement materials and that it is not a building intended for human occupation. 15. She confirmed that before the Broker’s letter of 31st December 2010, the defendant had received a Proposal Form in which the plaintiff indicated that it wished to insure machinery foundations and that all machinery related to cement manufacture was intended to be covered. She acknowledged that the proposal formed part of the Policy and that the defendant agreed to place the cover while awaiting further particulars, which was consistent with insurance practice. 16. DW1 confirmed that the defendant did not request for detailed particulars of the machinery before placing the cover and that it later sought a breakdown of insured items, which was supplied on 24th March 2011. She stated that the Machinery Breakdown Policy and the Loss of Profits Following Machinery Breakdown Policy were the Policies relevant to the dispute herein. She explained that the Machinery Breakdown Policy covered sudden and unforeseen damage to specified machinery, including defects in design, casting, workmanship, lack of skill and carelessness. 17. She confirmed that a premium exceeding Kshs.3 Million was paid for the machinery cover and that the insurance was intended to cover the cement plant and its specified equipment. She acknowledged that the list provided on 24th March 2011 identified a *“3000 TPD Clinker Grinding Plant and Accessories”* and expressly listed a blending silo supplied by Thyssenkrupp India Pvt. Limited. Although she maintained that the defendant later disputed coverage, she conceded that the blending silo appeared on the list of machinery supplied to the defendant and that the Policy was subsequently issued. 18. DW1 admitted that the defendant never undertook a risk survey despite the Broker’s recommendation that periodic surveys be conducted due to the size of the insured premises. She explained that the defendant considered the risk to be a *“listed risk,”* requiring guidance from the Insurance Regulatory Authority on applicable rates and that it relied on the plaintiff’s disclosures in assessing the risk. 19. She confirmed that the Policy’s basis of indemnity included not only damage to machinery but also costs associated with erection, defects in design, bad workmanship, lack of skill, and other construction-related faults. 20. With regard to the Loss of Profits Policy, she indicated that the cover was intended to indemnify the plaintiff against interruption of business resulting from machinery breakdown. She maintained that liability for loss of profits could only arise if liability for material damage under the Machinery Breakdown Policy had first been admitted. 21. DW1stated that in the defendant’s view, the blending silo had not been covered and had not been erected or operational at the time of the collapse, although she later acknowledged that the plant had operated for approximately eight (8) months before the loss. 22. She confirmed that the defendant accepted liability for certain components of the claim, including clinker and foundation-related losses, but did not accept liability for loss of profits. She confirmed receipt of the plaintiff’s notification letter and admitted that the defendant had sought reinsurance and received support from various Re-insurers. She stated that following appointment of Loss Adjusters, the defendant approved an interim payment of Kshs.200 Million and eventually offered KShs.393 Million as full settlement following adjustment of the loss. 23. She further stated that the defendant relied entirely on the Reports of its appointed Loss Adjusters and did not independently appoint technical experts to investigate the cause of the collapse. 24. On being referred to the findings of Development Consultants International Limited, which attributed the collapse of the blending silo to inadequate concrete cover, excessive sulphate content and inconsistencies in wall thickness, DW1 agreed that these findings pointed to construction deficiencies, but maintained that the defendant relied on its Loss Adjusters’ conclusions. 25. She also confirmed that the defendant instructed McLarens Young International Ltd, and its Interim Report had assessed the material damage claim at approximately Kshs.1 Billion and the business interruption claim at about Kshs.600 Million. DW1 admitted that the figures in the Final Reports differed substantially from those contained in the interim assessments. In regard to the Report prepared by the Loss Adjuster Milind Bhatawadekar, DW1 acknowledged that the said Report was to be read together with earlier Interim and Status Reports. 26. She confirmed that at one stage, Milind Bhatawadekar assessed material damage and business interruption losses at figures exceeding Kshs.727 Million and that he initially proceeded on the assumption that the silo was insured. She admitted that the said Adjuster expressly recorded that he had only later realized that the silo was not covered under the Policy. She confirmed that Milind Bhatawadekar discussed the findings of Construction Diagnostic Centre and considered policy exclusions relating to contractor responsibility and poor workmanship. 27. DW1 agreed that poor workmanship was generally a risk covered under the Machinery Breakdown Policy, but maintained that the defendant did not consider the collapse of the silo, even if caused by poor construction, to fall within the Policy cover. 28. She stated that the defendant did not pursue subrogation proceedings against the contractor responsible for the construction despite the Adjuster’s view that the contractor could potentially be held responsible. She confirmed that the Loss of Profits Policy provided a 12-month indemnity period commencing from the date of the loss and that the Policy period itself ran from 31st December 2010 to 31st December 2011. 29. In re-examination, DW1 stated that the plaintiff had procured an Erection Policy designed to cover losses arising during the erection of structures and third-party liability associated with such construction works. She identified the contractors involved in the Vipingo cement project as Mulji Devraj & Brothers Ltd, Hallmark Technical Services Pvt Limited, Lucy Steel & Company Limited, and Yang Fabricators Mombasa. 30. Referring to Annexures I & II of the supplementary documents, Ms Owiti stated that while Annexure I contained descriptions of equipment and suppliers, Annexure II described the property to be erected and specifically included a blending silo to be constructed by Mulji Devraj & Brothers Ltd. She further referred to documents produced pursuant to the defendant’s Notices to Produce, including a Contractors’ All Risks Policy issued by Mayfair Insurance, which provided a six-month maintenance period after construction. She also referred to the construction contract between Mombasa Cement Limited and Mulji Devraj & Brothers Limited for the Vipingo cement factory, which included clinker storage silos and other civil works. 31. DW1 referred to contractual documents between Salzgitter Mannesmann and Thyssenkrupp Industries India Limited, which indicated that a blending silo valued at USD 200,000.00 was part of the project. She pointed to technical documents and specifications showing that the blending silo was to be constructed as a reinforced cement concrete structure and that the scope of supply and exclusions expressly excluded civil engineering works, civil structures, reinforced concrete construction, steel structures, hoppers, bins and silos. She claimed that these provisions demonstrated that Thyssenkrupp Industries India Limited did not supply the blending silo as machinery and that the blending silo constituted a civil structure rather than insured machinery. 32. DW1 indicated that although the plaintiff’s initial request for insurance under the Industrial All Risks Policy included a request to cover foundations and structures, which could encompass buildings and silos, the Machinery Breakdown Policy was distinct and required the insured to specifically identify the machinery to be covered. She noted that the proposal dated 5th January 2011 referred generally to all machinery, hoistings and equipment used in cement manufacture, but no detailed specification of machinery was provided until March 2011. She contended that even then, the list submitted through AUM Insurance Brokers on 24th March 2011 merely identified a *“3000 TPD clinker grinding plant and accessories”* and other equipment values, without specifically identifying the blending silo. She maintained that although the clinker grinding plant was listed, the blending silo was not supplied by Thyssenkrupp Industries India Limited and was therefore not included within the machinery insured under the Machinery Breakdown Policy. 33. With regard to the policy terms, DW1 stated that the Machinery Breakdown Policy and the Loss of Profits Following Machinery Breakdown Policy defined the extent of coverage and contained specific exclusions. She emphasized that the loss of profits cover was limited to losses arising from insured machinery breakdowns occurring during the policy period and was subject to the exclusions set out in the Policy. 34. Referring to the plaintiff’s Claim Form, she noted that the plaintiff sought compensation for local fabrication works, blending silo construction and other civil foundations. She opined that these items were not covered under the Machinery Breakdown Policy because they constituted civil works rather than insured machinery. 35. DW1 stated that under the Industrial All Risks Policy, buildings and structures could potentially be covered even if not individually specified, whereas machinery under the Machinery Breakdown Policy had to be specifically identified and scheduled. She maintained that the blending silo properly fell within the category of a building or civil structure rather than machinery. 36. Referring to Reports of the various Loss Adjusters, including Milind Bhatawadekar, she stated that none of the Adjusters concluded that the blending silo was insured under the Machinery Breakdown Policy. She explained that figures appearing in certain Reports, including a provisional assessment of approximately USD 18 Million (Kshs.1.5 Billion), were merely preliminary estimates and not recommendations for payment. She contended that although some Reports proceeded on assumptions that the blending silo formed part of the loss, no Adjuster ultimately recommended compensation for the silo, and none concluded that it was covered under the Policy. 37. Mr. Mahesh Mavji, a Loss Adjuster and Managing Director at McLarens Young International Limited, adduced evidence as DW2. He adopted his witness statement dated 18th March 2015 as his evidence-in-chief. He testified that he prepared both the Interim Report dated 1st March 2012 and the Final Report dated 29th May 2013, concerning the collapse of the plaintiff’s blending silo at its Kilifi cement plant on 1st August 2011. He stated that the plaintiff initially claimed USD 12.87 Million, later revised to USD 15.45 Million, for damage to plant, machinery, buildings and consequential losses. It was his evidence that following investigations and assessment of supporting documentation, the Loss Adjusters quantified the recoverable loss at USD 6.28 Million (Kshs.533.8 Million), which was reduced to Kshs.480.7 Million after accounting for salvage. 38. He stated that application of the Average Clause reduced the recoverable amount to approximately Kshs.393 Million because the sum insured of Kshs.3 Billion represented only 81.76% of the assessed replacement value of Kshs.3.669 Billion, falling below the 85% threshold required to avoid the application of average. 39. DW2 explained that the Machinery Breakdown Insurance Policy covered machinery and equipment valued at approximately Kshs.3 Billion, including components supplied by Thyssenkrupp India, Larsen & Toubro, Siemens, Takraf India and others. He testified that although the schedule included a clinker grinding plant incorporating a blending silo, the assessment of the claim was complicated because the plaintiff presented losses according to functional categories rather than by reference to the machinery listed in the policy schedule. He explained that the Adjusters therefore matched each claimed item against the insured machinery. He noted that while invoices were available for most expenditure, no invoices were produced for construction of the replacement silo and some erection and commissioning costs were supported only by estimates and contractor agreements. 40. DW2 testified that several heads of claim were excluded because they were not specifically insured under the policy schedule. He indicated that these included locally fabricated items valued at USD 2.23 Million, construction of the replacement blending silo valued at USD 5.65 Million, strengthening of civil structures and debris removal costs. He stated that the Adjusters recommended indemnity for damaged machinery and operating equipment within and around the silo, while excluding the silo walls and associated civil structures. He noted that neither the proposal letter dated 31st December 2010 nor the Proposal Form dated 5th January 2011, specifically identified the blending silo. He maintained that although a subsequent letter dated 24th March 2011 referred to a blending silo supplied by Thyssenkrupp India Pvt Limited, only the value attributable to the insured machinery could be considered and not the entirety of the civil works component of the clinker grinding plant. 41. DW2 stated that various adjustments were made during the loss adjustment process, including reductions relating to electrical installations, silo surge bins, erection charges, taxes and civil works costs where the claimed items were modified, unrelated to the loss, undamaged or uninsured. He further stated that salvage was assessed at Kshs.53.1 Million based on the highest available bid after considering transportation, cutting costs and the limited market for scrap material. 42. He testified that the Machinery Breakdown Policy covered sudden and unforeseen physical damage arising from causes such as defective materials, faulty design, faulty erection, bad workmanship and lack of skill, unless specifically excluded. He stated that in order to determine the cause of the collapse, the Adjusters engaged Structural Engineering Experts. 43. It was DW2’s evidence that laboratory testing on reinforcement bars recovered from the debris indicated compliance with four out of five required parameters but failure in the 0.2% proof stress test, and that concrete testing revealed excessive quantities of fine aggregate compared to the specified mix design. He also referred to Reports prepared by Construction Diagnostic Centre, the silo designers, Development Consultants International Limited, and other Experts, which identified deficiencies in concrete quality, elevated chloride and sulphate content, inadequate concrete strength, poor concrete cover, bond failure of reinforcement bars and possible design inadequacies. Based on all investigations, DW2 concluded that the collapse resulted from a combination of defective materials, deficiencies in the concrete mix, poor workmanship and possible inadequacies in reinforcement strength. DW2 stated that while Construction Diagnostic Centre identified potential design shortcomings, he noted that the designers denied the existence of any design defect. 44. He testified that the plaintiff supplied the cement and reinforcement bars used in construction and supervised the works through its own Engineer. He opined that the evidence adduced overwhelmingly demonstrated that poor workmanship and construction defects were the principal causes of the collapse and that the contractor, Mulji Devraj & Brothers Limited, bore primary responsibility for the construction works. DW2 reiterated that he considered Reports prepared by various Experts and Loss Adjusters, including Milind Bhatawadekar, Construction Diagnostic Centre and Toplis & Harding International Limited. He maintained that neither the Machinery Breakdown Policy nor the Material Damage Policy insured the blending silo structure itself, but only the machinery, accessories and equipment associated with it. 45. DW2 disagreed with the evidence of the plaintiff’s witness, David Spencer Russell (PW3), who maintained that the silo was covered under the operational insurance programme. DW2 claimed that the applicable Policies contained exclusions relating to defective workmanship, negligence, collapse of structures, known defects, losses recoverable from contractors or suppliers and losses caused by the wilful act or gross negligence of the plaintiff or its representatives. He stated that he concluded that the claim for damage to the silo structure fell outside the scope of cover. 46. Referring to the policy documentation and machinery schedules, DW2 stated that the schedule listing the equipment supplied by Thyssenkrupp India Pvt Limited did not specifically include the blending silo itself. He described the silo as a locally constructed storage structure with a capacity of approximately 20,000 tonnes and maintained that the plaintiff had failed to establish that it constituted insured property under the Policy. It was his opinion that the plaintiff was not entitled to recover for damage to the silo and that since a valid material damage claim was a prerequisite to business interruption cover, the consequential loss and loss of profits claim was equally not payable. 47. On quantum, DW2 contended that the plaintiff’s calculations were unsupported and substantially overstated. He testified that debris removal costs were not recoverable under the Machinery Breakdown Policy and estimated the construction cost of the silo at approximately Kshs.122 Million, significantly lower than the figures advanced by the plaintiff. With respect to the business interruption claim, he stated that he could not identify a proper basis for the plaintiff’s claim of approximately Kshs.2 Billion and noted that his review of the plaintiff’s trading accounts reflected savings in standing charges and overheads of approximately Kshs.51 Million. He contended that neither the material damage claim nor the consequential loss of profits claim was payable under the Policies. 48. In cross-examination, DW2 acknowledged that he had never previously dealt with a silo collapse claim, describing such incidents as rare in Kenya and East Africa. He confirmed that he was instructed by the defendant on 2nd August 2011 to investigate the loss, conduct site visits, prepare preliminary reports, verify the claim, determine whether it fell within policy coverage, and assess the quantum of loss. He stated that although he prepared Preliminary Reports and estimated the material damage loss at approximately Kshs.1 Billion and business interruption loss at about Kshs.600,000,000/=, he noted that those Reports and several supporting Expert Reports were not before the Court. He stated that his firm had instructed Structural Engineers, AB Patel Structural Engineers, to assess the loss, but their findings were neither included in his Final Report nor produced in evidence. He further confirmed that his Report referred to Technical Reports by Experts, including Reports from Consultation Diagnostic Centre and Development Consultants International Limited, which he considered when assessing the probable causes of the collapse. 49. DW2 stated that he relied on the conclusions of the Expert Consultants despite not being an engineer himself. Referring to the Report by Development Consultants International Limited, he noted findings such as inadequate concrete cover at lap splicing locations and other construction-related deficiencies. He also stated that based on the Expert Reports, he summarized the probable cause of the collapse as poor construction. 50. He acknowledged that the Machinery Breakdown Policy expressly covered losses arising from defects in materials, faulty design, faults in erection, bad workmanship, lack of skill and carelessness. He confirmed that the cement plant commenced operations in January 2011 and that the silo collapsed in August 2011, only a few months after commissioning. He agreed that the term *“blending silo”* appeared in the policy schedule and that there was no correspondence from the defendant stating that the blending silo was excluded from coverage. 51. Regarding the nature of the structure, he explained that a blending silo stored large quantities of material while continuously circulating its contents to prevent solidification and to facilitate blending or homogenization. He considered the homogenizing components within the silo to be machinery and equipment. 52. Although he initially stated that he did not believe the silo foundation was covered, he was referred to the Insurance Proposal Form, which indicated that the plaintiff had requested cover for machinery foundations. He then accepted that the foundation was included in the insurance cover. 53. On the issue of underinsurance, he confirmed that his Report assessed the value at risk at Kshs.3.669 Billion. He stated that this figure was derived from replacement cost calculations prepared jointly with the Re-insurer’s Adjuster and based on claim schedules, estimated freight, taxes, duties, erection costs, and other replacement expenses. 54. DW2 indicated that the replacement cost calculations were based on actual costs and supporting documentation, but stated that many of the supporting invoices and records were not produced in Court. He referred to a Report prepared by Milind Bhatawadekar, whose calculations formed part of the basis for determining the value at risk. He maintained that there was no margin for error in the computation and that if the plant had been insured at its full replacement value, there would have been no underinsurance. 55. He disagreed with suggestions that replacement costs would increase significantly over time, conceding only that some increase would be expected. He referred to policy provisions governing indemnity, noting that the defendant was liable for the actual value of damaged items immediately before the loss, including freight, erection charges and customs duties. He accepted that the Policy did not cover debris removal costs and acknowledged that this exclusion had not been specifically discussed in his Report. DW2 stated that he had been informed that the plaintiff supplied the cement and reinforcement bars used in constructing the silo and had employed clerks of works to supervise construction. 56. In relation to the business interruption claim, he confirmed that he assessed the loss at approximately Kshs.650 Million, comprising gross profit and wages. He stated that based on supplier quotations, the plant could reasonably have been reinstated within ten months after the loss, although in reality the reconstruction of the silo took nearly two years. He however confirmed that the supporting quotations used to determine the reinstatement period were not before the Court. He stated that in calculating the business interruption loss, he relied on production and sales data showing that between January and July 2011, the company (plaintiff) sold or transferred 413,648 tonnes of clinker and generated revenue of approximately Kshs.2.295 Billion, equivalent to about Kshs.5,548.00 per tonne. 57. He acknowledged that he did not use the company’s annual turnover figures when calculating gross profit and confirmed that his Report included projected savings of approximately Kshs.5.1 Million (monthly). He maintained that his assessments were based on information and documentation provided by the plaintiff, discussions with other Experts and Adjusters, and the policy terms applicable to the loss. 58. In re-examination, DW2 stated that while the plaintiff’s documents and pleadings referred to a blending silo supplied by Thyssenkrupp India Limited, the valuation summary contained in the Loss Adjusters’ Report attributed the construction of the blending silo itself to Mulji Devraj & Brothers Limited and valued it at Kshs.122,831,079.16. He emphasized that the schedule of insured plant and machinery identified machinery supplied by Thyssenkrupp and other equipment suppliers, but did not disclose Mulji Devraj & Brothers Limited as the builder of the silo. He reiterated that the Loss Adjusters concluded that the civil structure of the blending silo was not covered under the Machinery Breakdown Policy because the builder and the civil works component had not been specifically declared in the policy schedule. 59. He explained that the plaintiff maintained separate insurance covers, and under the Industrial All Risks Policy, foundations and structures were covered, whereas the Machinery Breakdown Policy covered only the machinery and equipment specifically listed in the schedule. Referring to the policy documents and the schedule of insured machinery, he maintained that no silo supplied or constructed by Mulji Devraj & Brothers Limited was listed under the Machinery Breakdown Policy. He stated that as a result, while machinery associated with the blending process could be covered, the civil structure of the silo itself was not. He reiterated that the policy provisions relating to losses arising from defects in materials, faulty design, faulty workmanship, and similar causes applied to machinery and equipment covered under the policy and did not extend coverage to an uninsured civil structure. 60. DW2 rejected suggestions that the defendants had concealed Expert Reports. He referred to a Notice to Produce documents, which listed several engineering reports prepared by Marigat, IB Patel & Partners dated 13th October 2011, 9th October 2012 and 19th November 2012. He confirmed that Reports by Development Consultants International Limited and the Construction Diagnostic Centre had been considered in investigating the cause of the collapse and that their conclusions were reflected in the relevant sections of the documentary evidence before the Court. 61. With respect to the business interruption claim, he stated that the Policy provided a basis for calculating indemnity and that the actual interruption period attributable to the insured loss was approximately seven (7) months. He explained that although the reconstruction of the silo took considerably longer, the machinery and equipment could reasonably have been supplied within six (6) months, and the Adjusters allowed an additional four (4) months for erection and commissioning, resulting in a ten-month reinstatement period. 62. In his view, extending the indemnity period to twelve (12) months would have been speculative and unsupported by the policy terms. He also clarified that the projected labour savings of Kshs.5.1 Million referred to monthly savings, which over the ten-month reinstatement period amounted to Kshs.51 Million. 63. DW2 defended the valuation methodology used in assessing underinsurance. He stated that the free-on-board replacement cost of the insured machinery was approximately USD 33 Million and was supported by documentation, and to the said amount, the Adjusters added freight, erection and commissioning charges and local taxes, which together represented approximately 29.5% of the free-on-board value. He maintained that this percentage was reasonable and conservative, noting that the Adjusters had initially considered using a higher figure of approximately 43%. **Submissions.** 1. At the close of the defendant’s case, the Court gave directions for the filing of written submissions. The plaintiff’s submissions were filed by the law firm of Iseme Kamau & Maema Advocates on 16th March 2026 & 29th May 2026, whereas the defendant’s submissions were filed on 18th May 2026 by the law firm of Oraro & Company Advocates. The said submissions were highlighted on 2nd June 2026. 2. Mr. Nyaburi, learned Counsel for the plaintiff submitted that the Insurance Policies issued by the defendant were intended to provide comprehensive cover for the entire *“3000 TPD Clinkerisation Plant”* at Vipingo, including all machinery, equipment, accessories, foundations and related structures. Counsel relied on the Machinery Insurance Proposal Form dated 5th January 2011, correspondence exchanged between the parties and the policy schedules to demonstrate that the blending silo formed an integral part of the insured plant. He argued that the defendant was fully aware of the nature and extent of the risk, having previously insured the plant under an Erection All Risks Policy and having received detailed schedules of the machinery and equipment installed at the site. According to Counsel, the defendant never objected to the inclusion of the blending silo, failed to undertake a risk survey despite being invited to do so and even accepted additional premiums after the collapse, thereby acknowledging the scope of the cover. 3. Mr. Nyaburi submitted that the blending silo was expressly covered under the Machinery Breakdown Policy because the schedule described the insured property as the *“3000 TPD Clinker grinding plant + accessories,”* specifically including the *“blending silo”* and associated equipment. He asserted that the policy language was clear and unambiguous and that the defendant could not subsequently exclude the silo on the basis that it was a civil structure or that it had been included by mistake. In support of his submissions, Counsel relied on the Court of Appeal case of **National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another** [2001] KECA 362 (KLR), to the effect that parties are bound by the terms of their Agreements. He invoked the parol evidence rule as discussed by the Court of Appeal in the case of **The Catholic Diocese of Mombasa Registered Trustees v Pereira & 2 others (Suing as the Registered Trustees of Goan Community, Mombasa) & another** [2026] KECA 295 (KLR), and argued that extrinsic evidence cannot be used to vary clear contractual terms. 4. Mr. Nyaburi further relied on the *contra proferentem* principle discussed by the High Court of Uganda in the case of **Okema v Okumu & another** (Civil Appeal No. 084 of 2018) [2019] UGHCCD 87, and submitted that any ambiguity in the Policy herein ought to be construed against the insurer (defendant), as the drafter of the contract. He maintained that the blending silo was not merely a static civil structure but an integrated mechanized system essential to the clinker production process. 5. Referring to technical descriptions by Thyssenkrupp, Development Consultants International Limited and witness testimony, Mr. Nyaburi argued that the silo comprised interconnected mechanical components that functioned together to homogenise raw meal prior to clinker production. To buttress this argument, Counsel cited the Irish decisions of **Kilsaran Concrete v Commissioner of Valuation** [2010] [EHC 434 (7 December 2010) and **Caribmolasses Co. Ltd. v Commissioner of Valuation** [1990] IEHC 7 (24 January 1990). 6. Relying on the Ugandan High Court case of **Atom Outdoor Ltd v Arrow Centre (U) Ltd** (High Court Civil Suit No. 488 of 2003) [2004] UGCommC 42, which adopted principles by the House of Lords in the case of **The Antaios and Miramar Maritime Corporation v Holborn Oil Trading Ltd** [11984] AC 676, Mr. Nyaburi urged this Court to adopt a purposive and commercially sensible interpretation of the insurance contract, arguing that such an approach would support the inclusion of the blending silo and its supporting structures within the scope of cover. 7. He submitted that even if the blending silo was to be classified as a civil structure, the policy proposal expressly extended cover to foundations and structures supporting machinery. Counsel further submitted that the Policy’s indemnity provisions which provided for compensation of erection and dismantling costs, demonstrated that the cover was intended to extend beyond movable machinery components. 8. Mr. Nyaburi also emphasized that the defendant had not expressly excluded civil structures from the Policy and as such, and therefore could not rely on such an exclusion to deny liability. In support of a restrictive interpretation of exclusion clauses, Counsel relied on the South African Supreme Court of Appeal case of **Centrig Insurance Company Limited v Qosthuizen & another** (237/2018) [2019] ZASCA 11; 2019 (3) SA 387 (SCA). He submitted that the defendant’s settlement calculations included salvage attributable to the blending silo structure, thereby acknowledging that it formed part of the insured property. 9. Counsel also relied on the determination of the Insurance Regulatory Authority, which found no justification for excluding the blending silo or the related loss-of-profit claim from settlement. With regard to the exclusions relied upon by the defendant, Counsel argued that no evidence had been produced to establish liability on the part of any contractor, supplier or repairer, and the defendant had not instituted any subrogation proceedings. 10. Referring to the South African Supreme Court of Appeal case of **Transnet Ltd t/a Portnet v MV Stella Tingas' & another** (378/01) [2002] ZASCA 145; [2003] 1 All SA 286 (SCA); 2003 (2) SA 473 (SCA), Mr. Nyaburi submitted that there was no evidence that the plaintiff knew of any defects at the commencement of the Policy or that it had engaged in willful misconduct or gross negligence. He stated that the plaintiff had engaged independent specialists to design and construct the plant and had disclosed all material facts to the defendant through the earlier Erection All Risks Policy. 11. On causation, Counsel relied on Expert Reports prepared by Development Consultants International Limited and Construction Diagnostic Centre, both of which attributed the collapse to a combination of factors, being faulty design, inadequate concrete cover, poor-quality materials, insufficient bond stress, defects in erection and poor workmanship. He noted that the defendant’s own Loss Adjusters, including McLarens and its consultants, similarly concluded that the collapse resulted from multiple contributing factors rather than a single cause. 12. Mr. Nyaburi asserted that these causes fell squarely within the insured perils under the Machinery Breakdown Insurance Policy, which expressly covered losses arising from faulty design, defects in materials, faults in erection, bad workmanship, lack of skill and carelessness. He submitted that liability attached under both the Machinery Breakdown Insurance Policy and the Loss of Profits Policy, the latter being triggered once indemnity was established under the former. 13. Relying on the Report of Toplis & Harding International Ltd, Counsel submitted that the plaintiff was entitled to Kshs.664,767,843.00 under the Machinery Breakdown Insurance Policy and Kshs.982,434,033.00 under the Loss of Profits Policy. He criticized the defendant’s final loss-adjustment Reports for excluding the blending silo and argued that the earlier interim assessments had acknowledged substantial liability. 14. Mr. Oraro (SC), learned Counsel for the defendant submitted that the plaintiff’s claim failed because the blending silo that collapsed was neither disclosed nor specifically scheduled under the Machinery Breakdown Insurance Policy. He stated that the plaintiff’s proposal comprised the letter dated 31st December 2010, the Questionnaire and Proposal Form dated 5th January 2011 and the list submitted on 24th March 2011, all of which required the plaintiff to identify each item to be insured with its manufacturer and cost. He stated that while the plaintiff listed machinery supplied by Thyssenkrupp, it did not disclose or schedule the blending silo construction undertaken by Mulji Devraj. In relying on the cases of **Margaret Nduta Kamithi & George Njenga Kamithi v Kenindia Assurance Company Limited** [2001] KEHC 516 (KLR), **Halima Abdinoor Hassan & 3 Others v Corporate Insurance Company Limited** [2015] KEHC 7133 (KLR), and **Erdemann Company (K) Limited v Cannon Assurance Limited** [2019] KEHC 9989 (KLR), he submitted that insurance contracts are contracts of utmost good faith and that the plaintiff was under a duty to make full disclosure of all material facts. 15. Senior Counsel stated that the plaintiff’s reliance on the earlier Erection All Risks Policy was misplaced because that Policy related only to the erection and installation of machinery supplied under the Thyssenkrupp contract and did not extend to the civil construction of the blending silo undertaken by Mulji Devraj under a separate contract. He maintained that the Thyssenkrupp contract expressly excluded civil works, reinforced concrete silos and related structural works, which were separately undertaken by Mulji Devraj and insured by another insurer. He contended that the blending silo construction was never incorporated into the Machinery Breakdown Policy schedule and could not be brought within the Policy merely because blending equipment supplied by Thyssenkrupp was installed within it. As to whether the blending silo was covered under the Machinery Breakdown Policy, he submitted that the Policy insured only items specifically entered in the schedule. 16. He argued that the critical issue was not whether the blending silo functioned as machinery but whether it had been listed and insured. He emphasized that the plaintiff’s own evidence, including Reports by Toplis & Harding, established that the blending silo had been constructed by Mulji Devraj under a separate contract and at a separate cost. 17. Relying on the cases of **KK Lodgit Limited v Geminia Insurance Company Limited & Another** [2025] KEHC 1498 (KLR) and **APA Insurance Limited v Gatugi** [2024] KEMC 18 (KLR), Senior Counsel disputed the plaintiff’s reliance on its indication in the Proposal Form that foundations were to be insured and argued that the plaintiff failed to identify the relevant items and specifications as required. Addressing the plaintiff’s position that the blending silo qualified as machinery, Mr. Oraro (SC) submitted that the authorities relied upon by the plaintiff concerned taxation matters rather than insurance coverage. 18. He argued that even if functionality was relevant, the authorities relied on by the defendant such as **Singapore Manufacturing Co (PTC) Ltd v Comptroller of Income Tax** [2023] SGHC 57 and **South Wales Aluminium Co Ltd v Neath Assessment Committee** [1943] 2 All ER 587, supported the view that a silo is fundamentally a building or structure. 19. Mr. Oraro (SC) submitted that the Machinery Breakdown Policy and Loss of Profits Policy expressly excluded loss arising from collapse of a building, loss attributable to contractors or suppliers, and loss involving foundations or masonry unless specifically insured. He stated that the blending silo collapsed due to poor workmanship and inadequate supervision during construction, matters that fell squarely within the contractor-liability exclusion. He relied on Reports by Development Consultants International Limited, Construction Diagnostic Centre and other Experts, which attributed the collapse to inadequate concrete cover, poor concrete quality, defective reinforcement detailing and other construction defects. 20. He argued that the loss suffered by the plaintiff resulted from defects for which the contractor and supervising consultants were responsible and since the relevant contracts provided mechanisms for resolving disputes with those parties, the claim fell within the contractor and supplier liability exclusions. 21. He further contended that no subrogation rights arose because the insurer was not liable under the Policy. 22. On causation, Mr. Oraro (SC) submitted that the proximate cause of the loss was the collapse of the blending silo due to defective workmanship and inadequate supervision, both of which were excluded perils. He argued that any machinery damage was merely consequential to the collapse of the structure. In support of this position, he relied on **Co-operative Insurance Company Ltd v David Wachira Wambugu** [2010] KECA 481 (KLR), **Arthur Grebow v Mercury Insurance Co.** 241 Cal. App. 4th 564, 194 Cal. Rptr. 3d 259 (Cal. App. 2015) and **Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corporation Ltd** [1974] 1 QB 57. 23. With regard to quantum, Senior Counsel maintained that no indemnity was payable because the loss was excluded. In the alternative, he submitted that any recovery could only extend to machinery specifically scheduled under the Policy and not to the blending silo construction, locally fabricated items, strengthening of civil structures or debris removal costs. He further submitted that any recoverable amount would be reduced by the application of the average clause on account of underinsurance. 24. Relying on the assessments by McLarens Young and Milind Bhatawadekar, which proposed figures substantially lower than those claimed by the plaintiff, Mr. Oraro (SC) concluded that the blending silo constructed by Mulji Devraj was not insured under the Machinery Breakdown Insurance Policy, that the loss resulted from the collapse of a building caused by poor workmanship and inadequate supervision, and that the applicable exclusion clauses relieved the defendant from liability. 25. In rejoinder, Mr. Nyaburi submitted that the Proposal Form expressly disclosed the plaintiff’s intention to insure the foundations of the machinery. He pointed out that in Clause 3 of the Proposal, the plaintiff answered *“Yes”* to the question whether it wished to insure the foundations of the machinery, while Clause 5 confirmed that the specification included all machinery coverable under a Machinery Policy. Counsel asserted that these responses demonstrated an intention to insure the foundations and supporting structures of all plant, machinery and equipment, including the blending silo. He submitted that the plaintiff complied with its duty of utmost good faith by making those disclosures and subsequently providing a detailed list of machinery, including the blending silo, through the letter dated 24th March 2011. Counsel contended that even if the defendant considered the disclosure inadequate, it waived any right to avoid the Policy by its conduct. 26. Mr. Nyaburi emphasized that after receiving the machinery list on 24th March 2011, the defendant neither repudiated the Policy nor sought clarification. He stated that instead, following the collapse of the blending silo, the defendant issued an additional debit note for premium, which the plaintiff paid. Relying on the decision in the case of **Margaret Nduta Kamithi & George Njenga Kamithi v Kenindia Assurance Company Limited** [2001] KEHC 516 (KLR), Counsel argued that this conduct amounted to affirmation of the Policy and precluded the defendant from relying on the doctrine of *uberrimae fidei*. He noted that the plaintiff had expressly informed the defendant that it was impracticable to list every individual machine and had invited it to undertake periodic risk surveys, which invitation the defendant declined. 27. Mr. Nyaburi also relied on the case of **Halima Abdinoor Hassan & 3 others v Corporate Insurance Company Limited** (supra), and submitted that having failed to inspect the risk despite being invited to do so, the defendant could not subsequently rely on non-disclosure as a defence. 28. He distinguished the case of **Erdemann Company (K) Limited v Cannon Assurance Limited** (supra), arguing that unlike the insured in that case, the plaintiff had expressly disclosed the blending silo, declared that all machinery foundations were to be insured, and invited risk assessments. 29. Counsel submitted that there was no concealment of material facts capable of justifying avoidance of the Policy. He further submitted that the defendant, having previously insured the erection of the entire plant under an Erection All Risks Policy, was fully aware of the role played by Mulji Devraj & Brothers Ltd in the erection of the plant, machinery and equipment. 30. Mr. Nyaburi contended that the Erection All Risks Policy had expressly identified the blending silo as part of the machinery being erected, and as such, the defendant already possessed knowledge of the blending silo and its construction and could not later contend that it was unaware of the contractor or the nature of the structure. 31. He argued that the separate Contractor’s All Risks Policy issued by Mayfair Insurance Company Limited to Mulji Devraj did not affect the plaintiff’s entitlement to cover, under the Machinery Breakdown Policy. Counsel maintained that the indemnity clause only required that an insured item be entered in the schedule and did not make identification of the manufacturer a condition precedent to coverage. He contended that since the blending silo was expressly listed in the schedule, it qualified as an insured item. Counsel submitted that there was only one blending silo at the plant and that the defendant’s attempt to distinguish between a *“Thyssenkrupp blending silo”* and a *“Mulji Devraj blending silo”* was artificial and unsupported by the evidence. Relying on the Court of Appeal case of **Langat v Co-operative Bank of Kenya Ltd** [2017] KECA 152 (KLR), Mr. Nyaburi argued that accepting the defendant’s position would amount to rewriting the parties’ contract by excluding an item expressly included in the schedule. 32. Counsel relied on the Policy’s basis of indemnity provisions, which covered not only the value of damaged items but also freight charges, customs duties and erection costs. He submitted that the Policy contemplated indemnifying completed and operational machinery systems rather than isolated equipment components and that the blending silo necessarily comprised both the mechanical equipment and the civil structure supporting it. He further relied on observations in the McLarens Young Report acknowledging that the cost of the civil works undertaken by Mulji Devraj formed part of the insured values used in the loss assessment. Counsel argued that the defendant’s own Loss Adjusters treated the blending silo as part of the insured property. 33. In urging the Court to adopt a purposive and commercially sensible interpretation of the Policy, Mr. Nyaburi noted that in a large industrial installation covering approximately 50 acres of built-up area, it would be unrealistic to require every individual component to be separately identified. He distinguished the case of **KK Lodgit Limited v Geminia Insurance Company Limited & Another** (supra), on the basis that it concerned an actual misrepresentation, whereas the plaintiff herein had accurately disclosed its intention to insure all machinery foundations. 34. On the exclusion clauses, Mr. Nyaburi submitted that the defendant’s own Loss Adjusters did not invoke Exclusion 3 relating to collapse of a building. He asserted that both the Milind Bhatawadekar Report and the McLarens Young Report considered Exclusions 4, 5 & 6, but not Exclusion 3. 35. Mr. Nyaburi argued that the blending silo constituted machinery rather than a building and urged this Court to prefer the Irish authorities he had cited on machinery classification. 36. He rejected reliance being put on the contractor-liability exclusions, submitting that no supplier, contractor or repairer had been found liable either in law or under contract and that there was no evidence of wilful misconduct or gross negligence on the part of the plaintiff. 37. On causation, Mr. Nyaburi submitted that the Reports prepared by Construction Diagnostic Centre and Development Consultants International identified causes such as defects in casting and materials, faulty design, faults in erection, bad workmanship, lack of skill and carelessness. He asserted that these were risks expressly covered under the Machinery Breakdown Policy’s indemnity clause and constituted insured perils rather than excluded causes. Counsel maintained that since the blending silo was specifically entered in the schedule and the causes of loss fell within the scope of cover, both the Machinery Breakdown Policy and the Loss of Profits Policy responded to the loss. 38. On quantum, he urged this Court to rely on the assessment prepared by Toplis & Harding International, arguing that the defendant’s criticisms of its own Loss Adjusters undermined the reliability of the Milind Bhatawadekar and McLarens Young Reports. He submitted that Toplis & Harding adequately addressed issues of currency conversion and valuation, and that the figures adopted by the defendant’s Loss Adjusters were erroneous. **Analysis and determination.** 1. I have considered and analyzed the evidence adduced in line with the pleadings filed, as well as the written submissions by Counsel for the parties. The issues that arise for determination are – 2. **Whether the blending silo was insured under the Machinery Insurance Policy issued by the defendant;** 3. **Whether the defendant is entitled to repudiate liability based on alleged non-disclosure, misrepresentation or the doctrine of utmost good faith;** **iii) Whether the collapse of the blending silo resulted from an insured** **peril or from causes excluded under the Machinery Insurance** **Policy;** 1. **Whether the plaintiff is entitled to recover under the Machinery Insurance Policy and the Loss of Profits Policy;** 2. **What quantum, if any, is payable to the plaintiff?;** 3. **Whether underinsurance was established;** 4. **Material damage claim;** 5. **Loss of Profits and the appropriate methodology;** 6. **The applicable indemnity period;** 7. **Claim for interest; and** 8. **Costs.** **Issue No. 1- Whether the blending silo was insured under the Machinery Insurance Policy issued by the defendant.** 1. It is important to point out from the outset that the witnesses who testified and the Advocates in their submissions interchangeably used the term “*Machinery Insurance Policy”* and *“Machinery Breakdown Insurance Policy”.* In my understanding from the evidence adduced, the two terms refer to one and the same thing, that is the *“Machinery Insurance Policy No. P/107/021/0223/2010/2/12”* issued by the defendant to the plaintiff. 2. The plaintiff's case is that the blending silo formed part of the insured property under the Machinery Insurance Policy, while the defendant contended that the said Policy covered only machinery and equipment specifically identified in the schedule and did not extend to the reinforced concrete blending silo constructed by Mulji Devraj & Brothers Limited. It is in the background of these contestations, and the defendant’s position that the claim under the Loss of Profits Policy is not payable, that this Court has been called upon to ascertain, interpret and give effect to the intention of the parties as expressed in the contract documents. 3. Professor A Burrows QC in the 2019 case of **Federal Republic of Nigeria v. JP Morgan Chase Bank** NA [2019] EWHC 347 (Comm), paragraph 32, approved by the Court of Appeal in **JP Morgan Chase Bank NA v. Federal Republic of Nigeria** [2019] EWCA Civ 1641, paragraphs 29, 73 and 74, summarized the modern approach to contractual interpretation in the following terms – ***The modern approach is to ascertain the meaning of the words used by applying an objective and contextual approach. One must ask what the term, viewed in the light of the whole contract, would mean to a reasonable person having all the relevant background knowledge reasonably available to the parties at the time the contract was made (excluding the previous negotiations of the parties and their declarations of subjective intent). Business common sense and the purpose of the term (which appear to be very similar ideas) may also be relevant. But the words used by the parties are of primary importance so that one must be careful to avoid placing too much weight on business common sense or purpose at the expense of the words used; and one must be astute not to rewrite the contract so as to protect one of the parties from having entered into a bad bargain***. (Emphasis added). 1. In our local jurisdiction, the Court of Appeal in the case of **Fidelity Commercial Bank Limited v Kenya Grange Vehicle Industries Limited** [2017] eKLR, had the opportunity to address itself on the matter of interpretation of contracts and held that - ***So that where the intention of parties has in fact been reduced to writing, under the so-called parole evidence rule, it is generally not permissible to adduce extrinsic evidence, whether oral or written, either to show the intention, or to contradict, vary or add to the terms of the document, including implied terms. Courts adopt the objective theory of contract interpretation, and profess to have the overriding aim of giving effect to the expressed intentions of the parties when construing a contract. This is what sometimes is called the principle of four corners of an instrument, which insists that a document's meaning should be derived from the document itself, without reference to anything outside of the document (extrinsic evidence), such as the circumstances surrounding its writing or the history of the party or parties signing it…. The supporting rationale for this rule is that, since the contracting parties have reduced their agreement to a single and final writing, extrinsic evidence of past agreements of terms should not be considered when interpreting that written contract agreement, as the parties had consciously decided to ultimately leave them out of the contract. In other words, one may not use evidence made prior to the written contract to contradict the ultimate contract that has been reduced into writing.*** (Emphasis added). 1. It is trite law that Courts are not permitted to rewrite contracts for parties merely because one party later considers the bargain disadvantageous. This position was succinctly stated by the Court of Appeal in the oft-cited case of **National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd** [2002] 2 EA 503, as hereunder – ***A court of law cannot rewrite a contract between parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved. There was not the remotest suggestion of coercion, fraud or undue influence in regard to the terms of the charge…*** 1. In addition to the foregoing, this Court is cognizant of the fact that Courts have often held that where the words employed in a contract are clear and unambiguous, extrinsic evidence cannot be used to alter their meaning. 2. Upon perusal of the evidence adduced by the parties herein, the defendant in its bundle of documents dated 1st September 2014, produced a Machinery Breakdown Proposal Form dated 5th January 2011, which pre-dated the issuance of the Policy. An analysis of the said Proposal Form shows that it contains a schedule of the assets that the plaintiff sought to insure, “*all machines, hoists and equipment related to the manufacture of cement and related products.”* It is worth noting that DW1 expressly admitted during cross-examination that the Proposal Form comprised part of the basis of the insurance contract. She acknowledged that the proposal expressly stated that all machinery related to the manufacture of cement was intended to be covered by the Machinery Insurance Policy. It is also noteworthy that the plaintiff indicated that it sought insurance cover for machinery foundations, thereby demonstrating an intention for the cover to extend beyond the machinery itself to encompass its supporting structures. 3. On examination of the plaintiff’s bundle of documents dated 25th June 2014, it is evident that annexed thereto, there is a copy of the subject Machinery Policy No. P/107/021/0223/2010/2/12, with a schedule. The evidence adduced established that on 24th March 2011 the plaintiff through AUM Insurance Brokers, furnished a machinery and equipment schedule to the defendant. On perusal of the schedule, this Court notes that item No. 1 therein was *“3000 TPD Clinker Grinding Plant + Accessories (Dry Process Clinkerisation) plant to include complete Raw Mill, Separator, Blending Silo, Preheater, Precalciner, Rotary Kiln, Cooler, Coal Mill, Separator and all other Equipments and accessories associated with a Clinker Grinding Plant,"* supplied by Thyssenkrupp India Pvt. Limited. 4. DW1 admitted under cross-examination that the defendant accepted the risk before receiving the detailed machinery schedule and thereafter continued the cover after receiving the schedule on 24th March 2011, which schedule expressly referred to a blending silo supplied by Thyssenkrupp India Pvt Limited. DW2 similarly acknowledged that the term *"blending silo"* appeared in the schedule. 5. The above notwithstanding, the defendant argued that the blending silo referred to in the schedule was not the reinforced concrete structure that ultimately collapsed, but rather mechanical equipment associated with blending operations. According to the defendant, the civil structure itself had been separately constructed by Mulji Devraj & Brothers Limited and was therefore not insured. This Court has carefully considered the aforestated argument but finds considerable difficulty with it. 6. Firstly, on perusal of the evidence adduced, and as was submitted by Mr. Nyaburi Advocate, there is no evidence that the machinery schedule distinguished between a *"Thyssenkrupp blending silo"* and a *"Mulji Devraj blending silo."* To the contrary, it is not disputed that there was only one blending silo at the plaintiff’s plant. The defendant's attempt to separate the mechanical and structural components of the blending silo appears to have arisen only after it collapsed. 7. Secondly, DW1 admitted that the defendant never objected to the inclusion of the blending silo after receipt of the schedule of machinery annexed to the Insurance Broker’s letter dated 24th March 2011. The defendant did not request for clarification regarding its manufacturer, constructor or physical composition. Despite now asserting that disclosure of the constructor was material, the defendant issued the Policy without seeking any further particulars and thereafter accepted the requisite premium. 8. Thirdly, the evidence shows that the defendant had previously provided an Erection All Risks cover for the same plant, when it was being constructed. DW1 acknowledged that under the erection cover, the defendant had inspection rights and was aware that Mulji Devraj & Brothers Limited was the principal contractor involved in the construction of the cement plant. This Court therefore finds it difficult to accept the defendant's contention that it was unaware that substantial portions of the plant included reinforced concrete structures constructed by local contractors. 9. Fourthly, the defendant's own conduct after the collapse of the blending silo undermines its present position. Both PW1 and DW1 acknowledged that DW2, the defendant's Loss Adjuster, initially assessed losses running into hundreds of Millions of Shillings, before subsequently excluding the blending silo from the final assessment. DW1 conceded that some interim assessments had proceeded on the assumption that the silo was insured, while DW2 admitted that one Adjuster expressly recorded that he only later formed the view that the silo was not covered. In the premise, this Court is of the considered view that such evidence suggests that the alleged absence of insurance cover for the blending silo under the Machinery Insurance Policy, was not obvious from the wording of the Policy itself. 10. In addition to the foregoing, this Court notes that in as much as the defendant claimed that the plaintiff did not provide a comprehensive list of all the machinery and equipment available at its premises, in the letter dated 24th March 2011 addressed to the defendant by the plaintiff’s Insurance Broker, a list of most of the machines installed at the plaintiff’s premises was supplied. The said Broker went further to inform the defendant that it was not possible to list each and every machine/equipment on site as the facility covered approximately 50 acres of built-up area. The Insurance Broker testified through PW2. It advised the defendant to carry out periodical risk surveys to monitor the risk and in turn advice the plaintiff of any points of mutual benefit. It is however manifest from the evidence adduced that even after receiving the aforesaid letter, the defendant accepted the requisite premiums and continued accepting the risk that came with covering the plaintiff under the Machinery Insurance Policy. 11. This Court is therefore persuaded that the conduct of the defendant after receipt of the machinery schedule objectively demonstrated acceptance of the risk as described therein. Having received the schedule identifying the blending silo and having continued the cover without qualification, the defendant cannot subsequently contend that the blending silo was excluded from the insured property. 12. This Court is further persuaded by the fact that the proposal expressly requested cover for buildings, foundation/structures, on all machines and equipment, and that the Policy indemnity provisions contemplated erection, dismantling, freight and associated costs. This Court is therefore persuaded that such provisions are consistent with insurance of an integrated industrial installation rather than isolated movable equipment or machinery. 13. This Court notes that the defendant has urged the Court to regard the blending silo as a civil structure and therefore outside the scope of the Machinery Insurance Policy. I however note that while it is true that the blending silo comprised substantial reinforced concrete works, the evidence adduced by the parties herein, through PW1, PW3, DW1 and DW2, establishes that the said silo performed a specialized industrial function integral to the clinker production process. The testimony of the above witnesses demonstrated that the blending silo was not an ordinary building intended for human occupation but a specialized industrial installation incorporating mechanical systems for storage, circulation and homogenization of raw materials for production of clinker. 14. In light of the above, this Court is satisfied that the proper question is not whether the blending silo was integrated in a structure, but whether the parties intended it to form part of the insured plant. Relying on the evidence adduced before this Court, I am persuaded that the answer to the aforesaid question is in the affirmative, since the *“3000 TPD Clinker Grinding Plant + Accessories (Dry Process Clinkerisation) plant”* could not function independent of the blending silo. 15. The machinery schedule submitted to the defendant by AUM Insurance Brokers on behalf of the plaintiff, expressly described the insured property as the 3000 TPD Clinker Grinding Plant together with accessories, including the blending silo. It is as such my finding that the blending silo was not merely incidental to the plant, but formed an integral part of the insured installation expressly identified in the machinery schedule. 16. To support its position that the structure formed an integral part of the blending silo and was insured under the Machinery Insurance Policy, Mr. Nyaburi relied on cases from Ireland, namely, **Kilsaran Concrete v Commissioner of Valuation** (supra) and **Caribmollases Company Limited v Commissioner of Valuation** (supra), which held that where the machinery and structures work together to induce a process of change in the substance contained, it was not a rateable herediment. Reliance was placed in the said decisions to illustrate that since the blending silo in this case induced a process of change in raw meal resulting in a homogenized meal used in clinker production, the blending silo was machinery and was rightfully included in the description of machinery, and it formed an integral part of the plant. 17. The defendant’s Counsel, Mr. Oraro (SC) held a different position, and relied on the cases of **Singapore Manufacturing Co. (PTC) Ltd v Comptroller of Income Tax** (supra). Having carefully gone through the said decision, it is clear that the silos in the said case were being used for storage or containment of cement after being offloaded from ships and there was no processing or transformation of the cement inside the silos. The Judge therein upheld the Board’s finding that the function of the disputed assets was storage and housing. The facts of the said case are distinguishable from the instant case as there was a production process that was taking place in the plaintiff’s blending silo, whereas in the Singaporean decision, no process of change took place. In the case of **South Wales Aluminium Co. Ltd v Assessment Committee for the Neath Assessment Area** (supra), also relied on by Mr. Oraro (SC), it involved a case where the plaintiff was transforming alternating current to direct current to manufacture metallic aluminum. The Court held that on a true construction of the (Rating & Valuation Act) Act, the motor generators were not used for the *“primary transformation of power”*, nor were the cells in the nature of *“buildings and structures”.* The Court went on to define a structure as something that has been built up. 18. Based on the evidence adduced by witnesses and theauthorities relied upon by Counsel, this Court finds that the blending silo formed part of the insured property under the Machinery Insurance Policy. **Issue No. 2 - Whether the defendant is entitled to repudiate liability based on alleged non-disclosure, misrepresentation or the doctrine of utmost good faith.** 1. In denying liability for the collapsed blending silo, the defendant contended it, that the plaintiff failed to disclose material facts regarding, particularly that it had been constructed by Mulji Devraj & Brothers Limited as a reinforced concrete structure. In doing so, the defendant relied on the doctrine of utmost good faith, which imposes upon an insured the duty to disclose all material facts that would influence the judgment of a prudent insurer in deciding whether to accept the risk and on what terms. In the case of **Britam General Insurance Company (Kenya) Ltd v Absalom** [2026] KEHC 3252 (KLR), the Court in addressing the doctrine of utmost good faith with respect to insurance contracts held as follows- ***Insurance contracts are governed by the doctrine of utmost good faith (uberrimae fidei). The classical exposition of this doctrine is found in Carter v Boehm, where Lord Mansfield held that insurance is a contract upon speculation and requires full and frank disclosure of material facts. The doctrine was further clarified in Pan Atlantic Insurance Co Ltd & Another v Pine Top Insurance Co Ltd, where it was held that material non-disclosure or misrepresentation that induces the contract entitles the insurer to avoid it.*** ***The Kenyan courts have consistently applied these principles. In CIC General Insurance v Chuka Farmline Stores Limited & two others, the Court of Appeal affirmed that the duty of utmost good faith subsists throughout the life of the insurance relationship, and that material breach entitles the insurer to repudiate liability. Similarly, in Occidental Insurance Company Limited v Dulu, the Court held that the use of a motor vehicle for hire or reward contrary to the terms of a private policy constituted a fundamental breach absolving the insurer from liability.*** 1. The Court of Appeal in the case of **Corporate Insurance Company Limited v Rainbow Cabs & Car Hire Limited** [2023] KECA 1029 (KLR), discussed the aforesaid doctrine in the following words - ***A contract of insurance is a contract that is based on the doctrine of utmost good faith. The insured has a duty to disclose any material facts within his/her knowledge. A representation is said to be material if it would influence the judgment of a prudent insurer in fixing the premium or determining whether he will take the risk. In Margaret Nduta Kamithi & George Njenga Kamithi v Kenindia Assurance Company Limited [2001] eKLR, the court cited the Law of Insurance 5th Edition para. 5 on page 92 by Colinvaux where the author stated:*** ***“In the case of certain contracts, however, the law demands a higher standard of good faith between the parties, and “there is no class of documents as to which the strictest good faith is more rigidly required in courts of law than policies of assurance.” “As the underwriter knows nothing and the man who comes to him to ask him to insure knows everything, it is the duty of the assured, the man who desires to have a policy, to make a full disclosure to the underwriters without being asked of all the material circumstances, because the underwriters know nothing and the assured knows everything. This is expressed by saying that it is a contract of the utmost good faith – uberrima fides.”*** 1. The burden of proving material non-disclosure rests upon the insurer, who in this case is the defendant herein. Having considered the evidence adduced by the parties’ witnesses, this Court is not persuaded that the defendant has discharged that burden. This Court has arrived at this conclusion based on several factors. Firstly, as held earlier in this Judgment, the existence of the blending silo was expressly disclosed to the defendant by the plaintiff through its Insurance Broker, as it appeared in the machinery schedule supplied to the defendant vide the letter dated 24th March 2011. Both DW1 & DW2 admitted as much. 2. Secondly, the plaintiff disclosed and it is evident from the Machinery Insurance Proposal Form dated 5th January 2011, that the plaintiff sought cover for all machines, hoists, and equipment related in the manufacture of cement and related products. 3. Thirdly, the plaintiff via its Broker’s letter dated 24th March 2011, informed the defendant that because of the size and complexity of the plant, it was impractical to identify every individual component and invited the defendant to conduct periodic risk surveys. DW1 however admitted that no such survey was ever undertaken despite having been requested to inspect the plant. 4. Fourthly, the foregoing notwithstanding, the defendant proceeded to issue the Policy and continued accepting premiums. 5. It is trite law that an insurer who possesses sufficient information to put into inquiry, but elects not to investigate cannot subsequently rely upon matters that reasonable inquiry would have disclosed. This Court is satisfied from the record that the defendant knew that the risk involved a large cement manufacturing plant. It also knew that the plant had previously been insured during erection, that a blending silo existed and that machinery foundations were intended to be covered. In the circumstances, the defendant cannot now contend that it was misled by the plaintiff, merely because it did not undertake inquiries, that it could easily have made before accepting the risk. 6. This Court therefore finds that no material non-disclosure or misrepresentation sufficient to avoid liability has been established by the defendant. **Issue No. 3 - Whether the collapse of the blending silo resulted from an insured peril or from causes excluded under the Machinery Insurance Policy.** 1. The record shows that there is very little dispute concerning the technical cause of the collapse of the blending silo. The Expert Reports relied upon by both parties consistently identified the causes of the collapse of the blending silo to include, inadequate concrete cover, deficiencies in concrete quality, excessive sulphate and chloride content, poor workmanship, faults in erection, inadequate reinforcement detailing, possible design deficiencies and deficiencies in quality control. DW2 testified that the said collapse resulted from construction deficiencies, poor workmanship, defective concrete, inadequate reinforcement and related structural defects. 2. The issue that is left for determination is whether those causes were insured perils or excluded causes. From the documentary evidence produced by the parties herein, the Machinery Insurance Policy expressly covered losses resulting from- 3. Defects in casting and material; 4. Faulty design; 5. Faults at workshop or in erection; 6. Bad workmanship; 7. Lack of skill; and 8. Carelessness. 9. The defendant sought to invoke exclusions relating to contractors, suppliers and collapse of buildings as provided for in the Machinery Insurance Policy and the Loss of Profits Following Machinery Breakdown Insurance Policy. This Court is however not persuaded that it should accept that argument. This is because the causes identified by the Experts correspond almost exactly with the causes expressly covered under the insuring clause. Additionally, no evidence was adduced to demonstrate that a supplier, contractor or repairer of the plaintiff had been found responsible for the said loss or damage and/or that the faults and defects that led to the collapse of the blending silo were within the plaintiff’s knowledge, and that they existed at the time of commencement of the Machinery Insurance Policy. The defendant failed to demonstrate that the loss or damage arose out of wilful acts or gross negligence on the part of the plaintiff. 10. Insurance contracts must be interpreted as a whole and Courts should avoid constructions that deprive the insuring clause of practical effect. This Court therefore holds that to construe the exclusion clauses of the Machinery Insurance Policy so broadly as to remove all losses arising from defective workmanship, faulty design or faults in erection, would effectively nullify the principal cover granted by the Policy, which could not have been the intention of the parties herein. 11. The Court in the case of **Federal Republic of Nigeria v. JP Morgan Chase Bank NA** (supra), addressed itself on the issue of construction of insurance contracts and held that the modern approach to contract interpretation is founded upon an objective assessment of the words employed, construed within their contractual context. The said Court went on to state that Courts must consider how a reasonable person, possessed of the relevant background knowledge reasonably available to the parties at the time of contracting, would understand the term when read in light of the contract as a whole. 12. Although the defendant further argued that the proximate cause of the loss was collapse of a building, this Court has already found that the blending silo formed an integral part of the insured industrial installation. It is therefore my finding that the collapse was not an independent peril, but merely the manifestation of the defects and failures identified by the Experts. This Court is satisfied that the proximate cause of the loss consisted of defects in materials, faulty design, faults in erection, poor workmanship and lack of skill, all of which constituted insured perils under the Machinery Insurance Policy. 13. Accordingly, this Court finds that the collapse of the blending silo resulted from insured perils and not from causes excluded under the Machinery Insurance Policy. **Issue No. 4 - Whether the plaintiff is entitled to recover under the Machinery Insurance Policy and the Loss of Profits Policy.** 1. Having found that the blending silo formed part of the insured property, that there was no material non-disclosure that could lead to repudiation of the Machinery Insurance Policy, and the finding that the collapse of the blending silo resulted from insured perils, it follows that the plaintiff is entitled to indemnity under the Machinery Insurance Policy and the Loss of Profits Policy Following Machinery Breakdown Insurance Policy. 2. This Court finds that the defendant did not sufficiently establish a case to warrant this Court to accept its contention that the Loss of Profits Policy following Machinery Breakdown Policy never triggered. The defendant’s witnesses acknowledged that the Loss of Profits Insurance Cover was intended to indemnify the plaintiff against business interruption arising from machinery breakdown. It therefore follows that once liability attaches under the Machinery Insurance Policy, the foundation for the business interruption claim is established. The evidence adduced shows that the collapse of the blending silo interrupted operations at the clinker plant and caused cessation of production and consequent loss of profits. Due to the said circumstances, this Court is satisfied that interruption of business and operations was directly attributable to the insured event. 3. Consequently, this Court finds that the plaintiff is entitled to be indemnified both under the Machinery Insurance Policy and the Loss of Profits Following Machinery Breakdown Insurance Policy. **Issue No. 5 - What quantum, if any, is payable to the plaintiff?** 1. Save for the prayer in which the plaintiff seeks a declaration that the blending silo was covered under the Machinery Insurance Policy, the other reliefs sought by the plaintiff in this case are in the nature of special damages. The Court of Appeal in the case of **Jogoo Kimakia Bus Services LTD v Electrocom International LTD** [1992] KECA 48 (KLR),defined what constitutes special damages as follows - ***Special damages are the precise amount of pecuniary loss which the claimant can prove to have followed from the particular facts set out in the pleadings. They must be specifically pleaded.*** 1. Special damages must not only be specifically pleaded, but must also be strictly proved. It is not in contest that the plaintiff specifically pleaded special damages in the sum of Kshs.664,767,843.00 under the Machinery Insurance Policy arising from the loss occasioned to the blending silo and Kshs.982,434,033.00 under the Loss of Profits Following Machinery Breakdown Insurance Policy, being the loss of profits. 2. The evidence on quantum was extensive and was principally contained in the Reports prepared by Toplis & Harding International Limited on behalf of the plaintiff, and the Reports prepared by Milind Bhatawadekar, and lastly, the Interim and Final Reports prepared by McLarens Young International Ltd as adduced through DW2, Mr. Mahesh Mavji for the defendant. 3. The Supreme Court of Kenya in the case of **Attorney General v Zinj Limited** [2021] KESC 23 (KLR), held as follows with respect to admissibility of expert evidence as proof of special damages - ***Having determined that the respondent’s right to property had been violated by the Government, the trial court, and later the appellate court, made orders for compensation in favour of the respondent. Both courts granted special and general damages. As we have arrived at a similar conclusion, we see no reason to interfere with the findings of the two superior courts in this regard. We take note of the appellant’s submission to the effect that in arriving at the quantum of special damages, the trial court placed reliance upon a Valuation Report by a private valuer. Such Report, in the view of the appellant, was not only unreliable, but could very likely have been tailored to support the respondent’s claim. However, in answer to this court’s question as to whether, the appellant had tabled in court, a Government Valuation Report to counter the contents of the impugned one, counsel for the appellant stated that no such Report was ever tabled at the trial court. The main basis upon which special damages can be granted for the deprivation of property, is the market value of the said property. In case of general damages, a court of law exercises discretion guided by the circumstances of each case. In granting special damages, the trial judge was guided by the Valuation Report tabled by the respondent. In the absence of a contrary report on record, we have no basis upon which to interfere with the award. Even if there had been one such other report, our jurisdiction to interfere would still have been largely circumscribed, unless the award had clearly ignored the fundamental principles of valuation as demonstrated by the counter-report*** 1. In this case, there is no dispute that a substantial loss occurred following the collapse of the blending silo on 1st August 2011. The record shows that the defendant admitted liability to the extent of Kshs.393,018,965.00 and issued a Discharge Voucher for that amount. It was however rejected by the plaintiff which considered the said amount to be inadequate compensation. The dispute therefore concerns not whether loss occurred, but the extent of the recoverable loss and the proper interpretation of the Policies in assessing the same. 2. The record shows that the plaintiff principally relied upon the Report by Toplis & Harding International Limited, which assessed the recoverable material damage loss at Kshs.664,767,843.00 and the business interruption leading to loss of profits at Kshs.982,434,033.00. The plaintiff contended that the assessment reflected the actual costs incurred in reconstruction, replacement of damaged equipment, reinstatement expenditure and consequential interruption losses suffered following the collapse of the blending silo. 3. During cross-examination, DW1 admitted that McLarens Young International Ltd, initially assessed material damage at approximately Kshs.1 Billion and business interruption losses at approximately Kshs.600 Million, while Milind Bhatawadekar initially assessed recoverable losses exceeding Kshs.727 Million. It is not disputed that these assessments were prepared before the Loss Adjusters adopted the position that the blending silo was not insured. 4. Mr. Mahesh Mavji (DW2), testified that the plaintiff initially claimed approximately USD 15.45 Million and that the gross material damage loss was assessed at approximately Kshs.533.8 Million. He also testified that after salvage and application of the Average Clause, the recoverable amount reduced to Kshs.393,018,965.00. 5. According to DW2, the reduction arose because the sum insured was Kshs.3 Billion, while the replacement value at risk was assessed at Kshs.3.669 Billion, resulting in a ratio of 81.76% and attracting application of the Average Clause. 6. During cross-examination, DW2 however acknowledged that the blending silo appeared in the machinery schedule, that no correspondence had been issued expressly excluding it from cover, that the Machinery Breakdown Policy covered losses arising from defective materials, faulty design, faulty erection, bad workmanship, lack of skill and carelessness. He also acknowledged that machinery foundations were covered under the Proposal Form. He further acknowledged that a number of Technical Reports, calculations and supporting materials relied upon in the adjustment process were not produced before the Court. 7. This Court notes that Milind Bhatawadekar initially assessed the claim on the footing that the blending silo was insured and only later revised his position after concluding that the said silo fell outside the scope of cover. 8. In the case of **Kenya Ports Authority v Modern Holdings [E.A] Limited** [2017] KECA 293 (KLR), the Court of Appeal discussed the issue of what Trial Courts should do when faced with conflicting expert reports. The said Court stated as follows- ***We agree with the learned Judge that in the event of conflicting expert evidence, it is the duty of the court to consider the evidence and form its own opinion. However, in so doing the court must give cogent reasons why it prefers the evidence of one expert over the other.*** 1. This Court has carefully considered the competing assessments presented by the parties herein, regarding both the material damage claim and the loss of profits claim. The plaintiff relied on the Report by Toplis & Harding International Limited, whereas the defendant relied on the Reports prepared by McLarens Young International Ltd and Milind Bhatawadekar. 2. This Court notes that a significant portion of the disparity between the competing assessments did not arise from disagreement regarding the occurrence of the loss or the fact of reconstruction, but from fundamentally different assumptions concerning policy coverage. McLarens Young International Ltd and Milind Bhatawadekar ultimately proceeded on the basis that the blending silo structure and associated civil works were not insured and consequently excluded those costs from their calculations. 3. Having already found that the blending silo formed part of the insured property, this Court must evaluate the competing assessments from that standpoint. This Court holds that once the principal exclusion adopted by the defendant’s Loss Adjusters is rejected, the evidential foundation for a substantial portion of the reductions proposed in their final assessments is materially weakened. 4. This Court notes that earlier interim assessments prepared by the defendant’s own Experts quantified the loss at substantially higher amounts before the position that the blending silo was not insured was adopted by the said Experts. This Court is of the finding that while interim assessments were not determinative, they demonstrate that the defendant’s own Experts initially regarded the loss suffered as being substantial, and lend support to the plaintiff’s contention that the reductions made later in assessments flowed from the insurance coverage dispute. 5. This Court has carefully examined the constituent heads of loss contained in the Toplis & Harding International Limited’s assessment, with the analysis and critique advanced by McLarens Young International Ltd and Milind Bhatawadekar. The evidence adduced by the parties herein demonstrates that the plaintiff’s assessment was supported by reconstruction contracts, contractor accounts, supplier quotations, invoices, payment vouchers, replacement cost schedules and other contemporaneous records generated during the reinstatement process. This Court is therefore satisfied that the assessment was substantially grounded upon actual expenditure incurred and liabilities reasonably incurred in restoring the blending silo following its collapse. 6. Although the Reports prepared by McLarens Young International Ltd and Milind Bhatawadekar contained detailed technical analysis, a substantial portion of the reductions proposed therein arose from the conclusion that the blending silo structure and associated civil works did not fall within the scope of the Machinery Insurance Policy cover. Having found otherwise, this Court is unable to accept those exclusions as forming a sound basis for quantification of the plaintiff’s loss. 7. This Court has independently evaluated the competing methodologies applied by the Experts and it is satisfied that once the erroneous exclusion of the blending silo is removed from the defendant’s assessments, little evidential basis remains for the substantial downward adjustments ultimately proposed. This Court therefore finds that the assessment by Toplis & Harding International Limited provides the more reliable evidential foundation for quantification of the recoverable loss. **Issue No. 6 - Whether underinsurance was established.** 1. The defendant contended that any recovery should be reduced by application of the Average Clause on account of underinsurance. DW2 testified that the replacement value of the insured property was approximately Kshs.3.669 Billion, whereas the sum insured was Kshs.3 Billion, resulting in a ratio of 81.76%. DW2 gave direct evidence regarding the replacement value assessment and I do not doubt that such an exercise was undertaken. The burden of establishing underinsurance however rested upon the defendant. 2. The record shows that some of the underlying schedules, calculations, valuation materials, assumptions and primary documents from which the figure of Kshs.3.669 Billion was derived from were not produced before this Court. DW2 admitted the said position. As a result, this Court was not afforded an opportunity to independently verify the methodology adopted or the accuracy of the asserted replacement value. 3. In the circumstances, while the Court accepts that the issue of underinsurance was raised, it is not satisfied that the defendant established underinsurance with sufficient certainty to justify the substantial reduction proposed under the Average Clause. This Court therefore declines to apply the Average Clause against the plaintiff. **Issue No. 7 - Material damage claim.** 1. This Court must now determine the recoverable material damage loss. In the case of **Nkuene Dairy Farmers Co-op Society Ltd & another v Ngacha Ndeiya** [2010] KECA 20 (KLR), the Court of Appeal held as hereunder with respect to a material damage claim - ***In our view, special damages in a material damage claim need not be shown to have actually been incurred. The claimant is only required to show the extent of the damage and what it would cost to restore the damaged item to as near as possible the condition it was in before the damage complained of.*** 1. Similarly, in **Kenya Wildlife Service v Sea Star Malindi Limited** [2024] KECA 364 (KLR), the Court in awarding Kshs.90,000,000/= based on a Quantity Surveyor’s estimates of costs, cited a passage from **McGregor on Damages**, 19th Edat p. 349, as hereunder - ***Indeed, if absolute certainty were required as to the precise amount of loss that the claimant had suffered, no damages would be recovered at all in the great number of cases. This is particularly true since so much of damages claimed are in respect of prospective, and therefore necessarily contingent, loss…… Generally, therefore, although it remains true to say that ‘difficulty of proof does not dispense with necessity of proof’, the standard demanded can seldom be that of certainty. Even if it is said that the damages must be proved with reasonable certainty, the word ‘reasonable’ is really the controlling one, and the standard of proof only demands evidence from which the existence of damage can be reasonably inferred and which provides adequate data for calculating the amount.*** (Emphasis added). 1. This Court has independently examined the constituent heads of loss contained in the Toplis & Harding International Limited assessment and the critique advanced by McLarens Young InternationalLtd and Milind Bhatawadekar. As earlier stated, I am persuaded that the evidence demonstrates that the Toplis & Harding International Limited’s assessment was substantially supported by reconstruction contracts, contractor accounts, invoices, supplier quotations, payment records and actual reinstatement expenditure incurred following the collapse of the blending silo. A substantial portion of the reductions proposed by the defendant’s Experts flowed from their conclusion that the blending silo structure and associated civil works were not insured. This Court therefore finds that the Toplis & Harding International Limited’s assessment provides the most reliable measure of the plaintiff’s recoverable material damage loss. 2. This Court therefore accepts the plaintiff's material damage assessment of Kshs.664,767,843.00 as representing the recoverable loss under the Machinery Breakdown Policy. **Issue No. 8 - Loss of Profits and the appropriate methodology.** 1. This Court has similarly considered the competing assessments relating to the loss of profits claim as a result of business interruption following the collapse of the blending silo. DW2 testified that he assessed business interruption losses at approximately Kshs.650 Million and further testified that savings in standing charges and overheads amounting to approximately Kshs.51 Million, ought to be taken into account. He also relied upon production and sales figures indicating that between January and July 2011, the plaintiff generated revenue of approximately Kshs.2.295 Billion from clinker production. 2. Business interruption claims leading to loss of profits ordinarily require consideration of turnover trends, production records, gross profit calculations and savings in standing charges. Upon examination of the Toplis & Harding International Limited’s assessment, it is evident that it was derived from the plaintiff’s production records, sales data, financial statements and operational history before and after the collapse of the blending silo. The said assessment further considered the interruption to clinker production arising from destruction of the blending silo and quantified the resulting loss during the indemnity period. 3. This Court notes that the defendant’s alternative calculations were substantially influenced by the assumption that the blending silo was not insured. Having held that the blending silo was insured under the Machinery Insurance Policy, the foundation upon which many of the defendant’s Experts’ downward adjustments were made is materially weakened. 4. With regard to the alleged savings in standing charges, this Court is in agreement that any savings proved to have been made by the plaintiff ought to be deducted from the loss of profits claim. It must however be noted that beyond the broad estimate advanced by DW2, the defendant did not place before this Court sufficient accounting evidence to demonstrate how the alleged savings were calculated, the specific expense categories that the savings were made from or the extent to which such savings would materially alter the plaintiff’s overall loss calculations. 5. This Court has considered DW2's evidence concerning turnover trends, gross profit calculations and the alleged savings in standing charges. While those matters are relevant in principle, this Court is not satisfied that the defendant demonstrated any specific error in the methodology adopted by Toplis & Harding International Limited or any quantified adjustment that would materially alter the final assessment. This Court therefore finds that the Toplis & Harding International Limited’s analysis remains the more persuasive assessment of the plaintiff's loss of profits, during the indemnity period. **Issue No. 9 - The applicable indemnity period.** 1. A dispute arose concerning the period reasonably required for reinstatement of the plant. The plaintiff pointed out that reconstruction ultimately took almost two (2) years, whereas DW2 maintained that reinstatement could reasonably have been completed approximately within ten (10) months. This Court is of the view that both positions find some support in the evidence. The issue however before this Court is not to determine with precision how long reconstruction actually took or how quickly reinstatement might theoretically have been completed under ideal conditions. The primary inquiry is the period for which the parties agreed that business interruption losses would be indemnified under the insurance contract. 2. The Loss of Profits Policy Following Machinery Breakdown Policy expressly provided for a maximum indemnity period of twelve (12) months. That contractual period represents the parties’ own assessment of the period within which interruption losses would be recoverable following an insured event. While actual reconstruction extended beyond twelve (12) months, the plaintiff cannot however recover beyond the contractual limit agreed upon. In the same footing, this Court finds that the defendant has not sufficiently demonstrated any basis upon which the indemnity period should be reduced below the twelve (12) months expressly agreed by the parties. 3. It is noted that reinstatement of the blending silo involved demolition, redesign, procurement, reconstruction, installation and recommissioning of a major industrial facility. This Court therefore accepts as a matter of commercial reality that the availability of insurance proceeds may materially affect the speed with which reinstatement works can be undertaken. In this case, the defendant disputed liability for a substantial portion of the claim from an early stage and declined to indemnify the plaintiff for the blending silo. The plaintiff therefore had to resort to its own resources to reconstruct the blending silo. As such, this Court does not regard the actual period taken to complete reconstruction as a proper basis for reducing the contractual indemnity period of 12 months agreed upon by the parties. 4. Accordingly, this Court finds merit in the plaintiff’s claim under the Loss of Profits Following Machinery Breakdown Policy in the sum of Kshs.982,434,033.00. 5. In light of the foregoing, this Court is persuaded that the plaintiff proved its material damage loss in the sum of Kshs.664,767,843.00 and its loss of profits claim in the sum of Kshs.982,434,033.00, making the total recoverable loss Kshs.1,647,201,876.00. **Issue No. 10 -** **Claim for interest.** 1. The plaintiff in this suit claimed interest on the above sums at the rate of 18% per annum from 31st December 2012, until payment in full. 2. The record shows that the blending silo collapsed on 1st August 2011 and the claim was promptly notified to the defendant. Thereafter, extensive investigations were undertaken by numerous Experts and Loss Adjusters, including McLarens Young International Ltd, Milind Bhatawadekar, Development Consultants International Limited, Construction Diagnostic Centre and Toplis and Harding International Limited. The defendant ultimately admitted part of the claim and assessed its liability at Kshs. 393,018,965.00, which amount it was prepared to pay. DW1 confirmed that the defendant issued a Discharge Voucher for that sum, but the amount was not accepted by the plaintiff. The Insurance Regulatory Authority directed that the admitted amount be paid while the disputed portion was to be determined by the Court. 3. Issuance of the said Discharge Voucher is evidence of the fact that the defendant never wholly repudiated the claim. Rather, it accepted liability for part of the loss and disputed liability in relation to the blending silo and the consequential loss of profits claim. The plaintiff's case is that had the indemnity been paid promptly, reconstruction of the blending silo would have commenced earlier and the interruption period would have been substantially reduced. 4. The evidence shows that the plaintiff was compelled to fund reconstruction from its own resources while simultaneously pursuing the insurance claim. Although no witness quantified with precision the exact delay attributable to lack of insurance proceeds, this Court cannot ignore the practical reality that the speed at which reconstruction of a major industrial installation costing hundreds of Millions of shillings would take, would be determined by availability of funds and the sourcing both locally & internationally, of materials, machinery and equipment needed for reconstruction of another blending silo. 5. At the same time, this Court must recognize that the claim was genuinely disputed and involved complex questions concerning policy interpretation, classification of the blending silo, causation, application of exclusions and quantum. The defendant's position, although ultimately unsuccessful, cannot be described as frivolous or dishonest. Numerous professional Reports commissioned by the defendant supported its interpretation of the Policies in issue. Consequently, this is not a case warranting punitive or aggravated interest. 6. In insurance law, interest is generally awarded either from the date the claim became payable under the Policy or from the date of filing suit or from the date of Judgment, depending on the circumstances of each case and the certainty of the amount due. 7. In this case, the amount ultimately found payable was not ascertainable immediately following the loss. The parties herein were engaged in extensive investigations and competing expert assessments over a prolonged period of time. Notably, each party’s Experts arrived at markedly different figures. This Court is therefore satisfied that the precise amount payable remained unliquidated and contested until determination by the Court. 8. This Court finds that interest on the sums determined as due to the plaintiff from the defendant shall to attract interest at Court rates from the date of filing suit until payment in full. **Issue No. (xi) – Costs** 1. On the issue of costs, Section 27 of the Civil Procedure Act provides that costs follow the event. The plaintiff having succeeded in this suit is awarded costs of the suit. **Conclusion.** 1. In winding up this Judgment, this Court commends the Advocates who represented the parties herein for their industry in the hearing of this case, which was rather complex and took a great deal of time before being finalized. Their well-researched and detailed submissions in support of the parties they represented, is also acknowledged and appreciated. 2. In the result, the plaintiff’s suit against the defendant is merited. I hereby make the following final orders- 1. **A declaration is hereby issued that the blending silo was covered by the Machinery Insurance Policy;** 2. **Judgment is hereby entered for the plaintiff as against the defendant in the sum of Kshs.664,767,843.00 arising from the loss occasioned to the blending silo under the Machinery Insurance Policy;** 3. **Judgment is hereby entered for the plaintiff as against the defendant in the sum of Kshs.982,434,033.00 being the loss of profits under the Loss of Profits Following Machinery Insurance Policy;** 4. **The gross award is in the sum of Kshs.1,647,201,876.00;** 5. **Interest is awarded on the amounts in paragraphs (ii) and (iii) above at Court rates from the date of filing suit until payment in full; and** 6. **Costs of the suit are awarded to the plaintiff.** It is so ordered. **DATED, SIGNED**and**DELIVERED**at **NAIROBI**on this**12TH** day of**AUGUST 2026.** **Judgment delivered through Microsoft Teams Online Platform.** **NJOKI MWANGI** **JUDGE** **In the presence of:** **Mr. Hiram Nyaburi for the plaintiff** **Mr. Chacha Odera (SC) h/b for Mr. Oraro (SC) for the defendant** **Mr. Muthomi – Court Assistant.**