[2023] KEHC 19921 (KLR)

Mutiga t/a Kimathi Booksellers v ICEA Lion General Insurance Company Limited (Civil Case 75 of 2014) [2023] KEHC 19921 (KLR) (Commercial and Tax) (3 July 2023) (Judgment)

Neutral citation: [2023] KEHC 19921 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Civil Case 75 of 2014

JWW Mong'are, J

July 3, 2023

Between

Lawrence Mutiga t/a Kimathi Booksellers

Plaintiff

and

ICEA Lion General Insurance Company Limited

Defendant

Judgment

1. By an amended Plaint dated the April 6, 2018, seeking the Plaintiff has moved this court seeking the following orders;-a.Balance of Kshs 2,617,900. 00/-b.Loss of Business of Kshs 63,975,000. 00/-c.Interest in (a) and (b)d.Cost of the suit

2. The suit defended and the Plaintiff called two witness to testify while the Defendant called one witness.

The Plaintiff’s Case:- 3. The Plaintiff testified as PWI. He confirmed to the court that he was at all material times the registered owner of the motor vehicle Volvo Tipper Registration Number KBK 564U which he had purchased on or around the 3/9/2010 for Kshs 4,500,000. 00/-. through a partial finance by Diamond Trust Bank Limited of Kshs 1,440,000. 00/-.

4. The Plaintiff testified that he also purchased a Comprehensive Insurance Cover for the motor vehicle for Kenya Shillings Three Hundred and Sixty-One Thousand (361,000. 00) from the Defendant and was issued with a policy Number 02098710766942010. As his evidence, the Plaintiff produced to the court the Debit note and the Insurance Policy Documents with the period running from 3/9/2010 to 2/9/ 2011.

5. Further, the Plaintiff testified that the motor vehicle was used for business of delivering river sand which would be collected from various rivers and on 13/3/ 2011 the said vehicle was on accident in Kajiado County while out collecting sand from the river and the same was reported by the Plaintiff’s driver, PW2 to the police first at Bisil Police Patrol Base and once the Plaintiff was notified, he notified the Defendant in line with the terms and conditions of the Insurance Cover provided by them. The Plaintiff later obtained police abstract from Kajiado police Station since the Bisil Patrol Base did not issue Abstracts.

6. Further, the Plaintiff testified that upon being notified of the accident to the Motor vehicle, the Defendant instructed that the Motor vehicle be towed to Auto-Sueco Limited premises and the same was done and the Plaintiff contracted Njohmu Suppliers and incurred towing charges amounting to Kshs 210,000. 00/-.

7. It was the evidence of the Plaintiff that subsequently the Defendant offered to settle the claim as per the policy document on 18/6/2012 for the sum of Kshs 3,420,000. 00/- but the Plaintiff declined since his vehicle had been insured comprehensively for Kshs 4,500,000. 00/-. Later on the Plaintiff was notified by his bank that he had been paid Kshs1,882,100. 00/- by the Defendant. In his evidence to the court, the Plaintiff stated that he considered the said payment as ex gratia as he had a legitimate expectation that the Defendant would settle the claim for the full amount of Kshs 4,500,000. 00/-. on which he had been paying premium for.

8. In making the above payment, the Defendant, according to the evidence by the Defendant did not involve the Plaintiff and neither was he called upon to execute any discharge voucher or agree to the settlement. To date, the Plaintiff stated that has never been made aware if any other payments were made and for how much they were for.

9. Further, the Plaintiff testified that the failure by the Defendant to settle the claim in a timely fashion led him to incur huge losses to his business. It was the Plaintiff’s evidence that while the vehicle was up and running, he would make a minimum of Kshs 25,000/- per day in collecting and delivering sand from the river to various clientele. He would also be contracted to ferry stones as well. The Plaintiff produced his books of accounts to support the same. The Plaintiff further testified that neither the Defendant nor its agents Sueco notified him to collect the salvage of the vehicle as the same would have been sold to cover the difference in the sum insured. The Plaintiff urged the court to find in its favour and grant the orders as prayed in the Plaint.

The Defendant’s Case: - 10. The Defendant called one witness to defend the claim, one Samuel Kangethe. The Defendant confirmed indeed the Plaintiff had insured Comprehensive Insurance for its Motor Vehicle Registration number KBK 564U through an insurance agent, Diamond trust Insurance Agency Limited, the Defendant confirmed indeed the said motor vehicle was insured for Kshs 4,500,000/- being also the purchase price for the said motor vehicle and that the Plaintiff paid a premium of Kshs 361,000. 00/-. The Defendant testified that the Plaintiff reported the accident after 45 days from the date of the alleged accident and contrary to the policy conditions that the same be done within 7 days after the occurrence of an accident.

11. The Defendant further testified that as a result of the period it took for the Plaintiff to report the accident, it lodged its own investigations by the Company’s investigator revealed that the said motor vehicle was not involved in an accident but rather a mechanical breakdown. Subsequently, the Defendant declined to settle the claim but later made the decision to settle the same after negotiations with the Plaintiff’s agent, on ex gratia terms.

12. The Defendant further testified that because of not having valued the vehicle prior to the insurance cover being issued, it engaged its assessors who returned a pre-accident salvage at a value of Kshs 3,800,000. 00/- and paid out a net value of Kshs 3,420,000/= less the 10% excess. Accordingly, the Defendant thereafter paid the Plaintiff the sum of Kshs 1,882,100/- less the salvage value of Kshs 1,537,900/-. The Defendant produced in its bundle and list of documents as evidence the Assessment Note. It was the evidence of the Defendant that said value of the salvage was communicated to the agents of the Plaintiff and that the same had been retained by the insured, the Plaintiff in this case. The Defendant urged the court to find that the Plaintiff had not established a claim for loss of business as pleaded and that the suit was misguided and should be struck off with costs to the Defendant.

Analysis and Determination :- 13. I have considered the pleadings and the evidence availed by the parties by the list and bundle of documents filed by either side, I have analyzed the testimonies of the Plaintiffs and Defendant’s witnesses, the written submissions and I identified the following issues for determination.i.Whether the Plaintiff was entitled to a claim and compensation and for what value;ii.Whether the Plaintiff is entitled to compensation for loss of business;

Whether the Plaintiff was entitled to a claim and compensation and, if so, for what value; 14. In the amended plaint the Plaintiff has sought the Balance of Kshs (2,617,900. 00). as the first prayer. This the Plaintiff claim is the sum is the total balance deducted from the Sum Insured which is Kshs (4,500,000. 00) after taking out the sums paid to the Bank and the Plaintiff. Both the Defendant and the Plaintiff agree that the vehicle subject matter of the suit was partly financed by Diamond Trust Bank and as a result the bank’s insurance agency, Diamond Trust Insurance Agency, procured the insurance cover on behalf of the Plaintiff. However, the Defendant testified that it chose to determine the pre-accident value post the accident and set the same hence its decision to settle the insurance claim at the sum of Kshs 3,800,000. 00/-. It emerged during cross examination of the Defendant’s witness that this was done one and half years later after the accident. The Defendant further confirmed that a salvage value of the said vehicle was determined at Kshs 1,882,100/- and that the communication of the same was only relayed to the Plaintiff/s insurance agency. As testified by the Plaintiff, the Defendant chose to not communicate directly with the Plaintiff who only became aware of the payment from a communication from his Bank.

15. A contract for insurance is usually entered between the insurance and the insured and these two are the principal parties to the said contract. The principle on privity of contract was reiterated by the Court of Appeal in the case of Aineah Liluyani Njirah v Agha Khan Health Services [2013] eKLRwhere the court stated that:-“The essence of the privity rule is that only the people who actually negotiated a contract (who are privy to it) are entitled to enforce its terms. Even if a third party is mentioned in the contract, he cannot enforce any of its terms nor have any burdens from that contract enforced against him.”From the testimony presented before the court, the Plaintiff notified the Defendant of the occurrence of the accident who after making the decision to settle the claim engaged the agent, Diamond Trust Insurance Agencies exclusively and did not bother to communicate at all with the Plaintiff. It is therefore not surprising that, the Plaintiff may never have been made aware that the salvage was available to him to collect from the yard where he had been directed to deliver the vehicle to.

16. Secondly, the contract was for the sum of Kshs 4,500,000. 00/- and this is the amount upon which the Plaintiff paid the insurance premium against. I therefore find no valid explanation as to why it was necessary to carry out a pre-accident valuation after the accident in order to arrive at a figure to compensate the Plaintiff. It is trite that parties are bound by the terms of their contracts. This was reiterated National Bank of Kenya Ltd. .vs. Pipeplastic Samkolit (K) Ltd & Another, Civil Appeal No 95 of 1999 (2001) KLR 112 (2002) EA 503, where the Court held that:-i.“A court of law cannot re-write a contract between the parties. The parties are bound by the terms of their contract unless coercion, fraud or undue influence are pleased and proved”.

17. In the matter before me, I find that there was a contract for insurance for which the Plaintiff expected to be paid the sum of Kshs 4,500,000/- in the event an accident occurred. The Defendant in an attempt to amend the said contract wrongly determined the pre-accident insured value to be Kshs 3,800,000. /- and therefore sought to amend the agreement ex-parte. To my mind, the said actions by the Defendant was in breach of the contractual terms contained in the contract for insurance that the parties had entered into. Secondly, despite the contract being between the Insurance, the Defendant in this case and the insured, the Plaintiff herein, I note that the Defendant chose to communicate with a third party who was not privy to the contract and omitted to notify the Plaintiff about the salvage of the motor vehicle or the payments made from the insurance contract. I am therefore satisfied, emanating from the evidence placed before me that the Plaintiff has proved his claim under prayer for the payment of the award of the sum of Kshs 2,617,900. 00/- being the balance of the contractual sum as per the contract of insurance.

Whether the Plaintiff is entitled to compensation for loss of business; 18. In the Amended Plaint of April 16, 2018, the Plaintiff asked the court to award him dames for loss of business a for a period of one year. This period covers the time between when the accident occurred and when the payment was made to the Plaintiff against the insurance claim. The Plaintiff produced books of Accounts as evidence and informed the court that it made a profit of Kshs 25,000. 00/- while using the lorry in ferrying sand and stones from Bisil to Kitengela, Namanga and Kangemi and that was the reasons it had taken the loan to purchase the vehicle. On the other hand, the Defendant states that the Plaintiff is not entitled to payment of loss of business as this is one of the exceptions in the insurance contract. The Defendant further stated that the insurance contract, as per the Policy documents under General Exceptions: in any event did not cover consequential loss. The Defendant relied on the said exceptions which stated as follows;“5(a) The Company shall not be liable in respect of any accident loss or damage to any property whatsoever or any loss or expense whatsoever resulting or arising therefrom or any consequential loss:”

19. 18. The general ‘rule’ under Common law for the recovery of damages following breach of contract was set down in Hadley v Baxendale (1854) 9 Exch 341. Recoverable damages are those either arising naturally or directly from the breach of contract (‘direct loss’), or within the contemplation of the parties at the time they made the contract (‘indirect’ or ‘consequential loss’). Other losses are irrecoverable as remote. Consequential loss is defined as losses that are not directly caused by damage but rather arising from results of such damage.

20. I note that the Defendant had initially declined to settle the claim when it was reported by the Plaintiff but only agreed to do so once the Bank’s agency, Diamond Trust Insurance Agencies intervened in order to protect the Banks rights under the insurance contract. The Plaintiff testified that this vehicle was used for business and that for every day that the Defendant delayed in settling the claim, the Plaintiff was incapacitated and lost an opportunity to replace the same or find another source of income. I am persuaded that this loss was occasioned by the Defendants’ actions and that the Plaintiff is entitled to compensation. The Plaintiffs claim is for compensation for loss 365 days in every year and has asked for damages to be paid for 7 years being the period when the accident occurred and when the suit was filed. As at the time of his testimony, the Plaintiff averred that he had not been informed of the whereabouts of the salvage and whether it was available for collection by him. The Plaintiff however testified that he was paid by the Defendant some ex gratia payments after one year. He further claims to have become aware of the payment through a notification from his bankers of a deposit in his account. He seeks compensation for lost business at the rate of Kshs 25,000/- for 365 days for a period of 7 years.

21. I am however not persuaded that the vehicle was in use for the full 365 days as claimed by the Plaintiff. At an average, the vehicle would have to be serviced or be taken in for some repairs and the driver or whoever was managing it take a day or two to rest. To my mind, a multiplicand of 22 days a month would be ideal bringing the total days for which the loss can be computed to 264 days in a year. I therefore will allow loss of business to be calculated at 264 days with a multiplier of 25000. The Plaintiff has claimed compensation for a period of 7 years. I however will reduce the period to 1 year being the period for which the claim remained unpaid. Having received payment from the Defendant even in the absence of communication, the Plaintiff should have mitigated his loss by finding out the fate of the salvage of his vehicle. This he failed to and therefore contributed to his loss of opportunity to repair the vehicle. I therefore find and hold that the Plaintiff is entitled to damages for loss of business assessed at Kshs 6,625,000/- for the period that the Defendant took to pay the insurance claim by the Plaintiff.

Disposition: - 22. The final disposition for this case is that judgement is entered for the Plaintiff against the defendant as follows;i.Kshs 2,617,900. 00/- being the balance of the sum insured.ii.Loss of Business of Kshs 6,625,000/- being 22 per month for 12 months at the rate of Kshs 25,000/- per day.iii.Interest in (a) and (b) from the date of filing suit.iv.Cost of the suit to the Plaintiff.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 3RD DAY OF JULY 2023………………………………..JWW MONGAREJUDGEIn The Presence OfMr. Rono for the Plaintiff.Mr. Mukonyi for the Defendant.Sylvia- Court Assistant.