https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7822

REPUBLIC OF KENYA IN THE HIGH COURT OF KENYA AT MACHAKOS CIVIL APPEAL NUMBER **E082** OF 2024 NICHOLAS KIAMBATI MURIUNGI…………………………...APPELLANT VERSUS CIC GENERAL INSURANCE COMPANY LIMITED………..RESPONDENT ***(Being an appeal from judgment and decree in the Small Claims Court at Machakos (Hon. M. Thibaru Adjudicator) claim number SCCCOMM E563 of 2023 dated 22-02-2024)*** **JUDGMENT** The respondent had insured the appellant’s motor vehicle registration number KCA 861P against risks and loss which would arise out of an accident involving the said vehicle. While the insurance cover was in force, the vehicle was on 18-12-2022 involved in a road accident with motor cycle registration number KTWC 498V following which one John Wambua Nzesi suffered personal injuries. The said victim sued the appellant herein for compensation in Machakos small claims court claim number E108 of 2023 (hereinafter referred to as ‘the primary suit’) and judgment was eventually entered against the appellant for Kshs 186,750.00 plus costs. The victim executed the decree and in the process incurred further costs which when added to the principal sum and costs of the suit made a total of Kshs 337,000.00 which the appellant settled. After paying the Kshs 337,000.00, the appellant filed a claim against the respondent in the lower court seeking compensation pursuant to the insurance contract between them. The appellant filed a response to the claim denying the existence of the insurance contract but added that if the same existed, it was entitled to repudiate the claim and was not bound to pay because the appellant did not inform it of the occurrence of the accident or existence of the primary suit. The matter went through trial and the court found as a matter of fact that the appellant had not informed the respondent of the occurrence of the accident or the existence of the primary suit. For that reason, it dismissed the claim with no orders as to costs. It is the above judgment that triggered this appeal in which the appellant has raised the following seven grounds. 1. THAT the learned trial Adjudicator erred in law by failing to interpret correctly Section 10 of the Insurance (Motor Vehicles Third Party Risks) Act. 2. THAT the learned trial Adjudicator erred in law and fact by failing to hold that the Respondent had not voided the insurance policy number C26189956 thus bound by Section 10(4) of the Insurance (Motor Vehicles Third Party) Risks Act. 3. THAT the learned trial Adjudicator erred in law and fact by failing to apply her judicial discretion in a fair manner and dismissing the Appellant’s claim against the Respondent. 4. THAT the learned trial Adjudicator erred in law and fact by failing to accord due regard to the appellant’s pleadings, submissions and authorities on record. 5. THAT the learned trial Adjudicator erred in law and fact in failing to properly identify, synthesize, analyze and evaluate the evidence on record thus reaching an erroneous decision. 6. THAT the learned trial Adjudicator erred in law and fact in failing to properly determine the issues raised in the respective pleadings. 7. THAT the learned trial Adjudicator erred in law and fact in relying on extraneous evidence in arriving at the decision. This is an appeal from the Small Claims Court which by virtue of Section 38(1) of the Small Claims Courts Act should be limited to matters of law only. The said Section provides that; *‘A person aggrieved by the decision or an order of the Court may appeal against that decision or order to the High Court on matters of law.’* In my view, the finding that the appellant did not report the accident or existence of the suit is a matter of fact and therefore not appealable to this court. I however hold the view that the issue of whether the trial court properly interpreted and applied Sections 10(2) and 10(4) of the Insurance (Motor Vehicle Third Party Risks) Act (hereinafter referred to as ‘the Act’) and whether the respondent was entitled to avoid liability for failure to report the accident and the primary suit are matters of law. I will therefore handle the appeal to that extent. No doubt an insurer has a contractual duty to settle any claims lodged against its insured which falls within the risks covered. This like any other contract is dependent on insured meeting their part of the bargain and observing the terms and conditions of the contract. The appellant has claimed that the respondent was in breach of the contract by failing to meet its obligations of settling the decretal sum in the primary suit or compensating him for what he paid to the third party claimant. It is indisputable that the respondent was under contractual obligation to pay but this should have been preceded by compliance by the appellant. The compliance in the context of this matter was to report the accident and inform the respondent of occurrence of the accident and existence of the primary suit. I have already held that whether or not the accident or suit was reported is a matter of fact which I will not revisit. An insurance contract is a special one which is based on the principle of utmost good faith which means that, the parties to it must disclose all material facts and act transparently in execution and performance of the contract. Honourable Lady Justice Noel I. Adagi held in ***Madison Insurance Co (K) Ltd v Muange [2024] KEHC 16778 (KLR)*** that; *‘It is trite law that insurance is a contract based on utmost good faith and it is expected of all parties to it to deal fairly and truthfully with one another*.’ The requirement of reporting an accident or a suit is pivotal to this principal as it enables the insurer who would definitely bear the burden of compensation, an opportunity to independently inquire into the circumstances surrounding the case and participate in prosecution or defending the resultant suit or processing of compensation. It is their rights under the contract to carry out investigations and avoid possibility of paying fake or fraudulent claims. The other issue is whether the trial court misinterpreted or misapplied the provisions of Section 10(2) and (4) of the Act. The two Sections provides as follows; *10(2) No sum shall be payable by an insurer under the foregoing provisions of this section-* 1. *in respect of any judgment, unless before or within thirty days after the commencement of the proceedings in which the judgment was given, the insurer had notice of the bringing of the proceedings; or* 2. *in respect of any judgment, so long as execution thereon is stayed pending an appeal; or* 3. *in connection with any liability if, before the happening of the event which was the cause of the death or bodily injury giving rise to the liability, the policy was cancelled by mutual consent or by virtue of any provision contained therein, and either—* 4. *before the happening of the event the certificate was surrendered to the insurer, or the person to whom the certificate was issued made a statutory declaration stating that the certificate had been lost or destroyed; or(* 5. *after the happening of the event, but before the expiration of a period of fourteen days from the taking effect of the cancellation of the policy, the certificate was surrendered to the insurer, or the person to whom the certificate was issued made such a statutory declaration as aforesaid; or* 6. *either before or after the happening of the event, but within a period of twenty-eight days from the taking effect of the cancellation of the policy, the insurer has notified the Registrar of Motor Vehicles and the Commissioner of Police in writing of the failure to surrender the certificate.* *10(4) No sum shall be payable by an insurer under the foregoing provisions of this section if in an action commenced before, or within three months after, the commencement of the proceedings in which the judgment was given, he has obtained a declaration that, apart from any provision contained in the policy he is entitled to avoid it on the ground that it was obtained by the non-disclosure of a material fact, or by a representation of fact which was false in some material particular, or, if he has avoided the policy on that ground, that he was entitled so to do apart from any provision contained in it:* *Provided that an insurer who has obtained such a declaration as aforesaid in an action shall not thereby become entitled to the benefit of this subsection as respects any judgment obtained in proceedings commenced before the commencement of that action, unless before or within fourteen days after the commencement of that action he has given notice thereof to the person who is the plaintiff in the said proceedings specifying the non-disclosure or false representation on which he proposes to rely, and any person to whom notice of such action is so given shall be entitled, if he thinks fit, to be made a party thereto.* According to the appellant, the insurer is under legal obligation to settle decretal amounts passed against their insured with the only exception being Section 10(4) of the Act. He argues that unless the insurer has obtained a declaration as per the said Section, it must settle the claims. There is no contest that the respondent did not obtain a declaration under the said Section. However, I am not persuaded by this strict interpretation of the provision. Interpretation and application of the provisions of the law must be done in a way that is logical and purposeful considering the realities of life. Whereas the insurer is required to seek such a declaration in order to avoid liability, it must have been made aware of the occurrence of the accident. A person cannot be expected to approach a court of law for declarations or remedies whose facts have not come into their knowledge. In any event, Section 10(2)(a) of the Act is very clear that for the insurer to be statutorily compellable to pay, it must have had a notice of the suit. In the circumstances, the appellant’s submissions that the only exception is Section 10(4) is not correct. Even the extract of the holding cited by the appellant in the case of *APA Insurance Co, Ltd v George Masele [2014] eKLR* bears the element of the insurance company being aware of the accident. The following is the quote; *‘The duty to settle a judgment under Section 10 is statutory. An insurer cannot run away from that duty merely because it neglected to act when notified of the proceedings.’* In view of the above, the answers to the issues I have identified go against the appellant. Consequently, this appeal is not merited and I proceed to dismiss it with costs to the respondent. Dated signed and delivered at Nairobi this **5th** day of **June** 2026. **B.M. MUSYOKI** **JUDGE OF THE HIGH COURT.** Judgment delivered in presence of Mr. Wekesa holding brief for Miss Susan Tum for the appellant and in absence of the respondent.