https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7950

Kagika v Otuto (Civil Appeal E276 of 2024) [2026] KEHC 7950 (KLR) (5 June 2026) (Judgment) Neutral citation: [2026] KEHC 7950 (KLR) Republic of Kenya In the High Court at Machakos Civil Appeal E276 of 2024 BM Musyoki, J June 5, 2026 Between Peter Mugo Kagika Appellant and Tom Mokua Otuto Respondent (Being an appeal from judgment and decree of the Small Claims Court at Machakos (Hon. M. Thibaru RM) dated 7-10-2024 in claim number E832 of 2024) Judgment 1.It was pleaded in the statement of claim filed in the trial court that on 14th July 2021, the appellant was lawfully and carefully driving his motor vehicle registration number KCX 145T along Nairobi-Namanga road interchange area when the respondent’s motor vehicle registration number KBY 826N was so negligently driven that it rammed into the appellant’s vehicle causing extensive damage to it. The appellant claimed Kshs 456,910.00 being special damages arising from the accident. 2.The respondent filed a response to the claim in which he denied liability. In addition, the respondent pleaded that the appellant’s vehicle was insured by Old Mutual General Insurance Kenya Limited (Now UAP-Old Mutual Group) (hereinafter referred to as ‘Old Mutual’) while the his vehicle was insured by Corporate Insurance Company Limited (hereinafter referred to as Corporate’) and that the two insurance companies were participants in Association of Kenya Insurer’s Knock-For-Knock Agreement (hereinafter referred to as ‘the agreement’) by virtue of which the appellant’s insurer lodged its claim but failed to follow up compensation, opting to file the claim in court. The respondent also raised an issue of the appellant’s insurer failing to invoke an arbitration clause provided in the agreement. He stated that the claim was premature as the respondent had not exhausted the available alternative remedies before he filed the claim in court. 3.The matter was heard under Section 30 of the Small Claims Court Act which allows the court with concurrence of the parties to dispose a claim relying on the documents filed by the parties. The trial court in its impugned judgment held that the claim was covered by the provisions of the agreement and observed that;a.Clause 5 of the agreement provided that each insurer shall compensate or repair their insured’s motor vehicles regardless of who was responsible for the accident;b.Clause 14 of the agreement provided for limitation period of filing claim to be 18 months; andc.Clause 17 of the agreement made provision for settling dispute arising from implementation of the agreement through arbitration which UAP had failed to pursue. 4.The trial court stated that the appellant did not rebut the evidence in respect of the above observations and had not even made submissions on the same. She also held that the appellant’s insurer had not denied being bound by the agreement. She consequently struck out the suit with each party to bear their own costs. 5.The appellant was aggrieved by the trial court’s judgment and has approached this court seeking to overturn it relying on the following five grounds;1.That the learned Honourable Magistrate erred in law in applying the provision of the Knock-for-Knock Agreement entered between Old Mutual General Insurance Kenya Limited (formerly known as UAP Insurance Company Limited) and the Corporate Insurance Co. Limited to the Appellant’s suit.2.That the learned Honourable Magistrate erred in law in finding that the suit was filed after 36 months from the date of accident contrary to clause 14 of the Knock-for-Knock Agreement.3.That the learned Honourable Magistrate erred in law in finding that Old Mutual General Insurance Kenya Limited ought to have pursued the Arbitration Avenue as provided for in the Knock-for-Knock Agreement.4.That the learned Honourable Magistrate erred in failing to appreciate that the Knock-for-Knock Agreement did not supersede the application of the Limitation of Actions Act.5.That the learned Honourable Magistrate erred in law failing to consider the Claimant’s filed documents and previous submissions on the preliminary objection as a response to the issue of Knock-for-Knock Agreement. 6.Like in the trial court, this appeal has been disposed of by way of written submissions. I have read the submissions of the appellant dated 25th July 2025 and those of the respondent dated 13th August 2025. It is not disputed that Old Mutual and Corporate were participants in the agreement. It is also not disputed that the clauses cited by the trial court in striking out the claim existed in the agreement. The only thing the appellant disputes is that the case before the trial court fell under and was governed by the agreement. 7.The appellant submits that the parties herein were not privy to the agreement as the same was between their respective insurers. It is true that the parties to this suit were not signatories to the agreement. Actually, it is most likely that they were not even aware of its existence. However, the question is, in what capacity was the claim filed? Paragraph 7 of the statement of claim stated that;‘By virtue of the insurance cover aforesaid, M/S Old mutual General Insurance Kenya Limited formerly known as UAP Insurance Company Limited compensated the claimant for the loss detailed herein above and incurred related expenses thereto and is entitled to recover the same from the respondent through the claimant under the doctrine of subrogation.’ 8.The position in law is that once the insurance company compensates its insured for insurable risks which have attached, it gets into the shoes of the insured and assumes all their rights and obligations associated with the risk. The appellant admitted in his own pleadings and still does in his submissions in this appeal, that the claim was being prosecuted for and on behalf of Old Mutual and not him. In the circumstances and by virtue of the doctrine of subrogation, the real party in the claim was Old Mutual. In David v Teachers Service Commission [2023] KEHC 1850 (KLR), it was held that;‘The principle of subrogation applies where there is a contract of insurance. If the “insured risk” takes effect and the insurer settles the insured’s claim, then the insurer is entitled to diminish the loss suffered by its insured by seeking compensation from the party who caused the loss. The assumption is that the loss would have accrued due to the acts of a third party. By the principle of subrogation, the insurer is put in the position of the insured and is entitled to claim compensation from the 3rd party tortfeasor.’ 9.In view of the above, it is my finding that the rights and obligations of the insurers in the agreement extended and absorbed the relationships between their insureds. In that case, the suit by the appellant having been brought for the benefit of Old Mutual was governed and should have been processed under the provisions of the agreement. The argument by the appellant that the parties were not privy to the agreement has no merits. 10.The appellant has argued that the limitation period provided for in clause 14 of the agreement applied to lodging of claims with the liable person’s insurer company and not filing them in court. The said clause provided as follows;‘If a member fails to make a claim within eighteen (18) months from the date of the accident then limitation applies. However, if a claim is lodged within the period, limitation shall not be pleaded.It is further agreed that members shall sort out knock-for-knock claims within a maximum period of eighteen (18) months from the date of the accident.’ 11.I am inclined to agree with the appellant on this point. The clause does not make it clear that the limitation was to be pleaded in matters filed before the court. The clause does not even state which limitation was to be pleaded and in which forum. Further, the trial court seems to have read the clause half way. The court cited the first part of the clause that gave the limitation period of 18 months and left out that which stated that if the claim was lodged within the period, limitation will not be pleaded. The appellant’s insurer wrote a letter dated 22-07-2021 which was within 7 days of the accident and obviously within the 18 months period. I would take the letter as an action of putting in motion the lodging of the claim as there was no provision in the agreement for the specific method of lodging a claim. If at all the limitation was extended or applicable to court actions, the respondent or its insurer still could not invoke the clause because the lodging was made in time going by the second part of the clause. 12.I however disagree with the appellant’s argument that the claim having not been settled within 18 months, the agreement was no longer binding. In my view, there is nothing in the agreement that gave a party liberty to opt out of the agreement for failure to sort out the claim within the 18 months period. Further, the appellant did not demonstrate that it pushed for settlement. Lodging a claim without making follow ups or notices of intention to escalate it to another forum does not entitle a party to benefits of non-compliance. 13.The appellant argues that the claim having been based on tort could not be bound or prosecuted through contractual obligations. The position in law is that parties are at liberty to enter into a contract in anything that is capable of being contracted including the way they would like to settle their disputes irrespective of the area of the law. The only exception in freedom of contract is that parties cannot enter into a contract that is illegal or against public policy or other vitiating factors. I have not seen anything in the agreement that may translate to illegality or that works against public policy or any attendant vitiating factor. The tortious liability in this matter arose from actions or risks covered in the framework of the agreement. 14.It has been argued that the judgment of the trial court was inconsistent with its earlier ruling on a preliminary objection based on the same grounds. It is true that the trial court delivered a ruling on 2-09-2024 in which she held that the issue of pre-maturity of the claim based on the agreement did not qualify as a preliminary objection as it was a matter of fact which touched on applicability of the agreement. This did not mean that the court could not revisit the issue of applicability of the agreement once evidence in support thereof was produced. 15.When the matter came for hearing, the appellant just as in this appeal did not deny existence of the agreement but its meaning and purport. The trial court was entitled to make the decision the way it did regardless of what it had stated in its earlier ruling. It is not a must for a court to give a final judgment that entirely agrees with its earlier interlocutory ruling as long as the evidence produced before it justified the final findings. A ruling that does not bring finality to a suit does not bind the same court from expressing a different position after taking evidence of the parties. 16.The last issue was the applicability of the arbitration clause. The parties hold common position and the court confirms that the agreement had an arbitration clause. The appellant submits that the agreement provided for inter-insurer arbitration and not for arbitration involving third-party insured persons or claimants. I have already held that in real sense under the principle of subrogation, the claim belonged to the appellant’s insurer. The arbitration clause therefore was applicable to it because the claimant was not the appellant but Old Mutual who was a participant to the agreement. 17.Where an arbitration clause exists in an agreement, the regular court’s jurisdiction is ousted unless and until the arbitration process is initiated and exhausted. The appellant argues that the if the respondent’s insurer did not want to submit to the jurisdiction of the court, the onus of initiating the arbitration was on it. This argument is in my view lacking in merits. The clause states that where parties cannot agree, they shall refer the matter to arbitration. It does place the onus of the reference to either of the parties. The appellant has not demonstrated that Old Mutual made efforts to go for arbitration or declare a dispute. The evidence placed before the court was that, after the appellant’s insurer sent the initial demand letter and the same was responded to by the respondent’s insurer, it took no further steps until the suit was filed. A party cannot be assumed to have waived its rights to alternative remedies and submitted to jurisdiction of the court simply because it failed to respond or comply with a demand. 18.Based on the above discussion, I must come to conclusion that this appeal does not bear merits. The same is dismissed with costs to the respondent. DATED SIGNED AND DELIVERED AT NAIROBI THIS 5TH DAY OF JUNE 2026.B.M. MUSYOKIJUDGE OF THE HIGH COURT.Judgment delivered in presence of Miss Ochieng holding brief for Mr. Keiro for the appellant and in absence of the respondent.