Majority of Kenyans take insurance cover for their vehicles in the hope that in case of theft or an accident they will receive compensation.
However, this was not the case with Kimwa Holdings Limited when they sought compensation from an insurance company. The firm had to sue the insurer for breach of contract.
In the case, the company demanded for compensation for the loss of its car, payment of Sh8.8 million as value of the car, outstanding amount as principal accrued and penalty interest.
It also sought general damages for the loss of the car at the rate of Sh50,000 per day from April 6, 2000.
The company had in May 18, 1999 entered into a hire purchase agreement with CFC Bank Limited for the purchase of a vehicle and as security, the company provided one of its vehicles to transport goods from Orbit Chemicals Limited to Kasese Cobalt Limited in Uganda.
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In the hire purchase agreement, Kimwa was to insure the new vehicle with a reputable firm and it opted for Occidental Insurance Company.
The insurance company agreed to insure the two vehicles comprehensively for the sum of Sh8.8 million and Sh4 million respectively.
Ten months later, armed robbers stole the vehicle in Nairobi’s Ngara and the matter reported to the police.
The driver of the vehicle had delivered a consignment of maize to Chuka in Meru, and was returning to Nairobi when armed robbers struck.
When the company informed the insurer about the incident, it refused to settle the claim, saying the vehicle was being used for hire at the time of theft.
The bank was forced to sell the vehicle used as security for the loan after the company failed to service it.
In response, the insurer denied that theft was one of the risks covered by the policy, adding that it could not compensate Kimwa because the intended use of the vehicle was not disclosed.
But Kimwa argued that there was no limitation clause in the insurance policy.
The High Court Judge Anyara Emukule ruled in favour of the insurer on the grounds that the vehicle was being used in breach of the conditions of the policy insurance.
Nothing supports the allegation
Aggrieved by the decision, Kimwa moved to Court of Appeal on eight grounds, saying the judge erred in saying the vehicle was being used for hire without any evidence.
In a judgment delivered on April 27, appellate Judges Mohamed Warsame, Wiliam Ouko and Agnes Murgor set aside the High Court orders and awarded Kimwa Sh5,620,000 compensation for the loss of the car, interest at court rates and the cost the suit.
“Nothing supports the allegation that at the time the vehicle was stolen, a third party had hired it, and the respondent (insurer) did not produce any evidence in support of this assertion,” read the judgment.
The judges pointed out that the vehicle was stolen during the currency of the policy and it meant that the insurer was liable to pay all and any claims arising therefrom, subject to compliance by the company with its terms and condition.
The judges also said the insurer did not accord the company a hearing before arriving at the decision not to pay for the stolen vehicle.
