CIC General Insurance Company Limited v Nyabera [2022] KEHC 13887 (KLR)

CIC General Insurance Company Limited v Nyabera (Civil Suit 19 of 2014) [2022] KEHC 13887 (KLR) (7 October 2022) (Judgment)

Neutral citation: [2022] KEHC 13887 (KLR)

Republic of Kenya

In the High Court at Bungoma

Civil Suit 19 of 2014

SN Riechi, J

October 7, 2022

Between

CIC General Insurance Company Limited

Plaintiff

and

Nashon Ombeka Nyabera

Defendant

Judgment

1. By a plaint dated September 15, 2014, the plaintiff seeks the following prayers;1. A declaration that the plaintiff is and has at all material times been entitled to avoid the Policy of Insurance No 014/080/1/022735/2010/02 apart from any provisions contained therein on the ground that the said policy of insurance was obtained by;a)Non-disclosure of material fact or facts; or,b)Representation of facts which were false in material particulars; or,c)Both (a) and (b) above2. A declaration that the plaintiff is not liable to make any payment under the aforesaid Policy of Insurance No 014/080/022735/2010/02 in respect of any claim against the defendant herein arising out of injuries or death sustained in the accident alleged to have occurred on or about June 15, 2013 involving motor vehicle registration number KBH 139C.3. A declaration that motor vehicle registration number KBH 139C was being used for uninsured purposes on or about June 15, 2013 and therefore the plaintiff is not liable to pay any claim arising out of the accident on or about June 15, 2013. 4.Costs of the suit.

2. It is pleaded that the defendant requested and the plaintiff indeed issued the defendant with a private motor vehicle third party policy for his car. The proposal therein contained specific questions which were asked in relation to the use of the motor vehicle by the defendant which required the defendant to declare that the particulars given by him were correct and had not withheld any material fact because the proposal and the declaration would form the basis of the contract.

3. It is pleaded that the defendant had not informed the plaintiff of his intention to carry passengers for hire and or reward, for hire to third parties or other purposes other than the ones declared in the proposal. It is averred that the plaintiff on the strength of the information given by the plaintiff, issued a Policy of Insurance No 014/080/1/022735/2010/02 and subsequently a certificate of insurance which the plaintiff now claims was issued without disclosure of material facts by the defendant.

4. The plaintiff pleads that on the June 15, 2013, the insured motor vehicle while being driven on the Bungoma-Eldoret road in breach of the insurance policy, by a third party and ferrying passengers for gain, the motor vehicle was involved in an accident resulting into bodily and fatal injuries on the part of the passengers.

5. As a result of the above, the plaintiff now seeks to avoid the policy for having been obtained by way of material non-disclosure and or misrepresentation of material facts.

6. PW-1 Lydia Mwangi the plaintiff’s claims manager stated that the defendant insured the defendants Toyota Hilux Pick-Up against third party claims which excluded passengers and the cover limited the use of the motor vehicle to own use and carriage of own goods by the insured. That after the accident was reported, they instructed a firm to conduct investigations which revealed that the vehicle at the material time was on hire to Lexland Company Limited and was carrying passengers at the time. That the defendant later filed a claim form but left out the part showing the use of the motor vehicle at the time of accident.

7. On cross examination she stated that the cover extended to the owner’s use of the vehicle for social and leisure and his business. That the defendant was authorized to have an authorized and qualified driver and the cover only extends to other people other than the owner of the vehicle but excludes a passenger. That passenger covered by the policy are only 2 who constitute the sitting capacity of the vehicle. The passengers in the vehicle were employees of Lexland Company Limited where the defendant was a director. She confirmed that the accident occurred within the cover period and from the investigation report, the plaintiff deduced that the vehicle had been hired out though it could not be established who had hired it.

8. On the defendant’s part, Nahashon Ombeka Nyaberi testified as DW-1. His testimony was that he is director at Lexland Company Limited and the vehicle had been carrying his employees at the time the accident occurred.

9. On cross examination, he confirmed that the vehicle had been insured by himself and that the sitting capacity of the vehicle was 2 persons.

10. The parties were directed to file written submissions but only the plaintiff complied with the order.

11. It is submitted for the plaintiff that from the facts established in the trial, the motor vehicle was at the time of the accident being used by Lexland Co Ltd to ferry its employees; a purpose not in tandem with insurance policy and the defendant therefore ought to be found liable for using the vehicle to carry goods by a third party, failing to disclose that the vehicle would be used by third parties for carriage of passengers and that at the time of accident, the vehicle was being used for uninsured purposes.

12. In support of the position, counsel cites the cases ofCIC General Insurance Company LimitedvKefa Mukami Buloko (2019)eKLR,Gateway Insurance Company LimitedvKaboykek Farmers Co-Operative Society Limited (2014)eKLR and Charles Momanyi MagetovCo-operative Insurance Company of Kenya Limited (2016)eKLR

13. The undisputed facts in this suit are that the defendant took out a third party insurance cover from the plaintiff over his motor vehicle registration number KBH 139C. The motor vehicle was involved in accident during the subsistence of the cover and there were both fatal and serious injuries sustained by the occupants. At the time of the accident, the passengers on-board were numbering 10 and employees of Lexland Co. Ltd where the defendant served as a director. It was also confirmed by the defendant that the sitting capacity of the motor vehicle was 2 passengers.

14. From the above facts, the court is therefore called upon to answer whether the plaintiff is entitled to avoid liability arising from the policy for the reason that the defendant at the time of taking out the policy withheld material and crucial information that the motor vehicle was being used for commercial purposes; or, in the alternative, was the policy of insurance obtained by concealment of material facts?

15. The importance of disclosing material facts in an insurance were stated in Cannon Assurance (K) LimitedvAlkason Transporters Limited & 3 others [2017] eKLR where it was held;An enduring feature of a contract of Insurance is that it is a contract uberrimae fidei, that is, of utmost good faith. For that reason each party is required to disclose material facts and not to misrepresent any before the contract is concluded.

16. In the matter, the learned judge quoted from the often-cited case of Carterv. Boehm 1766 3Burr 1965 where Lord Mansfield held;Insurance is a contract upon speculation. The special facts upon which the contingent chance is to be computed, lie most commonly in the knowledge of the insured only: the underwriter trusts to his representation, and proceeds upon the confidence that he does not keep back any circumstance in his knowledge, to mislead the underwriter into a belief that the circumstance does not exist, and to induce him to estimate the risque as if it did not exist.

17. Once it has been established that there was non-disclosure, the insurer is entitled to avoid the contract upon satisfying the two tests set in Pan Atlantic Insurance Co. Ltd and anotherv. Pine Top Insurance Co Ltd (1994) 3 ALL ER 581, at page 638 that:-If your Lordships accept this conclusion, the position will be as follow. Whenever an insurer seeks to avoid a contract of insurance or re-insurance on the ground of misrepresentation or non-disclosure, there will be two separate but closely relate questions. (1) Did the misrepresentation or non-disclosure induce the actual insurer to enter into the contract on those terms? (2) Would the prudent insurer have entered into the contract on the same terms if he had known of the misrepresentation or non-disclosure immediately before the contract was concluded? If both questions are answered in favour of the insurer, he will be entitled to avoid the contract, but not otherwise.

18. The suit is expressed to be brought under the provisions of section 10(4) of Insurance (Motor vehicle Third Party Rules) Actcap 405 which, provides instances when an Insurer is entitled to avoid the policy and states:-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

19. Section 10(6) defines material’ for the purpose of the section as follows;In this section, “material” means of such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk, and, if so, at what premium and on what conditions; and “liability covered by the terms of the policy” means a liability which is covered by the policy or which would be so covered but for the fact that the insurer is entitled to avoid or cancel, or has avoided or cancelled, the policy.

20. My understanding of the section is that had the defendant told the insurer that he could be using the motor vehicle for work related purposes in the company he owns as director and carrying workers, the plaintiff could not probably have issued the policy or if it had issued, probably on a different premium because the nature of the use of the motor vehicle would have automatically changed.

21. The defendant insured according to the policy document 2 passengers only. It cannot be liable for the other unauthorized passengers not included in the document. I therefore find that the plaintiff will only be liable for the 2 passengers as per the policy document which I so order.

DATED AT BUNGOMA THIS 7TH DAY OF OCTOBER, 2022S.N. RIECHIJUDGE.