Kenya Medical Supplies Authority v Jubilee Insurance Company of Kenya Limited & Sapon Insurance Brokers Limited [2014] KEHC 8752 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL AND ADMIRALTY DIVISION

CIVIL SUIT NO.481 OF 2013

KENYA MEDICAL SUPPLIES AUTHORITY........................................................ PLAINTIFF

- VERSUS –

THE JUBILEE INSURANCE COMPANY OF KENYA LIMITED.................1ST DEFENDANT

SAPON INSURANCE BROKERS LIMITED…….................................…..2ND DEFENDANT

RULING

The application dated 17th March 2014 was brought by the plaintiff, seeking the striking out of the Defences herein.

The plaintiff further invites the court to enter Judgment in its favour, after the defences are struck out.

As far as the plaintiff was concerned, there can be no doubt at all that the defendants are liable to compensate the plaintiff, in the sum of Kshs. 1,287,308,103/-.  Therefore, the defences filed in this case were described by the plaintiff, as a sham which were merely intended to delay the plaintiff from realizing the compensation owed to it.

Why does the plaintiff describe the defences as a sham?

First, the Insurer (The Jubilee Insurance Company of Kenya Limited) is said to have expressly admitted that it had issued an Authorisation Letter to the Insurance Broker (Sapon Insurance Brokers Limited) to transact Insurance Business on behalf of the Insurer.

Secondly, the Broker had expressly confirmed, in their defence, that at all material times, they were acting as the agent of the Insurer.

According to the plaintiff, the agency relationship between the defendants was confirmed through the conduct of the parties, as the Insurer submitted information to the plaintiff, either directly or through the Broker.

Considering that the Broker, in their defence, had confirmed that they relayed all information to the Insurer, leading to the formation of the contract, the plaintiff expressed the view that that further demonstrated the fact that Sapon Insurance Brokers (hereinafter “Sapon”), was the agent of The Jubilee Insurance Company of Kenya Limited (hereinafter “Jubilee Insurance”).

The matters in issue arose after a fire broke out at the plaintiff’s premises, at the Embakasi Annex Warehouse, destroying or damaging the medical supplies which the plaintiff had stored in that warehouse.  The fire broke out and burnt down the warehouse on 19th January 2013.

Following that tragic incident, the plaintiff (hereinafter “KEMSA”) informed Jubilee Insurance about the accident on 21st January 2013.

Immediately after Jubilee Insurance were notified about the fire tragedy, they engaged the services of registered Loss Adjusters and Surveyors named General Adjusters Kenya Limited.

Jubilee Insurance also engaged the services of a Forensic Investigator, Dr. Karanja Thiong’o.

Whilst the Loss Adjusters and Surveyors, as well as the Forensic Investigators were still undertaking the tasks assigned to them, Jubilee Insurance andKEMSAwere engaged in discussions, with a view to settling the claim which KEMSA had lodged with the Insurer.

It is common ground that in the final report prepared by the Loss Adjusters, it was said that the sums claimed by the insured (KEMSA) were not payable because KEMSA had violated the Petrol and Mineral Warranty clauses in the Policy of Insurance.

The Jubilee Insurance relies upon that Report to deny the plaintiff’s claims for compensation.

But the plaintiff and the Insurance Broker insist that Jubilee Insurance cannot be allowed to rely on the Petrol and Mineral Warranty clause to deny them compensation.

On the one hand, the plaintiff and the Insurance Broker assert that the Insurer cannot be permitted to rely on the Petroleum and Mineral Oil Warranty because the relevant clause had never been incorporated in the Insurance Quotation which Jubilee Insurance had made available to KEMSA.

It is the case of KEMSA that the only applicable exclusion clauses and warranties for the Fire and Perils Policy were in relation to;

Earthquake;

Political Risks;

Electrical Clause;

Hazardous Goods;

Fire Brigade; and

Public Utilities.

I understand KEMSAand SAPON INSURANCE BROKERS to be saying that the JUBILEE INSURANCE sneaked into the Policy of Insurance, a provision which had not been brought to the attention of KEMSA when it was shopping around for appropriate insurance cover.

That would imply that both KEMSA and SAPON INSURANCE BROKERS acknowledge that in the policy of insurance, the Petrol and Mineral Warranty is one of the clauses incorporated.

But that is said to have been absent at the time when the insurance cover took effect on 1st of September 2012.

It is noteworthy that Jubilee Insurance does not even admit the plaintiff’s contention, concerning the date when the insurance cover took effect.

As far as Jubilee Insurance was concerned, it only has one contract with the plaintiff, and the said contract of insurance is dated 25th September 2012.

The plaintiff asserted that Jubilee Insurance authorized Sapon Insurance Brokers to transact the insurance business relating to the tender KEMSA/ONT 131/2012 – 2014.  According to KEMSA that tender was for provision of Insurance Brokerage Services.

If the Jubilee Insurance authorized the Broker to transact the business for the provision of Insurance Brokerage Services, that would imply that Jubilee Insurance was the principal, whilst Sapon was the agent.

As a principal, Jubilee Insurance would then have been expected to provide insurance brokerage services for KEMSA, if the contention of KEMSA is accurate.

In answer to that contention, Jubilee Insurance categorically denied having engaged Sapon as its agent.  Jubilee Insurance further stated that it could not have engaged Sapon as its agent for the purposes of procuring insurance brokerage services because Jubilee Insurance is not an insurance broker.

I understand the Jubilee Insurance to be saying that it was an Insurance Company that was registered under the Insurance Act.  By virtue of that registration Jubilee Insurance contended that it was only authorized to conduct long term insurance business and general insurance business.

The plaintiff’s contention, that Jubilee Insurance was involved in offering;

“Insurance coverage and mortgage finance services in Kenya, among other services”.

was therefore said to be inaccurate.

To the extent that a tender was submitted for the provision of insurance brokerage services, Jubilee Insurance contends that that was done by Sapon Insurance Brokers Limited alone.

Jubilee Insurance says that it cannot have put in any bid for insurance brokerage services either directly or through Sapon Insurance Brokers Limited, because Jubilee Insurance did not have legal capacity to provide such services.

If Sapon Insurance Brokers put in a bid for the tender in issue, Jubilee Insurance seems to be saying that that can only have been done either at the sole instance of Sapon Insurance Brokers or on behalf of KEMSA.  In effect, Sapon was deemed by Jubilee Insurance to be the agent of KEMSA.

Is that an attempt by Jubilee Insurance to try and avoid its obligations to compensate KEMSA?

As far as KEMSA was concerned, the answer to that question was in the affirmative.

But Jubilee’s position was the very opposite.  First, Sapon Insurance Brokers were said to have been the agents of KEMSA.

If Jubilee Insurance proves to the Court that Sapon Insurance Brokes were agents for KEMSA,then the failure by Sapon, to draw the attention of KEMSA to the clause in issue would be the fault of Sapon.  Jubilee would not be held to account for such an omission.

But if Sapon Insurance Brokers were agents of Jubilee Insurance, then it was the obligation of the brokers to draw the plaintiff’s attention to the clauses which are now in issue.

By a letter dated 9th July 2012, Jubilee Insurance informed the Chief Executive Officer ofKEMSA that Sapon Insurance Brokers had the authority of Jubilee Insurance, to transact the business of Insurance Services on behalf of Jubilee Insurance.  The contents of that Letter appear to indicate that Sapon Insurance Brokers were agents of Jubilee Insurance.

Assuming for a moment that Sapon Insurance Brokers were an agent of Jubilee Insurance, the next question would be with regard to the extent of the authority given to the said agent.  That question is significant because KEMSA contends that the broker was an agent of Jubilee Insurance in relation to “Insurance Brokerage Services”, whilst the letter vesting the alleged authority on the broker made reference to “Insurance Services”.

It is arguable whether or not those two phrases mean the same thing.

However, there is no dispute about the fact that Jubilee Insurance provided KEMSA with a Policy of Insurance.

The process that culminated in the said Policy of Insurance had begun with the tendering exercise.  At that stage Sapon Insurance Brokers were the agents for Jubilee Insurance.

It does also appear that when Jubilee Insurance was providing its detailed quotations, it did not incorporate the clause which is now in contention.

It was for that reason that KEMSA and Sapon Insurance Brokers both say that there was never an intention, on the part of Jubilee Insurance to incorporate into the Policy of Insurance the Mineral, Oil Warranty Clause 1.

That line of reasoning appears very plausible.

Yet again it cannot escape notice that the plaintiff makes reference to the contract of insurance that is dated 1st September 2012.  But then there is no document which the parties have produced, that bears that date upon its face.

The policy of Insurance which has been placed before the court is dated 25th September 2012.  And that policy contains the Mineral, Oil Warranty Clause 1.

In the circumstances, although the plaintiff (KEMSA) and Sapon Insurance Brokers have put forward very powerful arguments, the court cannot overlook the express contents of the Policy of Insurance.

The plaintiff has invited the court to consider the facts as stated in the pleadings and all the annextures.  Having accepted that invitation, I find that the primary document embodying the Policy of Insurance is the Policy document dated 25th September 2012.

By so holding, I am not suggesting that the documents which preceded the policy document were irrelevant.  Those documents remain an integral part of the contractual relationship between KEMSA and Jubilee Insurance, as they provide an insight into the thought processes of the parties, prior to the execution of the actual policy of insurance.

If the denial of a well known fact can be rightly described as scandalous, then it may well be said of the plaintiff that it was scandalous of KEMSA to deny the actual date of the policy of insurance.

Having given due consideration to the defence mounted by the Jubilee Insurance I find that it cannot be correctly described as being without substance or as being groundless or fanciful and vexatious.  The defence cannot be said to be hopeless or offensive.

KEMSA has contended that the Mineral, Oil Warranty clause I was inserted into the Policy document as an afterthought, so as to enable the Jubilee Insurance evade liability.

I am unable to appreciate that line of reasoning considering that the clause was incorporated into the contract document on 25th September 2012, which was more than 3 months before the outbreak of fire at the plaintiff’s premises.  In effect, the fire which gave rise to KEMSA’s claim for compensation, broke out almost four (4) months after the Insurance Policy was executed.  Therefore, none of the clauses in that policy document could be described as an afterthought.

But I also acknowledge the fact that although the clause in issue was incorporated into the contract document, the Jubilee Insurance does not appear to have drawn the attention of KEMSA to that material fact.

In conclusion, I find that all the three parties have some explaining to do, to enable the court arrive at the most justifiable determination.  I say so because I do not think that Jubilee Insurance can wish away the documents contained in the quotations, whilst KEMSA cannot have us ignore the express terms of the Policy of Insurance.

It would be important to know why Jubilee Insurance incorporated into the Policy instrument, a clause which does not appear to have been contemplated during negotiations.

It would be equally important to know why KEMSA appears to have accepted a Policy instrument which contained a clause which KEMSA had not contemplated.  Did not KEMSA peruse the contract after receiving it?

It may be possible that KEMSA presumed that the contract document contained only the terms which were in the quotation documents.  Would that be a good enough explanation?

Was Jubilee Insurance guilty of misrepresentation or is itKEMSA that failed to ensure that it was given the very thing that it had paid for?

In effect, I find that the Defence put forward by Jubilee Insurance raises triable issues.  I therefore decline the invitation to strike it out.

The application dated 17th March 2014 is dismissed.  However, I do order that the costs of the said application should be in the cause.  I so order because I hold the considered view that it was well worth the effort to bring the application, even though it has ultimately failed.  The effort was well worth because the competing submissions are almost equally balanced.  For that reason, it is only fair that the party who succeeds after the full trial should also be awarded the costs of this application.

It is so ordered.

DATED, SIGNED and DELIVERED at NAIROBI this 5th day of November 2014.

FRED A. OCHIENG

JUDGE

Ruling read in open court in the presence of

…………………………………………………………for the Plaintiff.

………………………………………………… for the 1st Defendant.

………………………………………………… for the 2nd Defendant.

Mr. C. Odhiambo, Court clerk.