Concord Insurance Company Ltd v Alinyo & another (Suing as Legal Representatives of Wellington Alinyo - Deceased) (Civil Appeal 163 of 2002) [2005] KECA 291 (KLR)
The bottom line
#Kenya's Court of Appeal ruled insurers can repair rather than replace a damaged vehicle, and cancelled a Shs.1.6 million award for lost earnings.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether Concord was in breach of the policy of insurance and therefore liable to the insured
- 2.Whether the learned Judge applied the correct measure of damages
- 3.Whether the loss of user (earnings) claimed was recoverable under the policy as pleaded, or was consequential loss and, in any event, mitigable
- 4.Whether the insured was entitled to a refund of the Shs.41,000 'excess' paid under the policy
Key legal issues
#Whether Concord was in breach of the policy of insurance and therefore liable to the insured
No. The repairs restored the rear load body to its pre-accident condition and the body did not require replacement; Concord indemnified the insured in terms of the policy. The trial judge's finding of breach rested on delay in authorising repairs, which was never pleaded as breach.
The pleaded breaches were sub-standard repairs and refusal to replace the body, not delay; the trial judge misapprehended the dispute. Under clause 2 of section 1 Concord could, at its own option, repair, reinstate or replace. Gohil, the assessor and loss adjuster, priced the repairs at Shs.70,757 as a fair cost of restoring pre-accident condition and on re-inspection found them satisfactory; Ruprah, the mechanic, confirmed the body was repairable. Their unshaken expert evidence was preferred over the unsubstantiated claim of sub-standard repairs by the insured's son, who had no specialised knowledge and never commissioned an independent assessment.
Whether repairs, as opposed to replacement, constitute sufficient indemnity under the policy
Yes. Where the damage covered by the policy is repairable and commercially worth repairing and the repairs restore the vehicle or part to its pre-accident condition, the insurer is not in breach by undertaking repairs rather than replacement.
Finding no direct insurance-law authority on when repairs suffice, the Court borrowed the tort measure for damaged chattels: restitution integrum, with the prima facie measure of diminution in value being the cost of repairs (Darbishire v Warran; Burdis v Livsey; McGregor on Damages). Because the insurer's option under clause 2 to repair, reinstate or replace depends on the extent of the damage, an insured cannot demand a new body where the repairs amount to full indemnity. Here the body was repairable and satisfactorily repaired, so Concord was not in breach.
Whether the learned Judge applied the correct measure of damages in awarding loss of user
No. The loss of user was consequential loss, irrecoverable under a standard form policy unless expressly covered; the policy here specifically excepted liability for consequential loss.
Damages for breach of an insurance policy are circumscribed by its terms, not at large. The policy covered loss or damage to the lorry or its parts, so the direct loss from failure to indemnify was the value of the load body, not loss of user, which arose subsequently and was peculiar to the insured's beer-distribution business. Following this Court's decisions in Corporate Insurance Company v Wachira and Madison Insurance Company Limited v Kinara, such consequential loss is irrecoverable under a standard form policy unless expressly covered.
Whether the insured mitigated his loss
No. The insured failed to act with commercial prudence and cannot recover mitigable loss; the 1½-year loss-of-user award of Shs.1,642,580 was set aside.
The load body had been repaired by 7th August 1986. The insured could have paid the repair costs and collected the vehicle without forfeiting his right to pursue Concord for the value of a new load body; instead he refused to sign the discharge voucher, left the lorry at the garage, and it was ultimately sold to meet repair and storage charges. Loss flowing from that refusal was avoidable and irrecoverable. The trial judge's award of Shs.1,642,580 for 547 days' loss of user was therefore unsustainable and was set aside on appeal.
Whether the insured was entitled to a refund of the Shs.41,000 excess paid under the policy
Yes. The excess is part of the performance of the contract, not premium; since Concord never paid the repair costs or for a new body, retention of the excess was unjustified and the appeal against that award was dismissed.
Relying on Kenya National Assurance Co Ltd v Kimani, where Plat JA and Apaloo JA distinguished premium — the consideration creating the contract — from excess, the insured's agreed contribution to the loss whose payment demands performance, the Court held that an insured who pays excess demands performance on the insured part of the loss. Concord performed nothing: it neither paid Ruprah the Shs.70,757 repair costs nor funded a new body, and the insured had not claimed those sums. Retention of the excess was therefore unjustified.
Legal principles established
#- On a first appeal, where the trial judge has failed to evaluate the evidence or has drawn wrong inferences from it, the appellate court has a duty to re-evaluate the evidence and draw its own independent conclusions
- Liability in breach of contract cannot be founded on conduct that was never pleaded as constituting the breach
- Where damage to a vehicle or part covered by an insurance policy is repairable and commercially worth repairing, and the repairs restore it to its pre-accident condition, the insurer is not in breach of the policy by repairing rather than replacing
- Consequential loss is not recoverable under a standard form policy of insurance unless expressly covered by the policy
- An insured cannot recover losses which were avoidable and for which he had a duty in law to mitigate
- Loss of user arising after the breach and peculiar to the insured's particular circumstances is consequential loss irrecoverable under the policy
Court orders
#- 1.Appeal partially allowed to the extent that the award of Shs.1,642,580/= as loss of user (earnings) is set aside
- 2.Appeal against the award of Shs.41,000/= as refund of the 'excess' dismissed; that sum to be paid with interest at court rates
- 3.The decretal sum deposited in an interest-bearing bank account (pursuant to the consent order of 9th August 2000) to be released to the appellant together with all the accrued interest
- 4.No orders as to costs of both the suit and of this appeal
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court (referred to in the judgment as 'the superior court')
- Jurisdiction invoked
- No constitutional or statutory provision is cited in the judgment; the matter came before the Court of Appeal at Kisumu as a first appeal from the superior court in exercise of its appellate jurisdiction
Relief refused
#Respondents' claim that Concord breached the policy by carrying out sub-standard repairs and refusing to replace the rear load body with a new body, with consequential damages
The repairs restored the body to its pre-accident condition; the insurer had indemnified the insured in terms of the policy and was not in breach
Loss of use/earnings of the vehicle (claimed at Shs.4,000 per day; awarded at Shs.1,642,580 by the trial court)
It was consequential loss not covered by the standard form policy and, in any event, avoidable loss which the insured had a duty to mitigate
Cross-appeal seeking enhancement of damages awarded for loss of user
Abandoned by the respondent
Costs
No orders as to costs of both the suit and of this appeal — each party to bear their own costs. Verbatim: 'In the light of those circumstances, it is just that there should be no orders as to costs of both the suit and of this appeal and we so order.'
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
we would partially allow the appeal to the extent that, we set aside the award of Shs.1,642,580/= as loss of user (earnings) but dismiss the appeal against the award of Shs.41,000/= as refund of the “excess” paid which will be paid with interest at court rates.
As a result of this decision, the decretal sum deposited in an interest bearing bank account will be released to the appellant together with all the accrued interest.
In the light of those circumstances, it is just that there should be no orders as to costs of both the suit and of this appeal and we so order.
Thus Concord indemnified the insured in terms of the policy and was not in breach of the policy for failure to replace the body.
consequential loss is not recoverable in a standard form policy of insurance unless expressly covered by the policy
where a trial judge fails to evaluate the evidence or draws wrong inference from the evidence, the appellate court has a duty to evaluate the evidence and draw its own independent conclusions
Issues in the judgment
#Name-order inconsistency for the first respondent/insured's son: he is rendered 'David Otieno Alinyo' in the case title and party descriptions but 'David Alinyo Otieno' in the evidence narrative
Arithmetic inconsistency in the judgment: the stated judgment total of Shs.1,683,500 does not equal the sum of its components (Shs.1,642,580 loss of earnings + Shs.41,000 excess = Shs.1,683,580); the daily-rate computation (547 days x Shs.3,000 = Shs.1,641,000) also differs from the awarded Shs.1,642,580
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Concord Insurance Company Ltd v Alinyo & another (Suing as Legal Representatives of Wellington Alinyo - Deceased) (Civil Appeal 163 of 2002) [2005] KECA 291 (KLR)", Case Analysis (2005). Not stated in the judgment (first appeal to the Court of Appeal; a related cross-appeal by the respondent was on file). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2005/291/eng@2005-07-15
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.