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Court of AppealPartially AllowedCivil Appeal 66 of 2008· [2010] KECA 481 (KLR)

Co-operative Insurance Company Ltd v David Wachira Wambugu

Court of Appeal of Kenya
12 February 2010
EGE. M. GithinjiPWP. N. WakiAVAlnashir Visram
2,142 words in judgment
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The bottom line

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Kenya's Court of Appeal voided an insurance policy because the policyholder hid his diabetes, so the insurer paid nothing on a Kshs.5 million claim.

What this practically means

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Executive summary

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The respondent insured himself with the appellant under a Personal Accident Policy taken out on 8th April 2002, with maximum cover of Kshs.5 million for death or permanent total disability and Kshs.500,000/= for temporary total disability. After an armed robbery in November 2003 in which he lost teeth, he claimed Kshs.5 million for permanent total disability. The insurer denied the claim, asserting the injury was temporary and that it had already paid Kshs.619,371/=. At trial, an amended defence raising a counter-claim alleged material non-disclosure: the respondent had failed to disclose pre-existing diabetes and periodontitis in the proposal form. The High Court (Khaminwa, J) found no non-disclosure, holding the respondent answered truthfully because no disease called 'diabetes paralysis' exists, and awarded Kshs.5,411,429/=. The Court of Appeal reversed. Applying the doctrine of utmost good faith (Joel v Law Union; Brownlee v Campbell; Carter v Boehm), it held the respondent was bound to disclose his diabetes and periodontitis regardless of his literal reading of the proposal question, and that his blanket 'No' answer, including to the recurring-disease limb, concealed material facts. The policy was therefore avoided; the appeal was allowed, the judgment and decree set aside, the suit dismissed, and the counter-claim allowed with a declaration that the insurer is entitled to avoid the policy, with costs of the suit, counter-claim and appeal to the appellant.

Key legal issues

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01

Non-disclosure of material facts in insurance proposal

Holding

The respondent's failure to disclose his diabetes and periodontitis entitled the appellant to avoid the policy.

Reasoning

Insurance contracts are uberrimae fidei. The respondent knew he was diabetic since 1996 and had periodontitis since 1997, facts material to the risk and known only to him. His literal answer to the 'diabetes paralysis' question did not discharge the duty; he should have disclosed the conditions or answered the recurring-disease limb. Concealment induced the insurer to underwrite a risk different from that understood, avoiding the policy.

p. 4
02

Consequence of avoidance on quantum issues

Holding

Once the policy was avoided, the arithmetical and permanent/temporary disability questions became moot.

Reasoning

The court framed non-disclosure as the single-most important issue; if the policy was avoided, the respondent was entitled to no payment at all, rendering the trial court's award and its alleged errors irrelevant. The court expressly declined to determine the amount payable.

p. 4

Legal principles established

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  • An insured is under a legal duty to disclose all material facts known to him that may influence the underwriter's assessment of the risk, whether or not he thought them material; concealment avoids the policy.
  • A contract of insurance is one of utmost good faith requiring pre-contractual disclosure of all material facts and circumstances affecting the risk.
  • An insured cannot rely on a literal or self-serving reading of an ambiguous proposal-form question to escape the disclosure duty; the duty extends to answering the substance of the question, including whether he suffered any recurring disease.

Court orders

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  1. 1.Appeal allowed
  2. 2.Judgment and decree of the superior court dated 27th September, 2007 set aside
  3. 3.Respondent's suit dismissed with costs to the appellant
  4. 4.Counter-claim allowed with costs to the appellant
  5. 5.Declaration in terms of prayer (iii) that the appellant is entitled to avoid the policy
  6. 6.Appellant to have the costs of this appeal

Authorities

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Cases cited (3)

  • Joel vs Law Union & Crown Insurance Company (2)
    (1908) 2 K B 883

    Life insurance contract is uberrimae fidei; insurer entitled to all material information possessed by the insured.

  • Brownlee vs Campbell
    5 A C 925

    Duty to disclose any circumstance that may influence the underwriter's opinion of the risk; concealment avoids the policy.

  • Carter vs Boehm
    (1766) Burr. 1905

    Lord Mansfield's classic statement that suppression of special facts known only to the assured is fraud and voids the policy.

On appeal from
High Court of Kenya at Embu
H.C. Civil Suit No. 107 of 2005
Jurisdiction invoked
First appellate jurisdiction over the High Court (Constitution/ Appellate jurisdiction Act not expressly cited in the judgment)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (2)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Co-operative Insurance Company Ltd v David Wachira Wambugu", Case Analysis (2010). Civil Appeal 66 of 2008. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2010/481/eng@2010-02-12

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.