Icea Lion General Insurance Company Limited v Noble Merchants Shipping Limited & 1 other
The bottom line
#Kenya's Court of Appeal confirmed an insurer must pay a fire claim of Kshs. 49 million because it never communicated an exclusion clause or proved the fire's cause.
What this practically means
#Executive summary
#Key legal issues
#Pleadings as the boundary of issues on appeal
Issues not expressly pleaded cannot ground a decision; the Appellant's insurable-interest and non-disclosure contentions were not pleaded in the defence and failed
The Court restated the rule that issues flow from pleadings and that parties are confined to their pleadings, citing Galaxy Paints, Gandy v Caspair and the Supreme Court's decision in Raila Odinga v IEBC. The Appellant's amended defence admitted a policy but never pleaded lack of insurable interest or material non-disclosure. Contentions built on alleged contradictions in the sale agreement and non-payment of the purchase price therefore fell outside the issues, and evidence that the broker inspected and verified the goods at inception further undermined the defence.
Insurable interest and passing of property
The 1st Respondent had an insurable interest; property in the goods passed under Sections 19 and 20(a) of the Sale of Goods Act notwithstanding non-payment of the full purchase price
Property passed when the contract was made in December 2001. An unpaid seller's remedy lies under Sections 39 and 40 of the Sale of Goods Act and does not defeat the buyer's ownership. Adopting Hardy Ivamy's General Principles of Insurance Law, the Court held that insurable interest may rest on legal or equitable ownership or on contract, and that a precarious interest still suffices to support a contract of insurance. The Court found the ownership trail from Arturro Cerutti to PW1 and to the 1st Respondent sufficiently established.
The bush fire exclusion clause
The exclusion clause could not be relied upon because it was introduced in the policy document issued only after the fire and was never brought to the insured's attention; and the insurer failed to prove the fire's cause
The contract took effect before the policy document was issued; its terms were those in the proposal form, debit/risk notes and endorsements. Any new terms should have been communicated so the insured could elect to continue the cover. The Court also applied Globe Trawlers: once fire loss is proved, the onus lies on the insurer to prove the exclusion applies. All investigators' reports were inconclusive, with the insurer's own witnesses confirming the cause of fire could not be established.
Proof of quantum and the principle of indemnity
The insured was entitled to be indemnified on the sum assured because the insurer failed to adjust the loss, leaving the insured's assessment as the only evidence of value
The Court accepted that indemnity requires proof of actual loss without unjust enrichment, but noted the insured's assessor assessed the loss at Kshs. 57,997,440, exceeding the insured sum of Kshs. 49,000,000. The insurer, having relied on breach of policy terms and declined to adjust or verify the claim, took a calculated risk. Applying Nkuene Dairy Farmers and Ratcliffe v Evans, the degree of proof required is that which is reasonable in the circumstances.
New points on appeal and the broker's agency
The contention that the 1st Respondent's servant caused the fire could not be entertained on appeal; and the broker's alleged knowledge of the exclusion could not aid the insurer where the clause was never communicated
Relying on Stallion Insurance v Ignazzio Messina and North Staffordshire Railways v Edge, the Court declined the new point as unfair and prejudicial, there being no evidence the fire was caused by the insured's employee. On agency, even assuming the broker knew of the clause, the insurer's evidence on causation was inconclusive, so the exclusion could not apply in any event; the trial judge's dismissal of the claim against the broker was unassailed.
Interest on the award (cross-appeal)
The trial judge erred in failing to specify the rate of interest; the proper rate is the court rate of 14% per annum, running from the date of filing suit because the claim was for a specific liquidated sum
Adopting Prem Lata, a party deprived of the use of money by a wrongful act should be compensated by interest. No proper basis was laid for awarding bank lending rates, so the court rate of 14% fixed in Highway Furniture Mart applies. Since the plaint claimed a specific amount and not unliquidated general damages, interest accrues from filing suit rather than from judgment, and the appeal on this point succeeded only via the cross-appeal.
Legal principles established
#- A policy term, particularly an exclusion clause, that was never brought to the insured's attention before the contract took effect cannot be used to repudiate liability under the policy
- Once loss by fire is shown, the insured makes out a prima facie case and the burden lies on the insurer to prove on a balance of probabilities that the loss falls within an exclusion
- An insurer who fails to verify or adjust a claim takes the risk that the only evidence of quantum will be the insured's evidence; non-payment of the full purchase price does not defeat an owner's insurable interest
- A party cannot raise a new issue for the first time on appeal that was not litigated before the trial court
- Where a sum certain is awarded on a liquidated claim, the proper rate of interest, absent evidence justifying a bank rate, is the court rate of 14% per annum running from the date of filing suit
Court orders
#- 1.The appeal is dismissed
- 2.The cross-appeal is allowed to the extent that the rate of interest is specified
- 3.Interest on the sum awarded will accrue at the rate of 14% from the date of filing the suit
- 4.The costs of the appeal are awarded to the Respondents
- 5.Each party bears own costs of the cross-appeal
- On appeal from
- High Court of Kenya
- Not stated in the judgment copy
- Jurisdiction invoked
- First appeal to the Court of Appeal (appeal from the High Court); no specific constitutional or statutory provision is cited in the judgment copy.
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (3)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Kerianko & 3 others v PJ Dave Flowers Limited & 3 others (Environment and Land Appeal E010 of 2023) [2025] KEELC 3240 (KLR)[2025] KEELC 3240 (KLR)27 Mar 2025
- Kerianko & 3 others v PJ Dave Flowers Limited & 3 others (Environment and Land Appeal E010 of 2023) [2025] KEELC 3240 (KLR)[2025] KEELC 3240 (KLR)27 Mar 2025applied
- Maundu v Kipilosh (Environment and Land Appeal E044 of 2022) [2024] KEELC 6310 (KLR)[2024] KEELC 6310 (KLR)26 Sept 2024applied
Cite this brief
#Cite this brief
Caselaw, "Icea Lion General Insurance Company Limited v Noble Merchants Shipping Limited & 1 other", Case Analysis (2023). Not stated in the judgment copy. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2023/1061/eng@2023-09-22
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.