Josephine Karen Atieno v Kenya Orient Insurance Company Limited

The Appeal 4. The Appellant was aggrieved by that decision and lodged this appeal seeking, inter alia, that the judgment be set aside and substituted with an order allowing the declaratory claim. 5. In her Memorandum of Appeal dated 26th August 2024, the Appellant raised, among others, the following key grounds: i. That the learned magistrate erred in holding that the Appellant lacked locus standi to institute the declaratory suit. ii. That the magistrate misapplied the doctrine of exhaustion of remedies and failed to appreciate the nature of declaratory proceedings under Section 10(1) of Cap 405. iii. That the trial court failed to consider uncontroverted evidence of insurance coverage as confirmed by the police abstract and statutory notice served on the Respondent. Appellant’s Submissions 6. The Appellant submitted that the learned magistrate erred in both law and fact in holding that she lacked locus standi and in failing to appreciate the purpose of declaratory proceedings. Counsel emphasized that Section 10(1) of the Motor Vehicles (Third Party Risks) Act grants a right to any person who has obtained a judgment against an insured party to institute declaratory proceedings against the insurer. 7. It was argued that since it was not disputed that the Respondent was the insurer of the subject motor vehicle KBG 937A under policy MSA/0700/261840/2019, as evidenced by the police abstract, and that statutory notice had been duly served and acknowledged by the Respondent, the declaratory suit was properly before the trial court. 8. The Appellant relied on several authorities, including: - 9. a. UAP Insurance Co. Ltd vs. Patrick Charo Chiro [2021] eKLRThe court held that Section 10(1) of Cap 405 imposes a duty on insurers to satisfy judgments obtained against their insureds, provided statutory notice has been served. b. Corporate Insurance Co. Ltd vs. Violet Nabwire Ouma [2019] eKLRJustice Waweru Kiarie emphasized that the insurer’s obligation under Section 10(1) can only be avoided through a formal declaration made before the commencement of the declaratory suit and within three months of the judgment. c. Caroline Wanyaga Njagi vs. Invesco Assurance Co. Ltd [2016] eKLRwhere the court recognized the right of an injured party to enforce judgment against an insurer where insurance coverage is not effectively repudiated. d. Guaranty Trust Co. of New York vs. Hannay and Company Limited [1915] 2 KB 536 cited for the principle that declaratory relief is available where a legal right exists, even absent immediate enforcement. The Appellant submitted that denying her the right to enforce judgment through a declaratory suit would “subvert the cause of justice” and occasion hardship, contrary to the purpose of the Act. It was also urged that the trial court misdirected itself by failing to appreciate that declaratory suits are secondary proceedings meant to actualize rights crystallized through a prior judgment. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19404/eng@2025-11-20 2

page 2 of 6

Respondent’s Submissions 10. 11. 12. The Respondent opposed the appeal, supporting the trial court’s reasoning. It was submitted that: i. The trial magistrate correctly held that the Appellant had not exhausted available remedies by way of execution against the judgment debtor. ii. The doctrine of exhaustion requires a claimant to first execute against the debtor before turning to the insurer. iii. The Appellant had failed to produce a valid insurance policy or certificate of insurance as proof of the Respondent’s contractual obligation. The Respondent relied on the following authorities: a. Richard Makau Ngumbi & Another vs. Cannon Assurance Co. Ltd [2011] eKLRWhere the court held that proof of insurance must be by way of a certificate or policy document, not a police abstract. b. Kasereka vs. Gateway Insurance Co. Ltd [2013] eKLRWhere it was found that a police abstract is insufficient proof of an insurance policy. c. Abdul Hameed Saif vs. Ali Mohamed Sholan [1955] 22 E.A.C.A. 270Affirming that appellate courts should exercise caution when reconsidering evidence, particularly where the trial court observed the demeanor of witnesses. The Respondent maintained that the Appellant’s case was defective and premature, and that the magistrate correctly dismissed it after evaluating the applicable law and evidence. Issues for Determination 13. Having considered the pleadings, the grounds of appeal, and submissions by both parties, the following issues arise for determination: a. Whether the Appellant had locus standi to institute declaratory proceedings under Section 10(1) of the Motor Vehicles (Third Party Risks) Act, Cap 405. b. Whether the declaratory suit was premature for want of exhaustion of remedies or failure to execute against the insured. c. Whether the evidence adduced sufficiently established the existence of a valid insurance policy covering the motor vehicle KBG 937A at the material time. d. Whether the trial magistrate’s dismissal of the declaratory suit was erroneous in law and fact. Analysis and Determination Locus Standi under Section 10(1) of Cap 405 14. Both parties anchored their arguments on Section 10(1) of the Motor Vehicles (Third Party Risks) Act, Cap 405. The Appellant argued that once a judgment is entered against the insured and statutory notice is issued to the insurer, liability attaches by operation of law. Conversely, the Respondent argued that the insurer’s liability must be proved by a valid policy or certificate and that the declaratory suit was premature absent exhaustion of execution remedies. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19404/eng@2025-11-20 3

page 3 of 6

15. Section 10(1) of the Motor Vehicles (Third Party Risks) Act provides that: “ If after a certificate of insurance has been issued under subsection (4) of section 5, judgment in respect of any liability required to be covered by a policy under paragraph (b) of subsection (1) of section 5... is obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel, the policy, the insurer shall, subject to the provisions of this section, pay to the person entitled to the benefit of the judgment... any sum payable thereunder.” 16. My understanding of the language of the statute is that once judgment is entered against the insured, the person entitled to the benefit of the judgment has the right to proceed directly against the insurer through declaratory proceedings. This means a new and distinct statutory right accrues to the thirdparty claimant, enabling them to institute declaratory proceedings against the insurer.This is the position that was affirmed in UAP Insurance Co. Ltd vs. Patrick Charo Chiro [2021] eKLR, where the court stated:“ Section 10(1) grants locus standi to any person who has obtained judgment against an insured person to enforce payment against the insurer by way of declaratory proceedings.” 17. Similarly, in Corporate Insurance Co. Ltd vs. Violet Nabwire Ouma [2019] eKLR, Justice Waweru Kiarie held: “ Once the statutory notice has been served and judgment entered against the insured, the injured third party is clothed with locus standi to institute declaratory proceedings against the insurer.” 18. In the instant case, the Appellant had obtained a judgment in Milimani CMCC No. E2436 of 2020 against the insured, and a statutory notice was duly served upon the Respondent. I therefore find that the trial court’s finding that the Appellant lacked locus standi was erroneous and contrary to express statutory provision. Doctrine of Exhaustion 19. The doctrine of exhaustion is a principle of administrative and procedural law which requires a party to first exhaust all internal or statutory remedies available before seeking judicial intervention. The doctrine is rooted in the idea that specialized bodies or prescribed statutory mechanisms should first be given the opportunity to resolve disputes before courts are called upon. 20. In Speaker of the National Assembly vs. Njenga Karume [1992] eKLR, the Court of Appeal stated: “ Where there is a clear procedure for the redress of any particular grievance prescribed by the Constitution or an Act of Parliament, that procedure should be strictly followed.” 21. This has been consistently cited in later cases, including Geoffrey Muthinja Kabiru & 2 Others vs. Samuel Munga Henry & 1756 Others [2015] eKLR, where the Court of Appeal reiterated: “ The exhaustion doctrine serves the purpose of ensuring that a party does not bypass mechanisms of dispute resolution established by Parliament.” 22. In this case, the Respondent contended that the Appellant ought to have first exhausted execution proceedings against the judgment debtor before turning to the insurer. The question that arises is https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19404/eng@2025-11-20 4

page 4 of 6

whether the doctrine of exhaustion is applicable to this dispute. I find that the answer to this question is to the negative. 23. The exhaustion doctrine primarily applies to administrative actions under statutes such as appeals to tribunals, boards, or commissions and in disputes requiring prior recourse to specialized statutory mechanisms such as labour tribunals, public procurement boards among others. The doctrine is not a general rule for all civil actions, particularly not for private law claims or statutory rights that create a direct cause of action, such as under the Motor Vehicles (Third Party Risks) Act, Cap 405. Section 10(1) of the Motor Vehicles (Third Party Risks) Act provides that: 24. Having noted that section 10 of the Act confers a new and distinct statutory right to the third-party claimants enabling them to institute declaratory proceedings against the insurer, I find that there is no statutory requirement to first execute against the insured before invoking this right. 25. My finding is that the Respondent’s argument misconceives the intent of Section 10(1) as the section does not make satisfaction by the insured a condition precedent to the insurer’s liability. The section is clear that once judgment has been entered and notice given, the right to institute a declaratory suit accrues automatically. Courts have consistently rejected attempts to apply the exhaustion doctrine to declaratory suits in motor accident cases.This is the position that was taken in Caroline Wanyaga Njagi vs. Invesco Assurance Co. Ltd [2016] eKLR, where the court observed that: “ Declaratory proceedings are independent and secondary suits intended to facilitate realization of judgment where the insurer has not voluntarily satisfied it. They are not contingent on exhaustion of execution against the insured.” 26. I find that the doctrine of exhaustion applies to administrative and statutory remedies where Parliament has provided a specific dispute-resolution path that must be followed before approaching the courts. The doctrine does not apply to declaratory suits under Section 10 of the Act, because such suits are independent statutory proceedings, not administrative appeals as the right to sue the insurer arises automatically upon compliance with statutory notice and judgment prerequisites. I therefore find that the learned magistrate misdirected himself in invoking the doctrine to defeat a statutory right. Insurance Cover 27. The Respondent disputed the sufficiency of the police abstract as proof of insurance. My take is that while it is true that a police abstract is not conclusive proof, it constitutes prima facie evidence of insurance coverage unless controverted. In Gateway Insurance Co. Ltd vs. Moses Jaika Luvai [2010] eKLR, the court held that: “ A police abstract is prima facie proof of insurance cover where not challenged by the production of a disclaimer or repudiation notice from the insurer.” 28. Similarly, in Zainab Musa vs. Invesco Assurance Co. Ltd [2017] eKLR, it was held that: “ The insurer, having failed to rebut the presumption created by the police abstract, cannot later deny coverage in declaratory proceedings.” 29. In the instant case, the Respondent neither produced the insurance policy nor any letter of repudiation. This means that evidence of coverage under policy number MSA/0700/261840/2019 remained uncontroverted. I find that the trial court therefore erred in dismissing the claim on grounds of insufficient proof. https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19404/eng@2025-11-20 5

page 5 of 6

Whether the Trial Court’s Decision Was Erroneous 30. Having regard to the combined effect of the findings and observations that I have made in this judgment, I find that the the trial court misapprehended both the scope of declaratory proceedings and the applicable standard of proof. Its findings were inconsistent with precedent and the legislative intent underlying Cap 405 of the Act which is to protect third parties injured by negligent drivers. I am guided by the decision in Peter Kimani Njuguna vs. Fidelity Shield Insurance Co. Ltd [2020] eKLR where it was held that: “ The spirit of Section 10 is to ensure that third-party victims of road traffic accidents are not left remediless merely because the insured has failed to satisfy judgment.” 31. In the circumstances of this case, I find that denying the Appellant the right to proceed against the insurer would therefore subvert justice and defeat the remedial purpose of the statute. Disposition 32. Accordingly, the Court makes the following orders: a. The appeal is allowed. b. The judgment and decree of Hon. E.M. Nyakundi (PM) delivered on 15th August 2024 in Milimani CMCC No. E1139 of 2023 are set aside. c. They are substituted with an order that judgment be and is hereby entered for the Appellant as prayed in the declaratory suit. d. The Respondent shall satisfy the judgment entered in Milimani CMCC No. E2436 of 2020 in favour of the Appellant. e. The Appellant shall have costs of the appeal and the suit below. DATED, SIGNED AND DELIVERED AT NAIROBI THIS 20TH DAY OF NOVEMBER, 2025. HON. W. A. OKWANY JUDGE 20/11/2025 For Appellant ……………. For The Respondent ………… Court Assistant Ubah https://new.kenyalaw.org/akn/ke/judgment/kehc/2025/19404/eng@2025-11-20 6

page 6 of 6