Jubilee General Insurance Limited v Levities International Reinsurance Brokers Limited

Background 5. The Plaintiff avers that in 2015 it issued an insurance policy to Neptune Group of Hotels Limited covering, inter alia, fire risks. 6. To mitigate its exposure, the Plaintiff entered into a Facultative Reinsurance Agreement with the Defendant on 25th January 2016, pursuant to which the Defendant placed 59.13% of the Plaintiff’s risk with various reinsurers. Under the agreement, reinsurance premiums were to be paid through the Defendant for onward remittance to reinsurers, and any recoveries arising from claims were to be channeled through the Defendant by way of indemnity to the Plaintiff. 7. The Plaintiff contends that it remitted all facultative premiums to the Defendant on 7th June 2016. Following a loss event, a claim was raised by the insured on 28th June 2016. The Plaintiff assessed and settled the claim in the sum of Kshs. 538,187,380.00 and thereafter sought recovery of Kshs. 318,230,197.79 being approximately 59% of the ceded risk from the reinsurers through the Defendant. 8. The Plaintiff further avers that the Defendant acknowledged that the sums were due and undertook to pursue recovery from reinsurers, and that on 6th February 2019 the Defendant acknowledged owing the Plaintiff Kshs. 159,000,000.00 as at 31st December 2018. While partial recoveries were allegedly made, the Plaintiff contends that the Defendant failed to remit the balance of Kshs. 182,628,477.48, prompting the filing of this suit. 9. The Defendant filed a Statement of Defence dated 23rd July 2021, amended on 21st July 2023, in which it admits only the description of parties and the existence of the facultative reinsurance arrangement, but denies liability. The Defendant avers that the Plaintiff was contractually obliged to deal exclusively with reinsurers through the Defendant, to promptly notify it of any risk event, and that the Defendant duly remitted all premiums to reinsurers in June 2016. 10. The Defendant further contends that any payments made were ex gratia and without prejudice, that it never acknowledged indebtedness, and that the Plaintiff breached the reinsurance agreement by late notification of the claim, direct engagement with reinsurers, misrepresentation of facts, and usurpation of the Defendant’s role, thereby frustrating performance of the contract. The Defendant also challenges the Court’s jurisdiction on the ground that statutory dispute resolution mechanisms under the Insurance Act were not exhausted. 11. At the trial, the Plaintiff called one witness, Mr. Evans Kipkorir, a Senior Underwriter with the Plaintiff, who adopted his witness statement dated 3rd October 2024 and the accompanying documents. He testified that all premiums were remitted to the Defendant on 8th June 2016, prior to the loss, and that the Defendant failed to remit premiums and recoveries as required. 12. The Defendant called one witness, Ms. Esther Muhindi, its Chief Executive Officer, who adopted her witness statement and documents and testified that premiums were remitted to reinsurers, that the Plaintiff breached the agreement, and that any losses were not attributable to the Defendant. 13. Parties thereafter filed written submissions. The Plaintiff relied on principles of agency and fiduciary duty, while the Defendant maintained that it acted within the contract and industry practice and that the Plaintiff’s claim is unmerited. Analysis and determination 5. Having considered the pleadings, evidence, and submissions, the Court finds that the following issues arise for determination: https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/802/eng@2026-01-29 2

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i. Whether the Defendant breached the Facultative Reinsurance Agreement or its fiduciary duties to the Plaintiff; ii. Whether the Plaintiff is entitled to the sums claimed; iii. Whether the suit is premature for failure to exhaust statutory dispute resolution mechanisms; and iv. Who should bear the costs of the suit. Whether the Defendant breached the Facultative Reinsurance Agreement 5. The Plaintiff’s central submission is that upon receipt of the reinsurance premiums on 8th June 2016, the Defendant was under an immediate contractual and professional obligation to remit the same to the reinsurers without undue delay. The Plaintiff contends that the loss occurred on 28th June 2016, during which period of approximately twenty (20) days the Defendant held the premiums without remitting them, thereby exposing the Plaintiff to uninsured risk. 6. The Defendant, on its part, submits that the Plaintiff breached the Premium Payment Warranty by allegedly paying premiums outside the stipulated ninety (90) day period and that any consequences arising therefrom cannot be attributed to the Defendant. The Defendant further contends that the premiums were remitted within a reasonable time and in accordance with industry practice. 7. It is common ground that the relationship between the parties was governed by a facultative reinsurance agreement. The law is settled that courts do not rewrite contracts freely entered into by parties; rather, parties are bound by the terms of their bargain unless vitiating factors such as fraud, coercion, or undue influence are pleaded and proved. This principle was succinctly stated by the Court of Appeal in National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & Another [2001] eKLR. 8. It is also not disputed that the Defendant acted as a reinsurance broker for the Plaintiff. In law, a broker acts as an agent and owes fiduciary duties of loyalty, good faith, and accountability to its principal. These duties include the obligation to promptly remit monies received on behalf of the principal and to render a proper and accurate account thereof. 9. It is trite law that an agent who receives money on behalf of a principal holds the same in trust and must account for it. In Standard Chartered Bank Kenya Ltd v Intercom Services Ltd & 4 Others [2004] eKLR, the Court affirmed that fiduciary obligations arise where one party undertakes to act for another in circumstances giving rise to trust and confidence. 10. The law on agency and fiduciary duty is clear and was correctly cited by the Plaintiff. In Pioneer Holdings (Africa) Ltd v Francis Thuo & Partners Ltd & 2 others [2019] eKLR, the Court of Appeal stated: “ Undoubtedly, an agent has duties towards the principal that include the duty to carry out the principal’s instructions; the duty to exercise care and skill…the duty of loyalty; and fiduciary duties including but not limited to duties to account and to avoid conflicts of interest.” 5. The evidence before the Court shows that the Plaintiff duly remitted all reinsurance premiums to the Defendant prior to the occurrence of the loss. This fact was not seriously controverted. Upon receipt of the premiums, such funds were held in trust. A fiduciary is under a strict obligation to act with utmost good faith and to avoid conduct that prejudices the principal’s interests. The Defendant became contractually bound to perform its obligations under the reinsurance arrangement, including https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/802/eng@2026-01-29 3

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the prompt remittance of premiums to reinsurers and the safeguarding of the Plaintiff’s reinsurance cover. 6. The Defendant received premiums belonging to the Plaintiff for onward transmission. 7. Further, under general principles governing performance of contracts, where no specific timeline is stipulated, performance must be undertaken within a reasonable time. What constitutes a reasonable time must be assessed in light of the nature of the contract and the surrounding circumstances. In the context of insurance and reinsurance, where risk attaches daily and exposure is continuous, the retention of premiums for a period of twenty (20) days without remittance cannot, in the Court’s view, be regarded as reasonable. 8. In the premises, the Court finds that the Defendant failed to discharge its contractual and fiduciary obligations and thereby breached the Facultative Reinsurance Agreement. 9. The Defendant argued that the Plaintiff breached the agreement by late notification and direct engagement with reinsurers. However, the evidence shows that the Defendant was aware of the loss event, participated in claim follow-ups, and continued to engage with reinsurers on behalf of the Plaintiff. 10. In Kenya Commercial Bank Ltd v Popatlal Madhavji & Another [2019] eKLR, the Court of Appeal held that a party who continues to perform a contract with knowledge of a breach may be deemed to have waived strict compliance. The Defendant cannot therefore rely on alleged procedural breaches while continuing to act as broker and partially remit recoveries. Whether the Plaintiff is entitled to the sums claimed 28. The starting point is the burden of proof. Under section 107(1) of the Evidence Act, whoever desires a court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist. The Plaintiff’s case was that it duly remitted all reinsurance premiums to the Defendant, settled the insured’s claim in full, and that the Defendant thereafter received reinsurance recoveries which it failed to fully remit or properly account for. 29. In discharge of that burden, the Plaintiff placed before the Court cogent documentary evidence demonstrating: the remittance of reinsurance premiums to the Defendant prior to the loss event; payment vouchers and settlement documentation evidencing payment of Kshs. 538,187,380.00 to the insured; correspondence and schedules relating to recoveries pursued from reinsurers; acknowledgments by the Defendant of outstanding sums; and evidence of partial recoveries remitted by the Defendant. The Plaintiff’s witness explained this body of evidence and consistently maintained that, despite repeated demands, a substantial balance remained unpaid. 30. The Defendant contested the claim on the grounds that it did not receive all recoveries from reinsurers, that some payments were made on an ex gratia basis, and that there was no admission of liability. However, these assertions were not supported by any coherent reconciliation or documentary accounting. Notably, the Defendant failed to place before the Court a complete statement showing the amounts received from each reinsurer, the dates of receipt, and the corresponding remittances made to the Plaintiff. 31. Once the Plaintiff demonstrated that recoveries were due from reinsurers and that partial remittances had in fact been made by the Defendant, the evidential burden shifted to the Defendant to account for the balance. This position is firmly anchored in law. In Trust Bank Ltd v Paramount Universal Bank Ltd & 2 Others [2009] eKLR, the Court held that where a party is under a duty to account for monies received on behalf of another, failure to provide a proper account justifies an inference of liability. https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/802/eng@2026-01-29 4

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Similarly, in Karugi & Another v Kabiya & 3 Others [1987] KLR 347, the Court of Appeal affirmed that while the legal burden of proof remains constant, the evidential burden shifts once a prima facie case is established. 32. The Defendant’s failure to render a satisfactory account is particularly significant given its fiduciary position as a reinsurance broker. An agent entrusted with funds is under a strict duty to keep clear and accurate accounts and to be ready at all times to explain how monies received have been applied. In Standard Chartered Bank Kenya Ltd v Intercom Services Ltd & 4 Others [2004] eKLR, the Court underscored that fiduciary relationships impose a higher duty of candour and accountability, and that unexplained retention of funds attracts liability. 33. The Defendant sought to downplay correspondence acknowledging outstanding balances by characterizing it as informal, qualified, or without prejudice. Having considered the tenor and context of that correspondence, the Court is satisfied that the Defendant expressly acknowledged owing the Plaintiff the sum of Kshs. 159,000,000.00 as at 31st December 2018. Such acknowledgement is not only evidentially significant but also legally relevant. Under section 23(3) of the Limitation of Actions Act, an acknowledgement of debt in writing constitutes sufficient evidence of the existence of liability. 34. On the totality of the evidence, the Court finds that the Plaintiff proved, on a balance of probabilities, that the Defendant received reinsurance recoveries which were not fully remitted. The Defendant’s failure to reconcile recoveries received with sums paid to the Plaintiff leaves the Court with no reasonable explanation other than that the outstanding sums remain in the Defendant’s hands or were otherwise misapplied. The Defendant is therefore liable to the Plaintiff for the outstanding recoveries. Whether the suit is premature for failure to exhaust statutory dispute resolution mechanisms 35. The Defendant contended that the suit is premature on the basis that the Plaintiff failed to exhaust the statutory dispute resolution mechanisms provided under the Insurance Act before approaching this Court. It was argued that the Plaintiff ought first to have invoked the regulatory framework administered by the Insurance Regulatory Authority, and that this Court therefore lacks jurisdiction to entertain the dispute at first instance. 36. The Plaintiff, on its part, submitted that the dispute before Court is not a regulatory or administrative dispute contemplated under the Insurance Act, but a private commercial dispute founded on breach of contract, agency, and fiduciary duty between an insurer and its reinsurance broker. It was argued that such a dispute falls squarely within the jurisdiction of this Court and is not subject to mandatory exhaustion. 37. The doctrine of exhaustion is now well settled in Kenyan jurisprudence. In Speaker of the National Assembly v Karume [1992] eKLR, the Court of Appeal held that where the Constitution or a statute provides a clear procedure for redress, that procedure ought to be strictly followed. 38. That said, the doctrine is not absolute. Courts have consistently recognized that it does not apply mechanically. In Republic v Independent Electoral and Boundaries Commission (IEBC) ex parte National Super Alliance (NASA) [2017] eKLR, the Court acknowledged exceptions to the exhaustion requirement, including where the dispute raises pure questions of law, where the statutory mechanism is inadequate, or where the matter falls outside the statutory body’s mandate. 39. Applying these principles to the present case, the Court is not persuaded that the dispute herein is one that must first be ventilated before the Insurance Regulatory Authority. The Plaintiff’s claim seeks recovery of specific sums of money allegedly withheld by the Defendant in breach of a facultative reinsurance agreement and fiduciary obligations arising from an agency relationship. The https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/802/eng@2026-01-29 5

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determination of such a claim necessarily entails interpretation and enforcement of contractual rights, evaluation of evidence, and assessment of liability and quantum—functions that are quintessentially judicial. 40. The Insurance Act principally vests the Insurance Regulatory Authority with supervisory and regulatory powers over insurers and intermediaries, including licensing, compliance, and enforcement of statutory standards. It does not confer upon the Authority jurisdiction to adjudicate contested private commercial claims for damages arising from breach of contract or fiduciary duty. As cautioned by the Court of Appeal in Kenya Revenue Authority v Menginya Salim Murgani [2010] eKLR, statutory dispute resolution mechanisms ought not to be extended beyond the scope expressly contemplated by statute. 41. Further, the Defendant did not demonstrate the existence of a specific, clear, and efficacious statutory procedure under the Insurance Act capable of granting the reliefs sought by the Plaintiff. In Mutanga Tea & Coffee Company Ltd v Shikara Limited & Another [2015] eKLR, the Court of Appeal held that the exhaustion doctrine applies only where the alternative remedy is adequate, effective, and capable of resolving the dispute in question. 42. The Court also notes that the Defendant engaged with the Plaintiff over a prolonged period through correspondence, reconciliations, and partial payments without insisting on referral of the dispute to the regulator. Having actively participated in such engagements, the Defendant cannot now approbate and reprobate by invoking exhaustion as a jurisdictional bar. In Kenya Commercial Bank Ltd v Popatlal Madhavji & Another [2019] eKLR, the Court of Appeal held that a party who, by its conduct, leads another to adopt a particular course cannot later resile from that position to the detriment of the other party. 43. In the circumstances, the Court is satisfied that the dispute is a private law claim properly before this Court, that no mandatory and efficacious statutory dispute resolution mechanism has been demonstrated, and that invocation of the exhaustion doctrine would merely delay substantive justice. 44. The Court therefore finds that the suit is not premature and that it is properly seized of jurisdiction. Final Orders 45. In the result, having found that the Plaintiff has proved its case on a balance of probabilities, the Court makes the following final orders: i. Judgment is hereby entered for the Plaintiff against the Defendant in the sum of Kenya Shillings One Hundred and Eighty-Two Million, Six Hundred and Twenty-Eight Thousand, Four Hundred and Seventy-Seven and Forty-Eight Cents (Kshs. 182,628,477.48). ii. Interest on the said sum shall accrue at court rates from the date of filing suit until payment in full. iii. In the alternative, and without prejudice to order (i) above, the Defendant’s admitted liability of Kshs. 159,000,000 is hereby confirmed as due and payable to the Plaintiff. iv. The Defendant shall bear the costs of the suit, together with interest thereon at court rates from the date of taxation until payment in full. JUDGMENT DELIVERED VIRTUALLY, DATED AND SIGNED AT NAIROBI THIS 29TH DAY OF JANUARY 2026. P.M. MULWA https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/802/eng@2026-01-29 6

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JUDGE In the presence of: Mr. Darr for Plaintiff Mrs. Awinja for Defendant Court Assistant: Carlos https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/802/eng@2026-01-29 7

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