Kenya Orient Insurance Limited v Elizabeth Njoki Mwangi & 1 other

4. Therefore, the suit proceeded undefended leading to an interlocutory judgment being entered on 10th November 2022 against the 1st Respondent for Ksh. 1,135,644 which accrued to Ksh 1,261,044,060 together with costs and interest. 5. As a result, the 1st Respondent sued the appellant for breach of contract for failing to repudiate liability before the commencement and or during the haring of Ruiru Civil suit no. E451 of 2022; and failing to void the insurance contract during its pendency or give notice of any breach of the terms therein by the 1st Respondent if any was ever breached. 6. Consequently, the 1st Respondent sought a declaration that the Appellant had an obligation to pay the claim including the decretal sum and all accrued interests arising out of Ruiru Civil suit No. E451 of 2022 to the interested Party arising out of the accident which occurred on the 1st of June 2020 involving the 2nd Respondent’s’ motor vehicle registration number KCP 276P Mercedes Benz. The 1st Respondent also sought a declaration that she was not liable in person to pay the 2nd Respondent any sums, judgments or claims payable or which may become payable in respect of the liability of the 1st Respondent arising from the accident of 1st June 2020 as she had a valid insurance cover with the appellant. 7. During the trial, the 1st Respondent testified as PW1 where she stated that she was served with the suit documents on 14th September 2022 by the 2nd Respondent’s advocates. The 2nd Respondent also served the pleadings upon the appellant on the same date. The appellant failed to take any action towards defending the suit resulting in an interlocutory judgment against the 1st Respondent. 8. The trial court relied on Edwin Ogada Odongo v Phoenix E.A Assurance Ltd Kisumu HCCC 132 of 2003 to find the Appellant liable. The court found that the 1st Respondent had demonstrated that she had met the standards for grant of a declaratory suit against the appellant. 9. The trial court awarded costs to the 1st Respondent on the basis that costs follow the event. 10. Being aggrieved and dissatisfied with the decision of the trial court, the appellant lodged the instant appeal on grounds that: i. The learned trial magistrate erred in principle by finding that the Respondent was free of obligation to disclose material facts contrary to the principle of good faith, a key principle and policy in insurance contracts; ii. The learned trial magistrate erred in law and principle by compelling the insurer to assume a risk without giving the insurer proper opportunity to asses and or investigate the risk contrary to the grounded principles of insurance iii. The learned trial magistrate erred in law and principle in absolving the respondent the duty to inform the defendant of the accident occurring on 1st June 2020 which resulted to the defendant being unable to exercise the principle of loss minimisation a right and principle recognized in insurance. iv. The learned trial magistrate erred in law and principle by failing to find that the respondent acted fraudulently and in breach of contract by suppressing material facts leading to the accident contrary to laid down insurance principles and policy. v. The learned trial magistrate erred in law and fact in concluding that the Respondent discharged her duty to prove her case on a balance of probabilities. vi. The learned trial magistrate erred in law and fact by awarding costs to the respondent. https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/6817/eng@2026-05-21 2

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11. Reasons wherefore the appellant prays that the judgment by the trial court be set aside and the same be substituted with a proper finding. 12. The court directed that the appeal be canvassed through written submissions. 13. The appellant submitted that there was no breach of contract as the respondent had failed to comply with the fundamental and standard principles governing contracts for insurance, particularly the principles of utmost good faith and loss minimization. The Respondent’s’ own conduct, including the failure to promptly notify the appellant of the peril and delay of over two years in raising the claim prejudiced the appellant and frustrated the contract and the trial court’s findings was therefore erroneous, warranting this honourable court’s intervention. 14. The Respondent submitted that the appellant had a statutory duty to settle the decretal sum in Ruiru MCC E451 of 2022. In the event that there was any legal bar to the payment of the decretal sum, the appellant failed to take the necessary steps to divest itself of liability. In any case, where a party fails to file a defence, produce documents and call witnesses they leave the court with no option but a finding that the other party’s evidence is unrebutted and uncontroverted. In the instant case, it was submitted that the trial magistrate took a wholistic view of the 1st Respondent’s testimony and made a finding that the documents adduced in court corroborated her testimony. The 1st Respondent therefore urged this honourable court to uphold the finding of the trial court and dismiss the appeal. Analysis and determination 15. I have considered the issues in this appeal. Being a first appeal, the duty of this court is to review the evidence adduced before the lower court and satisfy itself that the decision was well-founded. This principle was set out in Selle and another v Associated Motor Boat Company Ltd and others [1968] 1 EA 123 where the Court held: “ …this court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect. In particular this court is not bound necessarily to follow the trial judge’s findings of fact if it appears either that he has clearly failed on some point to take account of particular circumstances or probabilities materially to estimate the evidence ...” 16. Section 10(1) of the Insurance (Motor Vehicle Third Party Risks) Act, Cap 405, Laws of Kenya (the Act) provides as hereunder: (1) 17. If, after a policy of insurance has been effected, judgment in respect of any such liability as is required to be covered by a policy under paragraph (b) of section 5 (being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled, the policy, the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability, including any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments. The side note to that section is “Duty of insurer to satisfy judgments against persons insured”. Although it is true that the marginal notes do not form part of a statute, yet some help can be derived from the side note to show what the section is dealing with. From the side note it is clear that the section deals with the obligation by the insurer to satisfy judgements obtained against persons insured. https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/6817/eng@2026-05-21 3

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What clearly comes out from the said provision it is clear that for an insurance company to be under a statutory obligation to satisfy a decree certain condition precedent must be satisfied. Firstly, before a judgement is obtained, there must have been a policy of insurance in effect. Secondly, the judgement must have been in respect of a liability required to be covered by a policy under paragraph (b) of section 5 (being a liability covered by the terms of the policy). Thirdly, the judgement must have been obtained against a person insured by the policy. 18. The next issue is whether the Respondent is a Third Party within the meaning of Section 5 of the Insurance (Motor Vehicles Third Party Risks) Act, Chapter 405 of the Laws of Kenya. 19. 46. The said section 5 provides that: In order to comply with the requirements of section 4, the policy of insurance must be a policy which— (a) is issued by a company which is required under the Insurance Act, 1984 (Cap. 487) to carry on motor vehicle insurance business; and (b) insures such person, persons or classes of persons as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death of, or bodily injury to, any person caused by or arising out of the use of the vehicle on a road: Provided that a policy in terms of this section shall not be required to cover— (i) liability in respect of the death arising out of and in the course of his employment of a person in the employment of a person insured by the policy or of bodily injury sustained by such a person arising out of and in the course of his employment; or (ii) except in the case of a vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment, liability in respect of the death of or bodily injury to persons being carried in or upon or entering or getting on to or alighting from the vehicle at the time of the occurrence of the event out of which the claims arose; or (iii) any contractual liability; (iv) liability of any sum in excess of three million shillings, arising out of a claim by one person. 20. The 2nd Respondent’s claim was that the insured’s vehicle which was being driven by the insured’s lawful agent hit his motor vehicle registration number KCP 276P a Mercedes Benz along Eastern Bypass Road around Membley Estate she was on a motor cycle. A reading of the said section clearly reveals that he was covered by the policy under the said Act. 21. There is no dispute that the 1st Respondent’s motor vehicle was insured by the Appellant. The main contention is whether the 1st Respondent, complied with the terms of the Insurance contract in so far as notifying the Appellant that an accident had occurred was concerned. 22. A perusal of the record demonstrates that the Appellant failed to enter appearance hence a judgment in default of appearance was entered. To this moment, there is no indication that the judgment in default has neither been reviewed, stayed or appealed against. Accordingly, the judgment is binding on the Appellant as the 1st Respondent’s insured. The evidence by the Respondents that they notified the appellant have not been controverted in any way, in fact, the trial court’s finding in Ruiru MCC E451 of 2022 has not been appealed against. 23. In Ogada Odongo vs. Phoenix of E.A. Insurance Co. Ltd Kisumu HCC 132/2003, it was held that: (1) By an insurer issuing a policy of insurance, it automatically assures the rights of third parties. It simply means, the rights/obligation of the insured automatically transferred to the insured unless it is proved otherwise. https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/6817/eng@2026-05-21 4

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(2) By covering third parties, rights, the insurance was in essence performing a statutory duty imposed by an Act of Parliament.” 24. Based on the facts of the case and the above legal provisions, I am satisfied that the 1st Respondent proved his case and the Appellant has an obligation to settle the decree. 25. It is trite that costs follow the event, unless otherwise ordered by the Court. Section 27 of the Civil Procedure Act states: “ --- the costs of and incidental to all suits shall be in the discretion of the Court or Judge, and the Court shall have full power to determine by whom--– such costs shall be paid ---provided that the costs of any action, cause or other matter or issue shall follow the event unless the Court or judge shall for good reason otherwise order.” 26. The Appellant in the primary suit failed to honour obligations placed on by law. The 1st Respondent spent money and time to pursue fulfilment of the decree by filing the instant declaratory suit which the Appellant at all times knew about the case and knew it had a statutory obligation to the 1st Respondent to settle the decree or give tangible reason with evidence why it should not settle the decretal amount. Having found that the Appellant is liable to settle the decree, I uphold the finding of the trial court and dismiss the appeal with costs to the 1st Respondent. 27. Final Orders i. The finding of the Trial court in in Ruiru MCCC No. E050 of 2024 is hereby upheld ii. Appeal is hereby dismissed iii. Costs to the Respondent DATED, SIGNED AND DELIVERED VIRTUALLY ON THIS 21ST DAY OF MAY 2026. HON. T. W. OUYA, OGW JUDGE In the presence of: Kariuki for Mr. Njuguna for 1st Respondent Nyabanje for Mr. Mutegi for Appellant Hamza/Kevin – Court Assistants https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/6817/eng@2026-05-21 5

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