1. The plaintiff vide a plaint dated 11th March 2021 filed this suit against the defendants seeking Judgment against them jointly and severally for an interpleader determination on which defendant is liable to settle the deceased’s death claim under the Mortgage Protection Policy and an order of mandatory injunction compelling discharge of the deceased’s properties being L.R. No. 209/10236 and L.R. No. Nairobi/Block 82/1282, since the Mortgage Protection Policy crystallized upon his death.
2. The plaintiff also seeks an order of prohibitory injunction restraining the 1st defendant from selling, auctioning, charging further interest, or otherwise dealing with the charged properties, an order restraining the 1st defendant from recovering any outstanding loan balances from the Estate of the deceased and a declaration that the loan account is fully settled. The plaintiff also seeks an order directing the 2nd defendant to settle the insurance policy noted in favour of the 1st defendant, to cover the loan
advances following the death of the insured, and costs of the suit plus interest.
3. The plaintiff’s case is that the deceased obtained a mortgage-equity release facility of Kshs.70,000,000/= from the 1st defendant, secured by charges over L.R. No. 209/10236 & L.R. No. Nairobi/Block 82/1282, a deed of rental assignment, and a Mortgage Protection (Life) Insurance Policy under the 1st defendant’s group cover with the 2nd defendant. She averred that after the deceased underwent medical examination as was required by the insurer, the loan was approved, premiums were paid and the facility was disbursed to the deceased’s account. That thereafter, the deceased dutifully serviced the said financial facility until his death on 11th July 2020. The plaintiff stated that upon notifying the defendants of the deceased’s death, she expected the Mortgage Protection Cover to crystallize and the securities to be discharged.
4. She stated that the 2nd defendant later communicated to the 1st defendant that it deemed the death claim inadmissible, while the Bank (1st defendant), simultaneously issued a 90-day Statutory Notice demanding settlement of an outstanding sum of Kshs.61,722,571.09 and threatened to realize the charged properties. She stated that the defendants owed a duty of care to ensure that the insurance cover was validly in place, that premiums were properly computed and remitted, that any issues concerning the policy were communicated to the deceased during his lifetime, and that no further interest or penalties accrued after the insured event occurred. The plaintiff claimed negligence on the part of the defendants for failing to secure and administer the Mortgage Protection Policy, failing to notify the insured of any deficiencies and collusion to deny liability despite the deceased having fulfilled all requirements.
5. In opposition to the plaintiff’s suit, the 1st defendant filed a statement of defence dated 5th May 2021 denying the averments contained in the plaintiff’s plaint. The 1st defendant acknowledged having advanced the deceased a loan facility of Kshs.70,000,000/= repayable in 60 instalments, secured by charges over the suit properties and subject to payment of Mortgage Protection Insurance, although the offer letter did not specify whether the entire loan or only a portion of it was covered. It asserted that the charge instruments were always available to the borrower and denied withholding them. It was stated by the 1st defendant that the 2nd defendant is a distinct legal entity and that the medical examination required of the deceased was initiated by the 2nd defendant.
6. The 1st defendant contended that although the deceased attended the initial medical tests for the first tranche of Kshs.40,000,000/= whose premium was duly debited, he failed to attend further mandatory medical examination required before the second tranche of Kshs.30,000,000/= could be insured. It contended that only the first tranche was covered under the Mortgage Protection Policy, leaving the second tranche uninsured. It further claimed that the death claim lodged in January 2021 was submitted long after the insured’s death in July 2020 and was therefore time-barred under the Insurance Policy.
7. The 1st defendant averred that its letter of 3rd February 2021 merely acknowledged the demand and did not amount to a stay of recovery proceedings, and owing to arrears and continued default on the loan account, it issued Statutory Notices under Section 90 of the Land Act. The 1st defendant asserted that the Estate of the deceased is indebted to it in the sum of Kshs.61,722,571.09 as at 3rd February 2021, accruing interest at default rates, therefore securities cannot be discharged as their discharge is only possible upon full repayment or settlement of the claim by the insurer. The 1st defendant maintained that it is fully entitled to recover the outstanding loan and that no injunction or declaration sought by the plaintiff can issue in the face of the deceased’s indebtedness.
8. The 2nd defendant also opposed the plaintiff’s suit vide a statement of defence dated 7th May 2021 denying the averments contained in the plaintiff’s plaint. The 2nd defendant confirmed that it has a business relationship with the 1st defendant under a Group Mortgage Protection Policy but asserted that it is a separate and distinct legal entity. It averred that the deceased was found to have diabetes and hypertension after the first medical examination and was therefore required to undertake further tests, complete a diabetes mellitus questionnaire, and provide an updated HbaA1c report, but he failed to comply with the said further medical requirements.
9. The 2nd defendant contended that the deceased paid provisional premiums only for the first disbursement of Kshs.40,000,000/=, but since he failed to attend further medical examination, premiums for the second disbursement of Kshs.30,000,000/= were neither calculated nor paid. The 2nd defendant stated that the deceased’s cover was reduced to the free cover limit as stipulated in the Group Mortgage Protection Policy. The 2nd defendant explained that the policy benefits were not automatically payable upon death, as admission of a claim depended on compliance with all terms and conditions, which the deceased failed to meet by not attending further medicals, and his Estate is not entitled to full benefits. The 2nd defendant asserted that no demand or Notice of intention to sue was issued prior to filing of the suit, and contended that the plaintiff is not entitled to costs.
10. This matter proceeded to a full hearing where the plaintiff and the defendants each called one witness to ventilate their cases.
PLAINTIFF’S CASE.
11. Ms Anne Waithira Gachura, the Administrator of the Estate of the deceased testified as PW1. She confirmed to having recorded a statement dated 11th March 2021 which she adopted as her evidence in chief. She also produced the documents in the plaintiff’s list of documents dated 11th March 2021 as plaintiff’s exhibits No. 1 to 15. PW1 testified that the deceased applied for, and was later advanced a mortgage facility of Kshs.70,000,000/=, secured by legal charges over L.R. No. Nairobi/Block 82/1282 & L.R. No. 209/10236, a deed of rental assignment, and a life insurance cover with the 2nd defendant insurer, with the 1st defendant’s interest noted. She stated that the facility was approved on 31st January 2019, the deceased duly accepted the terms, and executed the relevant charge instruments.
12. PW1 stated that the 1st defendant maintained a Group Mortgage Protection Policy with the 2nd defendant. She testified that as a precondition for insurance cover, the deceased attended a medical examination at Meridian Medical Centre on 7th February 2019 at the insurer’s request. She further stated that the examination results were sent to the 2nd defendant and the deceased was neither asked to undergo further tests, nor was he issued with any medical report. She stated that the loan proceeds were subsequently disbursed and all insurance premiums and loan repayments were made until the deceased’s death on 11th July 2020. She testified that upon the insured’s death, the Estate notified both defendants and later requested discharge of the securities because the insured event had occurred. She stated that the deceased’s Estate became aware of a letter dated 27th October 2020 produced as plaintiff exhibit No. 14, in which the 2nd defendant advised the 1st defendant that it considered the death claim inadmissible, meaning that a death claim had been made.
13. Ms Gachura testified that on 3rd February 2021, the defendants acknowledged receipt of the Estate’s inquiries, with the 1st defendant indicating that it was conducting investigations but on the same day, the 1st defendant issued a 90-day Statutory Notice demanding payment of Kshs.61,722,571.09 and threatening to sell the charged properties. She asserted that upon the death of the borrower, the 1st defendant was under a duty to notify the insurer that the policy had crystallised, to freeze further interest and to pursue the death claim rather than demand repayment from the Estate. She asserted that the deceased paid all premiums, was never informed of any issue regarding the policy or adequacy of premiums and there was also no communication that the deceased was not covered under the Mortgage Protection Insurance for failing to go for further tests, thus any failure in administering the lending or insurance arrangements lies with the defendants and cannot be visited upon the Estate.
14. During cross-examination by Ms Onsare, learned Counsel for the 1st defendant, Ms Gachura confirmed that the letter of offer produced as the plaintiff’s exhibit No. 2 required the borrower to obtain a Mortgage Insurance Policy as a condition precedent to the loan. She testified that the 1st defendant deducted varying insurance premium amounts from the deceased’s account each month and remitted them to the 2nd defendant. She asserted that the deceased never defaulted on his loan obligations. PW1 stated that the borrower died on 11th July 2020 and that the Estate promptly notified the 1st defendant. She noted that the letter dated 27th October 2020 was addressed to Family Bank Insurance Agency and that the 1st defendant was not copied. Referring to plaintiff exhibit No. 6, she testified that the deceased had been invoiced for twelve tests and that all tests performed on him are reflected on page 43 of her bundle of documents. She maintained that she had not seen any document requesting the deceased to undergo any additional medical examination.
15. In cross-examination by Mr. Kiplagat, learned Counsel for the 2nd defendant, PW1 testified that all communication between the borrower and the 2nd defendant was channeled through the 1st defendant. She denied knowing whether the deceased visited the 1st defendant’s Gateway Branch to sign documents, though she confirmed that he underwent medical tests without knowing who had instructed him to do so. PW1 maintained that the entire loan was insured. She acknowledged that page 69 of the 1st defendant’s bundle of documents contains a Mortgage Protection Policy application for Kshs.40,000,000/= in which the deceased declared that he was in good health, and that there is a corresponding premium receipt. PW1 stated that the borrower died of COVID-19 complicated by diabetes. She noted that the medical tests recorded at page 43 of her bundle of documents were conducted on 7th February 2019, while the mortgage application form was completed on 1st February 2019.
16. She acknowledged seeing an email dated 15th February 2019 requesting the borrower to undergo diabetes and HB tests, but she did not know whether he complied. She further stated that she was unaware of a letter dated 10th February 2020 from Meridian Hospital to the 2nd defendant stating that the deceased did not undergo the requested tests. PW1 testified that she did not know that failure to undergo medical tests could limit the amount payable under the Mortgage Protection Policy. She confirmed that the letter of offer required the borrower to take three insurance policies, though she did not know how many he actually took. She also confirmed that the deceased’s bank statements at pages 14-19 of the plaintiff’s bundle of documents reflect deductions for insurance premiums but she did not know which of the three insurance covers those payments related to.
17. In re-examination, PW1 reaffirmed that the deceased received a loan of Kshs.70,000,000/= and was required to obtain Mortgage Insurance to cover that amount. She pointed out that although page 68 of the 1st defendant’s documents shows a transfer of Kshs.102,104.00 from a joint account that she held with the deceased, the purpose of the transfer is not indicated. She also highlighted that page 69 of the 1st defendant’s documents lists the loan amount as Kshs.40,000,000/= and stated that the 2nd defendant had not shown that the additional Kshs.30,000,000/= disbursement was insured. She referred to a 15th February 2019 email from Orient Life indicating a 5-year policy for Kshs.70,000,000/=.
18. Ms Gachura further noted an email of 10th November 2020 in which Orient Life inquired whether the deceased had undergone further medical tests, but the response indicated he had not. She however stated that she never saw any correspondence requesting for such tests. PW1 maintained that the 1st defendant was responsible for servicing the Mortgage Protection Policy since it was the proposer and the deceased did not directly pay premiums, nor did he default on premiums or loan repayments. She concluded by stating that in her view, diabetes is not a terminal illness.
DEFENDANTS’ CASE.
19. DW1 was Mr. Erastus Kuria Mwega, the 1st defendant’s former Relationship Manager at its Gateway Mall branch. He adopted his witness statement dated 17th June 2022 as his evidence in chief. DW1 produced the documents contained in the 1st defendant’s list and bundle of documents dated 5th May 2021, its supplementary list and bundle of documents dated 18th March 2024 and the response to the plaintiff’s Notice to Produce dated 7th May 2024 as the 1st defendant’s exhibits No. 1 to 10. Mr. Kuria testified that the loan advanced to the deceased was secured by inter alia, a Mortgage Protection Insurance cover in favour of the 1st defendant.
20. He stated that the said loan was disbursed in two tranches of Kshs.40,000,000/= and Kshs.30,000,000/= and that the deceased was required to undergo medical examination as part of the loan approval process. Mr. Kuria asserted that although the deceased later died of Covid-19 pneumonia due to diabetes mellitus, a chronic pre-existing condition, the medical results he submitted did not disclose this ailment and only two of twelve test results were provided. He contended that the said omission disqualified the deceased from benefiting under the Mortgage Protection Policy. DW1 stated that the premium of Kshs.102,104.00 for the first tranche was duly deducted, but the second tranche was never insured as no premium was paid and the deceased failed to attend further medical tests required for that coverage.
21. Mr. Kuria stated that following the deceased’s death, a formal claim under the Mortgage Protection Policy was lodged on 27th January 2021, but the 1st defendant maintains that the claim was time-barred and that the deceased’s undisclosed chronic illness excluded him from the insurance cover. He contended that the suit properties have not been discharged because the loan remains in arrears, prompting the 1st defendant to issue a Statutory Notice under Section 90 of the Land Act. DW1 stated that no stay of the 1st defendant’s statutory power of sale was ever issued and that penalties accrued due to non-settlement of the loan, noting that the policy has not crystallized. He further stated that as at 14th January 2021, the deceased’s Estate owed Kshs.61,722,571.09.
22. During cross-examination by Mr. Kiplagat, learned Counsel for the 2nd defendant, DW1 confirmed that the 1st defendant verbally informed the deceased to undergo a medical check-up. He explained that Eugene, an Officer in the 1st defendant’s Credit Department, Paul Githinji, the former Branch Manager at the Gateway Mall branch and Barrack Onyango, also an employee of the 1st defendant, had all communicated with both the deceased and the 2nd defendant regarding the Mortgage Policies. He further stated that email correspondence among these individuals included communication specifically requesting the deceased to attend a medical examination.
23. During cross-examination by Mr. Mogeni, learned Counsel for the plaintiff, DW1 testified that the 1st defendant procured the insurance cover as required under paragraph 7 of the letter of offer dated 31st January 2019. He added that paragraph 8 of the letter of offer imposed a precondition requiring a life insurance cover for Godfrey Mbuuri Gachura with the bank’s interest duly noted. DW1 stated that he had not seen any email addressed to the deceased requesting him to undergo further medical tests, nor was there evidence that the 1st defendant communicated to the deceased the requirements or contents of the email dated 23rd July 2020. He stated that the document dated 1st February 2019 indicated a partial approval of the loan and that a medical examination was conducted on 7th February 2019. He further stated that the 2nd defendant’s email of 10th November 2020 to the 1st defendant was sent after a claim had already been lodged.
24. DW1 conceded to being unaware of whether Meridian Medical Centre advised the deceased to take further medical tests. He testified that upon receipt of the cheque for Kshs.22,500,000/=, the 1st defendant credited the deceased’s account and apportioned the sum into two credits. He confirmed that the 1st defendant executed the discharge voucher acknowledging full settlement of the insured amount and waiving any further claims against the 2nd defendant. He however clarified that the insurance cover by the 2nd defendant extended only to Kshs.40,000,000/=, leaving the remaining Kshs.30,000,000/= in dispute.
25. DW1 maintained that the 1st defendant received notification of the deceased’s death on 27th January 2021, by which time the claim was already time-barred, given that the death occurred in July 2020. He nevertheless admitted that the letter dated 27th October 2020 from the 2nd defendant to Family Bank Insurance Agency resulted from the 1st defendant’s lodging of a death claim for Kshs.70,000,000/=, confirming that the 1st defendant was indeed aware of the death. He further conceded that paragraph 9 of the 1st defendant’s statement of defence was inaccurate. DW1 also confirmed that the 1st defendant proceeded to disburse the second tranche of the loan after the medical tests had been completed on 7th February 2019.
26. In re-examination, DW1 stated that the borrower died on 11th July 2020 and that by the time the communication appearing at page 52 of the plaintiff’s bundle of documents was issued, three months had already passed. He maintained that the 1st defendant did not receive all the medical results for tests undertaken by the deceased. He reiterated that the deceased had been advanced a loan of Kshs.70,000,000/= in two tranches and stated that both the initial request for medical tests and the subsequent request for further testing were communicated to the deceased verbally. PW1 further explained that the credit of Kshs.22,500,000/= to the deceased’s account was fully accounted for, with Kshs.15,462,473.30 applied towards the principal sum and Kshs.7,021,136.00 applied toward interest. He concluded by stating that as at 13th April 2022, the amount owed to the 1st defendant stood at Kshs.39,523,961.09.
27. On being examined by the Court, DW1 stated that the insurance premium for the loan amount of Kshs.40,000,000/= was paid, but the remaining Kshs.30,000,000/= was not insured because the deceased was required to undergo a further medical examination, which was not completed. He stated that as a result, the full loan amount of Kshs.70,000,000/= was not covered under the insurance.
28. Mr. Jackson Muli, the 2nd defendant’s Chief Executive Officer testified as DW2. He adopted his witness statement dated 20th May 2020 as his evidence in chief and produced the email correspondence filed together with the said statement as the 2nd defendant’s exhibits No. 1 to 4. Mr. Muli testified that the deceased was incorporated into the 1st defendant’s Group Mortgage Protection Policy dated 10th April 2015 upon being granted loan facilities. He explained that the policy offered a free cover limit of Kshs.20,000,000/=, beyond which the insurer required medical evidence of the borrower’s health.
29. He further testified that the deceased had initially been proposed for coverage of Kshs.40,000,000/= and after receiving the proposal and partial premiums, the 2nd defendant issued a conditional approval and directed that the deceased undergoes a medical examination, cautioning that failure to comply would restrict any claim to the free cover limit. DW2 testified that following the initial medical assessment, the 2nd defendant requested additional medical information, including a diabetes questionnaire and updated HbA1c test results, but records indicated that the deceased did not complete these requirements.
30. He stated that the loan in question was disbursed before a final underwriting decision was made and that no Mortgage Protection Policy Certificate was ever issued. He maintained that the 2nd defendant’s liability was limited to Kshs.20,000,000/=. Mr. Muli further stated that the deceased’s death certificate attributes the cause of death to complications arising from diabetes mellitus, underscoring the importance of the outstanding medical tests and full disclosure. He confirmed that the 2nd defendant received neither a proposal nor premiums for the second loan disbursement of Kshs.30,000,000/= and therefore undertook no underwriting in respect of it.
31. During cross-examination by Mr. Mogeni, learned Counsel for the plaintiff, DW2 testified that in an email dated 1st February 2019, Barrack Onyango of the 2nd defendant informed Eugene Achayo of the 1st defendant that partial approval had been granted for the disbursement of Kshs.40,000,000/=. He referred to a subsequent email dated 8th February 2019 in which Peter Kiragu of the 1st defendant notified the same Barrack Onyango that the deceased had attended medical examination the previous day, and another email dated 11th February 2019 in which Paul Kiragu sought confirmation from Barrack Onyango on when the medical report would be received. He acknowledged that the email appearing at page 6 of its documents, sent by Faith Kamene of the 1st defendant to Moureen Okiyah of the 2nd defendant, was not copied to the deceased.
32. DW2 emphasized that none of the email correspondence relied on by the 2nd defendant was ever copied to the deceased, nor did any of it state that the deceased declined to undergo further medical examination. He confirmed that Meridian Medical Centre was one of the 2nd defendant’s panel medical service providers and that upon examining any referred client, such medical reports were sent directly to the 2nd defendant. He further confirmed that the deceased’s medical results were transmitted to the 2nd defendant on 13th February 2019. He noted that the document at page 6 of the 2nd defendant’s bundle of documents showed that the insurer had made a decision to insure the sum of Kshs.70,000,000/= subject to further medical evidence.
33. He also confirmed that the email dated 10th November 2020 was written after the insurance claim had already been lodged. DW2 asserted that all communication relating to the deceased’s medical requirements was channeled through the 1st defendant, as the 2nd defendant does not communicate directly with borrowers. He added that a borrower would not attend additional medical tests unless advised to do so and maintained that it was the 1st defendant’s responsibility to relay such communication to the deceased.
34. In re-examination, DW2 reaffirmed that the 2nd defendant had no direct communication with the borrower. He stated that the 2nd defendant did not cancel the insurance policy because it was still awaiting the borrower’s completion of further medical examination. He added that the full premium had not been assessed or priced since the outstanding medical tests had not been undertaken. He further clarified that the additional payment of Kshs.2,500,000/= made to the 1st defendant was an ex gratia payment.
35. On being examined by the Court on what became of the premium for Kshs.40,000,000/=, DW2 stated that based on the premium paid, the 2nd defendant could not ascertain whether the amount was sufficient to cover even the Kshs.20,000,000/= free mortgage insurance available without the requirement for medical examination.
36. Upon the close of the plaintiff’s and the defendants’ cases, the Court directed parties to file written submissions. The plaintiff’s submissions were filed on 22nd January 2025 and 14th March 2025 by the law firm of Mogeni & Company Advocates, the 1st defendant’s submissions were filed by the law firm of Maina & Onsare Partners Advocates LLP on 3rd February 2025 and the 2nd defendant’s submissions were filed by the law firm of Munene Wambugu & Kiplagat Advocates on 4th March 2025.
37. Mr. Mogeni, learned Counsel for the plaintiff submitted that the deceased was a beneficiary of the 1st defendant’s Group Mortgage Protection Policy issued by the 2nd defendant and that the policy crystallized upon his death on 11th July 2020, in line with the Court of Appeal’s finding in the case of Anne N. Parmena v Housing Finance Company of Kenya Ltd [2015] KECA 476. He submitted that the deceased underwent the medical examination required as a precondition to disbursement and that the loan was advanced thereafter without any communication that further medical tests were required. Counsel contended that the deceased was neither notified of any deficiencies in the insurance cover, nor informed that the second tranche of Kshs.30,000,000/= was not insured. He asserted that the defendants’ claim that additional tests were needed only arose after the death claim was lodged and no evidence was produced to show that such requirements were communicated to the borrower.
38. Mr. Mogeni stated that premiums were duly paid, thus the deceased had a legitimate expectation that the entire loan was insured. He further stated that the defendants’ failure to notify the deceased of any limitations estops them from denying liability. Counsel contended that interest on the loan ought to have ceased accruing at the date of death of the borrower and that the 1st defendant acted in bad faith by issuing Statutory Notices and continuing to demand payment from the Estate despite knowledge of the borrower’s demise. He submitted that both defendants owed the deceased a duty of care in managing the insurance arrangements and that their failure to properly communicate material information resulted in prejudice to the Estate.
39. Mr. Mogeni referred to the Court of Appeal case of Kenya Breweries Limited & Tembo Co-operative Savings & Credit Society Limited vs Washington O. Okeyo [2002] KECA 284 (KLR), and argued that the circumstances of this case warrant the grant of injunctive reliefs, including a mandatory injunction to protect the charged properties, noting that the Mortgage Protection Policy should have crystallized and discharged the debt upon death. He asserted that unless the defendants are restrained, the deceased’s Estate risks irreparable loss through the threatened sale of the charged properties.
40. Ms Onsare, learned Counsel for the 1st defendant submitted that the deceased did not comply with the full requirements of the loan instruments and therefore no valid Mortgage Protection Insurance cover crystallized upon his death. She stated that although the deceased was an established customer of the 1st defendant and had previously serviced various facilities, the loan of Kshs.70,000,000/= advanced under the letter of offer dated 31st January 2019 required him to procure life insurance, with the 1st defendant’s interest duly noted. He further stated that it was a condition under the Group Mortgage Scheme that any borrower whose facility exceeded the free cover limit of Kshs.20,000,000/= undergoes medical examination and provides health evidence acceptable to the insurer.
41. Counsel contended that the 2nd defendant undertook a preliminary medical assessment and identified chronic conditions including diabetes mellitus and hypertension, prompting a mandatory requirement for further tests, specifically an HbA1c test and a diabetes mellitus questionnaire. He asserted that the deceased failed to attend further medical examination despite reminders, as evidenced by communication from Meridian Medical Centre. Consequently, the 2nd defendant did not finalize the premium pricing and no policy cover was put in place for the loan beyond the free cover limit, and in the circumstances, the 2nd defendant settled only Kshs.20,000,000/= under the free cover component.
42. Ms Onsare relied in the case of Anne N. Parmena v Housing Finance Company of Kenya Ltd (supra) and argued that although a lender bears responsibility to ensure insurance cover is arranged, the borrower equally has an obligation to comply with medical and premium requirements. She stated that since the deceased never completed the mandatory tests, the insurer was entitled to decline full cover and the Estate must shoulder the outstanding loan balance. She submitted that the deceased was already in default on loan repayments for approximately seven (7) months prior to h
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2. The plaintiff also seeks an order of prohibitory injunction restraining the 1st defendant from selling, auctioning, charging further interest, or otherwise dealing with the charged properties, an order restraining the 1st defendant from recovering any outstanding loan balances from the Estate of the deceased and a declaration that the loan account is fully settled. The plaintiff also seeks an order directing the 2nd defendant to settle the insurance policy noted in favour of the 1st defendant, to cover the loan
advances following the death of the insured, and costs of the suit plus interest.
3. The plaintiff’s case is that the deceased obtained a mortgage-equity release facility of Kshs.70,000,000/= from the 1st defendant, secured by charges over L.R. No. 209/10236 & L.R. No. Nairobi/Block 82/1282, a deed of rental assignment, and a Mortgage Protection (Life) Insurance Policy under the 1st defendant’s group cover with the 2nd defendant. She averred that after the deceased underwent medical examination as was required by the insurer, the loan was approved, premiums were paid and the facility was disbursed to the deceased’s account. That thereafter, the deceased dutifully serviced the said financial facility until his death on 11th July 2020. The plaintiff stated that upon notifying the defendants of the deceased’s death, she expected the Mortgage Protection Cover to crystallize and the securities to be discharged.
4. She stated that the 2nd defendant later communicated to the 1st defendant that it deemed the death claim inadmissible, while the Bank (1st defendant), simultaneously issued a 90-day Statutory Notice demanding settlement of an outstanding sum of Kshs.61,722,571.09 and threatened to realize the charged properties. She stated that the defendants owed a duty of care to ensure that the insurance cover was validly in place, that premiums were properly computed and remitted, that any issues concerning the policy were communicated to the deceased during his lifetime, and that no further interest or penalties accrued after the insured event occurred. The plaintiff claimed negligence on the part of the defendants for failing to secure and administer the Mortgage Protection Policy, failing to notify the insured of any deficiencies and collusion to deny liability despite the deceased having fulfilled all requirements.
5. In opposition to the plaintiff’s suit, the 1st defendant filed a statement of defence dated 5th May 2021 denying the averments contained in the plaintiff’s plaint. The 1st defendant acknowledged having advanced the deceased a loan facility of Kshs.70,000,000/= repayable in 60 instalments, secured by charges over the suit properties and subject to payment of Mortgage Protection Insurance, although the offer letter did not specify whether the entire loan or only a portion of it was covered. It asserted that the charge instruments were always available to the borrower and denied withholding them. It was stated by the 1st defendant that the 2nd defendant is a distinct legal entity and that the medical examination required of the deceased was initiated by the 2nd defendant.
6. The 1st defendant contended that although the deceased attended the initial medical tests for the first tranche of Kshs.40,000,000/= whose premium was duly debited, he failed to attend further mandatory medical examination required before the second tranche of Kshs.30,000,000/= could be insured. It contended that only the first tranche was covered under the Mortgage Protection Policy, leaving the second tranche uninsured. It further claimed that the death claim lodged in January 2021 was submitted long after the insured’s death in July 2020 and was therefore time-barred under the Insurance Policy.
7. The 1st defendant averred that its letter of 3rd February 2021 merely acknowledged the demand and did not amount to a stay of recovery proceedings, and owing to arrears and continued default on the loan account, it issued Statutory Notices under Section 90 of the Land Act. The 1st defendant asserted that the Estate of the deceased is indebted to it in the sum of Kshs.61,722,571.09 as at 3rd February 2021, accruing interest at default rates, therefore securities cannot be discharged as their discharge is only possible upon full repayment or settlement of the claim by the insurer. The 1st defendant maintained that it is fully entitled to recover the outstanding loan and that no injunction or declaration sought by the plaintiff can issue in the face of the deceased’s indebtedness.
8. The 2nd defendant also opposed the plaintiff’s suit vide a statement of defence dated 7th May 2021 denying the averments contained in the plaintiff’s plaint. The 2nd defendant confirmed that it has a business relationship with the 1st defendant under a Group Mortgage Protection Policy but asserted that it is a separate and distinct legal entity. It averred that the deceased was found to have diabetes and hypertension after the first medical examination and was therefore required to undertake further tests, complete a diabetes mellitus questionnaire, and provide an updated HbaA1c report, but he failed to comply with the said further medical requirements.
9. The 2nd defendant contended that the deceased paid provisional premiums only for the first disbursement of Kshs.40,000,000/=, but since he failed to attend further medical examination, premiums for the second disbursement of Kshs.30,000,000/= were neither calculated nor paid. The 2nd defendant stated that the deceased’s cover was reduced to the free cover limit as stipulated in the Group Mortgage Protection Policy. The 2nd defendant explained that the policy benefits were not automatically payable upon death, as admission of a claim depended on compliance with all terms and conditions, which the deceased failed to meet by not attending further medicals, and his Estate is not entitled to full benefits. The 2nd defendant asserted that no demand or Notice of intention to sue was issued prior to filing of the suit, and contended that the plaintiff is not entitled to costs.
10. This matter proceeded to a full hearing where the plaintiff and the defendants each called one witness to ventilate their cases.
PLAINTIFF’S CASE.
11. Ms Anne Waithira Gachura, the Administrator of the Estate of the deceased testified as PW1. She confirmed to having recorded a statement dated 11th March 2021 which she adopted as her evidence in chief. She also produced the documents in the plaintiff’s list of documents dated 11th March 2021 as plaintiff’s exhibits No. 1 to 15. PW1 testified that the deceased applied for, and was later advanced a mortgage facility of Kshs.70,000,000/=, secured by legal charges over L.R. No. Nairobi/Block 82/1282 & L.R. No. 209/10236, a deed of rental assignment, and a life insurance cover with the 2nd defendant insurer, with the 1st defendant’s interest noted. She stated that the facility was approved on 31st January 2019, the deceased duly accepted the terms, and executed the relevant charge instruments.
12. PW1 stated that the 1st defendant maintained a Group Mortgage Protection Policy with the 2nd defendant. She testified that as a precondition for insurance cover, the deceased attended a medical examination at Meridian Medical Centre on 7th February 2019 at the insurer’s request. She further stated that the examination results were sent to the 2nd defendant and the deceased was neither asked to undergo further tests, nor was he issued with any medical report. She stated that the loan proceeds were subsequently disbursed and all insurance premiums and loan repayments were made until the deceased’s death on 11th July 2020. She testified that upon the insured’s death, the Estate notified both defendants and later requested discharge of the securities because the insured event had occurred. She stated that the deceased’s Estate became aware of a letter dated 27th October 2020 produced as plaintiff exhibit No. 14, in which the 2nd defendant advised the 1st defendant that it considered the death claim inadmissible, meaning that a death claim had been made.
13. Ms Gachura testified that on 3rd February 2021, the defendants acknowledged receipt of the Estate’s inquiries, with the 1st defendant indicating that it was conducting investigations but on the same day, the 1st defendant issued a 90-day Statutory Notice demanding payment of Kshs.61,722,571.09 and threatening to sell the charged properties. She asserted that upon the death of the borrower, the 1st defendant was under a duty to notify the insurer that the policy had crystallised, to freeze further interest and to pursue the death claim rather than demand repayment from the Estate. She asserted that the deceased paid all premiums, was never informed of any issue regarding the policy or adequacy of premiums and there was also no communication that the deceased was not covered under the Mortgage Protection Insurance for failing to go for further tests, thus any failure in administering the lending or insurance arrangements lies with the defendants and cannot be visited upon the Estate.
14. During cross-examination by Ms Onsare, learned Counsel for the 1st defendant, Ms Gachura confirmed that the letter of offer produced as the plaintiff’s exhibit No. 2 required the borrower to obtain a Mortgage Insurance Policy as a condition precedent to the loan. She testified that the 1st defendant deducted varying insurance premium amounts from the deceased’s account each month and remitted them to the 2nd defendant. She asserted that the deceased never defaulted on his loan obligations. PW1 stated that the borrower died on 11th July 2020 and that the Estate promptly notified the 1st defendant. She noted that the letter dated 27th October 2020 was addressed to Family Bank Insurance Agency and that the 1st defendant was not copied. Referring to plaintiff exhibit No. 6, she testified that the deceased had been invoiced for twelve tests and that all tests performed on him are reflected on page 43 of her bundle of documents. She maintained that she had not seen any document requesting the deceased to undergo any additional medical examination.
15. In cross-examination by Mr. Kiplagat, learned Counsel for the 2nd defendant, PW1 testified that all communication between the borrower and the 2nd defendant was channeled through the 1st defendant. She denied knowing whether the deceased visited the 1st defendant’s Gateway Branch to sign documents, though she confirmed that he underwent medical tests without knowing who had instructed him to do so. PW1 maintained that the entire loan was insured. She acknowledged that page 69 of the 1st defendant’s bundle of documents contains a Mortgage Protection Policy application for Kshs.40,000,000/= in which the deceased declared that he was in good health, and that there is a corresponding premium receipt. PW1 stated that the borrower died of COVID-19 complicated by diabetes. She noted that the medical tests recorded at page 43 of her bundle of documents were conducted on 7th February 2019, while the mortgage application form was completed on 1st February 2019.
16. She acknowledged seeing an email dated 15th February 2019 requesting the borrower to undergo diabetes and HB tests, but she did not know whether he complied. She further stated that she was unaware of a letter dated 10th February 2020 from Meridian Hospital to the 2nd defendant stating that the deceased did not undergo the requested tests. PW1 testified that she did not know that failure to undergo medical tests could limit the amount payable under the Mortgage Protection Policy. She confirmed that the letter of offer required the borrower to take three insurance policies, though she did not know how many he actually took. She also confirmed that the deceased’s bank statements at pages 14-19 of the plaintiff’s bundle of documents reflect deductions for insurance premiums but she did not know which of the three insurance covers those payments related to.
17. In re-examination, PW1 reaffirmed that the deceased received a loan of Kshs.70,000,000/= and was required to obtain Mortgage Insurance to cover that amount. She pointed out that although page 68 of the 1st defendant’s documents shows a transfer of Kshs.102,104.00 from a joint account that she held with the deceased, the purpose of the transfer is not indicated. She also highlighted that page 69 of the 1st defendant’s documents lists the loan amount as Kshs.40,000,000/= and stated that the 2nd defendant had not shown that the additional Kshs.30,000,000/= disbursement was insured. She referred to a 15th February 2019 email from Orient Life indicating a 5-year policy for Kshs.70,000,000/=.
18. Ms Gachura further noted an email of 10th November 2020 in which Orient Life inquired whether the deceased had undergone further medical tests, but the response indicated he had not. She however stated that she never saw any correspondence requesting for such tests. PW1 maintained that the 1st defendant was responsible for servicing the Mortgage Protection Policy since it was the proposer and the deceased did not directly pay premiums, nor did he default on premiums or loan repayments. She concluded by stating that in her view, diabetes is not a terminal illness.
DEFENDANTS’ CASE.
19. DW1 was Mr. Erastus Kuria Mwega, the 1st defendant’s former Relationship Manager at its Gateway Mall branch. He adopted his witness statement dated 17th June 2022 as his evidence in chief. DW1 produced the documents contained in the 1st defendant’s list and bundle of documents dated 5th May 2021, its supplementary list and bundle of documents dated 18th March 2024 and the response to the plaintiff’s Notice to Produce dated 7th May 2024 as the 1st defendant’s exhibits No. 1 to 10. Mr. Kuria testified that the loan advanced to the deceased was secured by inter alia, a Mortgage Protection Insurance cover in favour of the 1st defendant.
20. He stated that the said loan was disbursed in two tranches of Kshs.40,000,000/= and Kshs.30,000,000/= and that the deceased was required to undergo medical examination as part of the loan approval process. Mr. Kuria asserted that although the deceased later died of Covid-19 pneumonia due to diabetes mellitus, a chronic pre-existing condition, the medical results he submitted did not disclose this ailment and only two of twelve test results were provided. He contended that the said omission disqualified the deceased from benefiting under the Mortgage Protection Policy. DW1 stated that the premium of Kshs.102,104.00 for the first tranche was duly deducted, but the second tranche was never insured as no premium was paid and the deceased failed to attend further medical tests required for that coverage.
21. Mr. Kuria stated that following the deceased’s death, a formal claim under the Mortgage Protection Policy was lodged on 27th January 2021, but the 1st defendant maintains that the claim was time-barred and that the deceased’s undisclosed chronic illness excluded him from the insurance cover. He contended that the suit properties have not been discharged because the loan remains in arrears, prompting the 1st defendant to issue a Statutory Notice under Section 90 of the Land Act. DW1 stated that no stay of the 1st defendant’s statutory power of sale was ever issued and that penalties accrued due to non-settlement of the loan, noting that the policy has not crystallized. He further stated that as at 14th January 2021, the deceased’s Estate owed Kshs.61,722,571.09.
22. During cross-examination by Mr. Kiplagat, learned Counsel for the 2nd defendant, DW1 confirmed that the 1st defendant verbally informed the deceased to undergo a medical check-up. He explained that Eugene, an Officer in the 1st defendant’s Credit Department, Paul Githinji, the former Branch Manager at the Gateway Mall branch and Barrack Onyango, also an employee of the 1st defendant, had all communicated with both the deceased and the 2nd defendant regarding the Mortgage Policies. He further stated that email correspondence among these individuals included communication specifically requesting the deceased to attend a medical examination.
23. During cross-examination by Mr. Mogeni, learned Counsel for the plaintiff, DW1 testified that the 1st defendant procured the insurance cover as required under paragraph 7 of the letter of offer dated 31st January 2019. He added that paragraph 8 of the letter of offer imposed a precondition requiring a life insurance cover for Godfrey Mbuuri Gachura with the bank’s interest duly noted. DW1 stated that he had not seen any email addressed to the deceased requesting him to undergo further medical tests, nor was there evidence that the 1st defendant communicated to the deceased the requirements or contents of the email dated 23rd July 2020. He stated that the document dated 1st February 2019 indicated a partial approval of the loan and that a medical examination was conducted on 7th February 2019. He further stated that the 2nd defendant’s email of 10th November 2020 to the 1st defendant was sent after a claim had already been lodged.
24. DW1 conceded to being unaware of whether Meridian Medical Centre advised the deceased to take further medical tests. He testified that upon receipt of the cheque for Kshs.22,500,000/=, the 1st defendant credited the deceased’s account and apportioned the sum into two credits. He confirmed that the 1st defendant executed the discharge voucher acknowledging full settlement of the insured amount and waiving any further claims against the 2nd defendant. He however clarified that the insurance cover by the 2nd defendant extended only to Kshs.40,000,000/=, leaving the remaining Kshs.30,000,000/= in dispute.
25. DW1 maintained that the 1st defendant received notification of the deceased’s death on 27th January 2021, by which time the claim was already time-barred, given that the death occurred in July 2020. He nevertheless admitted that the letter dated 27th October 2020 from the 2nd defendant to Family Bank Insurance Agency resulted from the 1st defendant’s lodging of a death claim for Kshs.70,000,000/=, confirming that the 1st defendant was indeed aware of the death. He further conceded that paragraph 9 of the 1st defendant’s statement of defence was inaccurate. DW1 also confirmed that the 1st defendant proceeded to disburse the second tranche of the loan after the medical tests had been completed on 7th February 2019.
26. In re-examination, DW1 stated that the borrower died on 11th July 2020 and that by the time the communication appearing at page 52 of the plaintiff’s bundle of documents was issued, three months had already passed. He maintained that the 1st defendant did not receive all the medical results for tests undertaken by the deceased. He reiterated that the deceased had been advanced a loan of Kshs.70,000,000/= in two tranches and stated that both the initial request for medical tests and the subsequent request for further testing were communicated to the deceased verbally. PW1 further explained that the credit of Kshs.22,500,000/= to the deceased’s account was fully accounted for, with Kshs.15,462,473.30 applied towards the principal sum and Kshs.7,021,136.00 applied toward interest. He concluded by stating that as at 13th April 2022, the amount owed to the 1st defendant stood at Kshs.39,523,961.09.
27. On being examined by the Court, DW1 stated that the insurance premium for the loan amount of Kshs.40,000,000/= was paid, but the remaining Kshs.30,000,000/= was not insured because the deceased was required to undergo a further medical examination, which was not completed. He stated that as a result, the full loan amount of Kshs.70,000,000/= was not covered under the insurance.
28. Mr. Jackson Muli, the 2nd defendant’s Chief Executive Officer testified as DW2. He adopted his witness statement dated 20th May 2020 as his evidence in chief and produced the email correspondence filed together with the said statement as the 2nd defendant’s exhibits No. 1 to 4. Mr. Muli testified that the deceased was incorporated into the 1st defendant’s Group Mortgage Protection Policy dated 10th April 2015 upon being granted loan facilities. He explained that the policy offered a free cover limit of Kshs.20,000,000/=, beyond which the insurer required medical evidence of the borrower’s health.
29. He further testified that the deceased had initially been proposed for coverage of Kshs.40,000,000/= and after receiving the proposal and partial premiums, the 2nd defendant issued a conditional approval and directed that the deceased undergoes a medical examination, cautioning that failure to comply would restrict any claim to the free cover limit. DW2 testified that following the initial medical assessment, the 2nd defendant requested additional medical information, including a diabetes questionnaire and updated HbA1c test results, but records indicated that the deceased did not complete these requirements.
30. He stated that the loan in question was disbursed before a final underwriting decision was made and that no Mortgage Protection Policy Certificate was ever issued. He maintained that the 2nd defendant’s liability was limited to Kshs.20,000,000/=. Mr. Muli further stated that the deceased’s death certificate attributes the cause of death to complications arising from diabetes mellitus, underscoring the importance of the outstanding medical tests and full disclosure. He confirmed that the 2nd defendant received neither a proposal nor premiums for the second loan disbursement of Kshs.30,000,000/= and therefore undertook no underwriting in respect of it.
31. During cross-examination by Mr. Mogeni, learned Counsel for the plaintiff, DW2 testified that in an email dated 1st February 2019, Barrack Onyango of the 2nd defendant informed Eugene Achayo of the 1st defendant that partial approval had been granted for the disbursement of Kshs.40,000,000/=. He referred to a subsequent email dated 8th February 2019 in which Peter Kiragu of the 1st defendant notified the same Barrack Onyango that the deceased had attended medical examination the previous day, and another email dated 11th February 2019 in which Paul Kiragu sought confirmation from Barrack Onyango on when the medical report would be received. He acknowledged that the email appearing at page 6 of its documents, sent by Faith Kamene of the 1st defendant to Moureen Okiyah of the 2nd defendant, was not copied to the deceased.
32. DW2 emphasized that none of the email correspondence relied on by the 2nd defendant was ever copied to the deceased, nor did any of it state that the deceased declined to undergo further medical examination. He confirmed that Meridian Medical Centre was one of the 2nd defendant’s panel medical service providers and that upon examining any referred client, such medical reports were sent directly to the 2nd defendant. He further confirmed that the deceased’s medical results were transmitted to the 2nd defendant on 13th February 2019. He noted that the document at page 6 of the 2nd defendant’s bundle of documents showed that the insurer had made a decision to insure the sum of Kshs.70,000,000/= subject to further medical evidence.
33. He also confirmed that the email dated 10th November 2020 was written after the insurance claim had already been lodged. DW2 asserted that all communication relating to the deceased’s medical requirements was channeled through the 1st defendant, as the 2nd defendant does not communicate directly with borrowers. He added that a borrower would not attend additional medical tests unless advised to do so and maintained that it was the 1st defendant’s responsibility to relay such communication to the deceased.
34. In re-examination, DW2 reaffirmed that the 2nd defendant had no direct communication with the borrower. He stated that the 2nd defendant did not cancel the insurance policy because it was still awaiting the borrower’s completion of further medical examination. He added that the full premium had not been assessed or priced since the outstanding medical tests had not been undertaken. He further clarified that the additional payment of Kshs.2,500,000/= made to the 1st defendant was an ex gratia payment.
35. On being examined by the Court on what became of the premium for Kshs.40,000,000/=, DW2 stated that based on the premium paid, the 2nd defendant could not ascertain whether the amount was sufficient to cover even the Kshs.20,000,000/= free mortgage insurance available without the requirement for medical examination.
36. Upon the close of the plaintiff’s and the defendants’ cases, the Court directed parties to file written submissions. The plaintiff’s submissions were filed on 22nd January 2025 and 14th March 2025 by the law firm of Mogeni & Company Advocates, the 1st defendant’s submissions were filed by the law firm of Maina & Onsare Partners Advocates LLP on 3rd February 2025 and the 2nd defendant’s submissions were filed by the law firm of Munene Wambugu & Kiplagat Advocates on 4th March 2025.
37. Mr. Mogeni, learned Counsel for the plaintiff submitted that the deceased was a beneficiary of the 1st defendant’s Group Mortgage Protection Policy issued by the 2nd defendant and that the policy crystallized upon his death on 11th July 2020, in line with the Court of Appeal’s finding in the case of Anne N. Parmena v Housing Finance Company of Kenya Ltd [2015] KECA 476. He submitted that the deceased underwent the medical examination required as a precondition to disbursement and that the loan was advanced thereafter without any communication that further medical tests were required. Counsel contended that the deceased was neither notified of any deficiencies in the insurance cover, nor informed that the second tranche of Kshs.30,000,000/= was not insured. He asserted that the defendants’ claim that additional tests were needed only arose after the death claim was lodged and no evidence was produced to show that such requirements were communicated to the borrower.
38. Mr. Mogeni stated that premiums were duly paid, thus the deceased had a legitimate expectation that the entire loan was insured. He further stated that the defendants’ failure to notify the deceased of any limitations estops them from denying liability. Counsel contended that interest on the loan ought to have ceased accruing at the date of death of the borrower and that the 1st defendant acted in bad faith by issuing Statutory Notices and continuing to demand payment from the Estate despite knowledge of the borrower’s demise. He submitted that both defendants owed the deceased a duty of care in managing the insurance arrangements and that their failure to properly communicate material information resulted in prejudice to the Estate.
39. Mr. Mogeni referred to the Court of Appeal case of Kenya Breweries Limited & Tembo Co-operative Savings & Credit Society Limited vs Washington O. Okeyo [2002] KECA 284 (KLR), and argued that the circumstances of this case warrant the grant of injunctive reliefs, including a mandatory injunction to protect the charged properties, noting that the Mortgage Protection Policy should have crystallized and discharged the debt upon death. He asserted that unless the defendants are restrained, the deceased’s Estate risks irreparable loss through the threatened sale of the charged properties.
40. Ms Onsare, learned Counsel for the 1st defendant submitted that the deceased did not comply with the full requirements of the loan instruments and therefore no valid Mortgage Protection Insurance cover crystallized upon his death. She stated that although the deceased was an established customer of the 1st defendant and had previously serviced various facilities, the loan of Kshs.70,000,000/= advanced under the letter of offer dated 31st January 2019 required him to procure life insurance, with the 1st defendant’s interest duly noted. He further stated that it was a condition under the Group Mortgage Scheme that any borrower whose facility exceeded the free cover limit of Kshs.20,000,000/= undergoes medical examination and provides health evidence acceptable to the insurer.
41. Counsel contended that the 2nd defendant undertook a preliminary medical assessment and identified chronic conditions including diabetes mellitus and hypertension, prompting a mandatory requirement for further tests, specifically an HbA1c test and a diabetes mellitus questionnaire. He asserted that the deceased failed to attend further medical examination despite reminders, as evidenced by communication from Meridian Medical Centre. Consequently, the 2nd defendant did not finalize the premium pricing and no policy cover was put in place for the loan beyond the free cover limit, and in the circumstances, the 2nd defendant settled only Kshs.20,000,000/= under the free cover component.
42. Ms Onsare relied in the case of Anne N. Parmena v Housing Finance Company of Kenya Ltd (supra) and argued that although a lender bears responsibility to ensure insurance cover is arranged, the borrower equally has an obligation to comply with medical and premium requirements. She stated that since the deceased never completed the mandatory tests, the insurer was entitled to decline full cover and the Estate must shoulder the outstanding loan balance. She submitted that the deceased was already in default on loan repayments for approximately seven (7) months prior to h
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