1. The plaintiff filed this suit vide a plaint dated 1st November 2022 seeking judgment against the defendant for the sum of Kshs.13,933,666.50 under Policy Number 18/CP/IANB/04/F/R0339 (renewed as Policy Number 19/CP/IANB/04/F/R0393), and a further sum of Kshs.7,500,000/= under Policy Number 19/CP/IANB/04/FCL/0024. The plaintiff also claims damages for lost business and profits and costs of the suit.
2. The plaintiff’s case is that it was a lessee of Godowns No. 6 & 9 situated on LR No. 209/8827 within Industrial Area, Nairobi. The plaintiff stated that the defendant had insured it under a Fire Industrial and Perils Policy No. 18/CP/IANB/04/F/R0339 (renewed as Policy No. 19/CP/IANB/04/F/R0393) for the period 16th June 2019 to 16th June 2020, and that it further provided a business interruption cover under Policy No. 19/CP/IANB/04/FCL/0024 valued at Kshs. 7,500,000/=. The plaintiff claimed that on or about 30th September 2019 through early December 2019, its premises were flooded, resulting in extensive destruction of goods and substantial loss. That subsequently, it lodged a claim initially valued at Kshs.16,058,666.50, which was later adjusted to Kshs.13,933,666.50 after excluding certain items.
3. The plaintiff averred that following the claim, the defendant appointed multiple loss adjusters whose assessments varied significantly, with recommendations ranging from Kshs.12,172,297.00 to Kshs.5,852,691.50 and later Kshs.9,354,15.00, the latter being after a disputed stock adjustment. It contended that it rejected the reduced offers and escalated the matter to the Insurance Regulatory Authority, but no resolution was achieved. The plaintiff claimed that the defendant acted in bad faith by appointing multiple adjusters, disputing stock records without basis, and ultimately repudiating the claim on untenable grounds, despite having settled a similar claim in the previous year. It further claimed that as a result of the defendant’s breach of the insurance contract, it suffered loss of business, profits, and financial hardship.
4. In opposition to this suit, the defendant filed a statement of defence and counterclaim dated 9th December 2022. In its defence, the defendant denied all the averments in the plaintiff’s plaint. While disputing the extent and particulars of the alleged loss suffered by the plaintiff, the defendant admitted receipt of a self-assessed claim for Kshs.16,058,666.50 following the alleged flooding and confirmed that it appointed licensed loss adjusters to assess the claim. The defendant acknowledged having appointed Accident & General Investigations, whose report recommended payment, but stated that both parties, particularly, the plaintiff, were dissatisfied with the report, leading to the appointment of a second adjuster, Safety Surveyors Company Limited.
5. The defendant asserted that the second adjuster identified material inconsistencies in the plaintiff’s documentation, including alleged tampering with stock records, incomplete and altered entries, discrepancies between documents, unsupported claims, and lack of audited financial records to substantiate business interruption. That consequently, the adjuster recommended repudiation of the claim, though the loss was nonetheless adjusted to Kshs.5,852,691.50, which the defendant offered in good faith on a without prejudice basis, but was declined by the plaintiff.
6. The defendant admitted that the dispute was referred to the Insurance Regulatory Authority, which led to the appointment of a third adjuster, Maritime Loss Adjusters, who also identified discrepancies, including outdated stock records, reliance on estimates, and disposal of damaged goods before verification, and adjusted the claim to Kshs.9,354,150.00. The defendant denied allegations of breach and asserted that the claim was lawfully repudiated due to the plaintiff’s breach of policy conditions, including failure to provide accurate and complete records, misrepresentation of material facts, lack of utmost good faith, and failure to exercise due care.
7. In the counterclaim, the 1st defendant averred that it issued a Fire Industrial - Fire and Perils Insurance Policy to the plaintiff, covering goods stored in Godowns No. 6 & 9 at Enterprise Road, Nairobi, for the period 16th June 2019 to 16th June 2020, with a total insured sum of Kshs.51,000,000/=. It stated that the policy covered various items including hardware, chemicals, MDF boards, gypsum, plywood and office equipment, and that it was subject to strict terms and conditions requiring the plaintiff to maintain accurate stock records, act in utmost good faith, and comply with all policy provisions.
8. It was stated by the defendant that following alleged flood damage reported in December 2019, the plaintiff submitted a claim for Kshs.16,058,666.00, prompting the defendant to appoint multiple loss adjusters whose assessments varied and revealed alleged discrepancies, including failure to properly store goods, inconsistencies in records, and suspected tampering with stock documentation.
9. He contended that while the first adjuster recommended Kshs.12,172,297.00, subsequent assessments reduced the claim and raised concerns about the legitimacy of the plaintiff’s documentation, with the second adjuster recommending repudiation and the third adjuster noting further irregularities, including disposal of damaged goods without authorization. The defendant stated that it lawfully repudiated the claim on grounds of fundamental breach of policy terms, including violation of the duty of utmost good faith, failure to maintain accurate records, and misrepresentation of material facts. The defendant maintained that due to the plaintiff’s alleged fraud and inaccuracies in the claim process, it bears no liability. It asserted that the plaintiff is in breach of contract and that it is not entitled to any of the reliefs sought.
10. The defendant in the counterclaim prays for a declaration that the plaintiff breached the fundamental warranties, terms, and conditions of the relevant insurance policies, a declaration that as a result of such breach, the plaintiff is not entitled to any compensation under the said policies, including both the primary fire and perils policy and the business interruption policy, a declaration that it is entitled to avoid liability and that it is discharged from any obligation in respect of claims arising from the flooding reported on 1st December 2019 and a declaration that the plaintiff is not entitled to damages for alleged loss of business and profits. The defendant also seeks orders for general damages and costs of the suit with interest.
11. Thereafter, the plaintiff filed a reply to the defence and a defence to the counterclaim dated 20th December 2022. In its reply, the plaintiff maintained that its claim is genuine and ought not to be partially settled if repudiated. The plaintiff denied liability of the claims raised against it by the defendant in the counterclaim and asserted that the insured premises had been inspected and approved by the defendant prior to issuance of the policy, thereby disputing the accuracy and motive of the loss adjusters’ reports. The plaintiff further contended that it provided all necessary documentation to the first loss adjuster and that any discrepancies, including reconstructed bin cards, were not indicative of fraud but arose from the adjusters’ handling of the documents. The plaintiff accused the defendant of deliberately complicating the claim to avoid full payment. It prayed for the defendant’s defence and counterclaim to be dismissed with costs and for judgment to be entered as sought in the plaint.
12. This matter proceeded to hearing where the plaintiff called one witness in support of its case, and the defendant also called one witness to ventilate its case.
PLAINTIFF’S CASE.
13. Mr. Shaista Kausar Sidi, the plaintiff’s Principal Officer testified as PW1. He adopted his witness statement dated 28th February 2024 as his evidence in chief, and produced the documents in the plaintiff’s lists of documents dated 1st November 2022 as the plaintiff’s exhibits.
14. The photographs on pages 114, 126, 142, 143, 144, 145, 162, 163, 172, 185 & 119 appearing on the plaintiff’s bundle of documents and the email dated 1st December 2019 at 1310 hrs from Mwangi of the defendant company addressed to Priti Patel and copied to Kalsi of the defendant company, were expunged from the record.
15. Mr. Sidi testified that the plaintiff had been consistently insured by the defendant over several years, including the 2017-2018, 2018-2019, and 2019-2020 policy periods, with the latter being a renewal cover. He recalled that in 2018, the plaintiff suffered flood damage for which a claim was assessed by Accident & General Investigations and subsequently settled by the defendant in the sum of approximately Kshs.18-20 Million.
16. He stated that in late November to early December 2019, the plaintiff’s premises were again affected by floods, with water levels reaching approximately four to five feet, submerging a significant portion of the plaintiff’s goods. PW1 asserted that the plaintiff promptly notified the defendant, completed a claim form for Kshs.16,058,666.50, and provided all original supporting documents, including stock/bin cards, to the loss adjuster for verification. He maintained that the godowns were left untouched pending assessment and that the documents provided to the defendants, accurately reflected the stock position at the time of loss. PW1 testified that following the assessment, Accident & General Investigations recommended payment of approximately Kshs.12.9 Million, although the plaintiff noted inconsistencies in the report, including instances where some items were undervalued or omitted altogether, such as SLES 70%, which he insisted was fully submerged (in water) but assigned a nil value.
17. Mr. Sidi stated that despite this recommendation, the defendant failed to settle the claim and instead appointed a second loss adjuster, Safety Surveyors Company Limited, who according to him, conducted minimal independent investigation and recommended a reduced figure of Kshs.5,852,691.50, alongside allegations of tampering with stock/bin cards. He stated that the plaintiff rejected the said offer as inadequate.
18. PW1 claimed that upon escalation of the dispute to the Insurance Regulatory Authority, a third loss adjuster, Maritime Loss Adjusters, was appointed and recommended a payment of Kshs.9,354,150.00, but this too was declined by the plaintiff as it fell short of the actual loss suffered. Mr. Sidi maintained that the plaintiff acted in utmost good faith throughout the claims process, having provided original documentation at the outset and only reconstructing certain bin cards after temporary misplacement during relocation from Godown No. 9 to No. 6 following the floods.
19. He explained that the reconstructed records were consistent with the originals and supported by invoices, and that continued entries in the bin cards after the floods were due to ongoing sales of undamaged stock in the ordinary course of business. He denied any tampering with documents and asserted that the defendant’s allegations are unfounded. Mr. Sidi contended that the repeated appointment of multiple loss adjusters and the shifting assessments demonstrate a deliberate effort by the defendant to reduce or avoid liability, allegedly influenced by the fact that a similar claim had been paid in the preceding year.
20. PW1 emphasized that the defendant’s failure to settle the claim, even at the level recommended by its own adjusters, caused the plaintiff severe financial distress, impairing its ability to sustain operations, pay staff, and meet its obligations. He testified that the plaintiff is entitled to compensation under the business interruption cover, in the sum of Kshs.7,500,000/=, as the floods significantly disrupted its operations. Mr. Sidi asserted that the plaintiff’s claim was valid, properly documented, and consistent with past practice, and that the defendant’s ultimate repudiation after initially offering partial settlement was unjustified.
21. During cross-examination, PW1 testified that the original stock/bin cards were handed over to Accident & General Investigators, as confirmed on page 4 of their report, but the plaintiff’s staff member who received them was not present to testify. He stated that the investigators reported that the insured goods were submerged in rainwater up to about four feet and were extensively damaged. Mr. Sidi stated that after the plaintiff disagreed with the valuation of Kshs.5,852,691.50 by Safety Surveyors Company Limited, the matter was escalated to the Insurance Regulatory Authority, which appointed Maritime Loss Adjusters. He explained that the stock/bin cards were recreated during the relocation from Godown 9 to No. 6, and that he could not recall specific provisions in Clause 49 of the policy.
22. Although PW1 claimed that there was disruption of business due to the floods, he had no documentation to show salary impacts or a separate claim form for business interruption, though communication in emails indicated financial strain, including unpaid rent and pending clearance of containers. Mr. Sidi acknowledged that Kshs.18,557,779.00 had been paid for the 2018 floods. He confirmed familiarity with loss adjustment procedures, noting that loss assessors rely on visibility and documentation and highlighted that the defendant repeatedly alleged tampering with the bin cards despite the originals having been provided. He asserted that after the original bin cards were temporarily lost and later found, the claim was reassessed by a third adjuster, but significant discrepancies remained between the valuations of different loss adjusters.
23. In re-examination, PW1 stated that the plaintiff had included a claim for loss of business in the 2019 claim form, prepared in the same manner as the 2018 claim. He confirmed that the defendant’s agent, Accident & General Investigations, was provided with original documents at the time of assessment, and noted that the report does not indicate that photocopies were supplied instead. Mr. Sidi maintained that the stock/bin cards were not tampered with and explained that any reconstruction of the bin cards occurred only after the original documents had been returned by the first loss adjuster. He emphasized that the recreated bin cards faithfully mirrored the originals. While acknowledging that there were discussions regarding business interruption, he stated that he was not aware whether compensation for the disruption of business had been made in the 2018 claim.
24. Upon being examined by the Court, PW1 clarified that before handing over the original stock/bin cards to Accident & General Investigations, the plaintiff had made photocopies of the same, and that the said photocopies were later used to recreate new bin cards after the plaintiff relocated its operations. He however testified that after settling into the new premises, the original bin cards were traced and the defendant was duly informed of their recovery.
DEFENDANT’S CASE.
25. Mr. Solomon Mwangi, a claims analyst at the defendant company, testified as DWI. He adopted his witness statement dated 21st June 2023 as his evidence in chief and produced the documents listed in the defendant’s list of documents dated 22nd June 2023 as defence exhibit Nos. 1 to 8. Mr. Mwangi testified that while it is not in dispute that the plaintiff suffered loss following heavy flooding at its premises, the claim was properly and lawfully repudiated due to fundamental breaches of the insurance policy. He claimed that upon notification of the loss, the defendant appointed Accident & General Investigations as the first loss adjuster, whose report adjusted the claim but was found by the defendant to be incomplete and containing anomalies in both methodology and figures. It was his evidence that the defendant prudently appointed a second loss adjuster, Safety Surveyors Limited, with instructions to independently verify all supporting documentation provided by the plaintiff.
26. DW1 stated that the second report significantly differed from the first, both in terms of quantum and liability, and the defendant concluded that there was evidence of tampering with stock records, thereby rendering the claim voidable. He further stated that despite the said findings, and in an effort to maintain goodwill with a longstanding client, the defendant offered an ex gratia settlement of Kshs.5,852,691.50 on a without prejudice basis, which the plaintiff declined, leading to the withdrawal of the offer. Mr. Mwangi testified that following escalation of the dispute to the Insurance Regulatory Authority, a third loss adjuster, Maritime Loss Adjusters, was appointed, who similarly observed that the plaintiff lacked proper and verifiable records, with much of the claim being based on estimates, memory, and reconstructed documentation. He asserted that across all assessments, a consistent concern emerged regarding the integrity of the plaintiff’s stock/bin cards.
27. Mr. Mwangi emphasized that under Clause 49 of the policy (the Safe and Books Clause), the plaintiff was obligated to maintain complete, accurate, and contemporaneous records of stock and business transactions as a warranty of the contract, but when the defendant requested for the original bin cards, the plaintiff initially claimed that they were in the possession of the first adjuster. He contended that upon inquiry, Accident & General Investigations confirmed that they had only taken copies and that they had returned the original documents to the plaintiff, thereby exposing inconsistencies in the plaintiff’s account. The defendant further contended that the plaintiff later produced purported “original” bin cards which materially differed from those submitted earlier, reinforcing the conclusion that the records had been altered or reconstructed.
28. DW1 highlighted that the plaintiff disposed of some of the damaged goods before the loss could be properly verified, further undermining the ability to accurately assess the extent of damage and prejudicing the defendant’s rights. In addition, he asserted that no proper claim for business interruption was lodged or substantiated. Mr. Mwangi contended that in light of these factors, including the failure to maintain proper records, submission of inconsistent and unverifiable documentation, and breach of the principle of utmost good faith, the defendant concluded that the plaintiff was in breach of the Safe and Books Clause, which breach went to the root of the policy and rendered it impossible for the defendant to ascertain the true extent of the loss. He also contended that the defendant was entitled to repudiate the claim and maintained that no liability arose under the policy.
29. During cross-examination DW1 confirmed that the plaintiff duly filed a claim form following the 2019 floods, which included a component for disruption of business under item No. 13, although it is unclear whether a separate claim form was required or submitted for that head of claim. He acknowledged that a similar flood claim in 2018 had been assessed by Accident and General Investigations and fully paid, though he could not confirm the completeness of that earlier report. In respect of the 2019 floods, he stated that Accident and General Investigations again assessed the loss and recommended payment of approximately Kshs.12 Million in a report issued in February 2020, about three (3) months after the incident, but the defendant declined to adopt this recommendation, noting that acceptance of a loss adjuster’s report is an internal decision of the insurer.
30. DW1 further stated that Accident and General Investigations did not raise issues regarding the plaintiff’s stock bin cards, and that concerns regarding those records arose from the defendant itself upon internal review. He testified that thereafter, the defendant appointed a second loss adjuster, Safety Surveyors Limited, whose report dated 20th May 2020 identified discrepancies and tampering in the stock records, leading to a significantly reduced assessment of approximately Kshs.5,000,000/=. DW1 further testified that although the defendant initially offered to settle at that figure, the plaintiff declined the offer, prompting its withdrawal, and the matter was subsequently escalated to the Insurance Regulatory Authority, which recommended the appointment of a third independent loss adjuster, Maritime Loss Adjusters. He stated that their report issued in December 2020, assessed the loss at approximately Kshs.9,354,150.00 but noted that the claim was largely based on estimates and memory due to inadequate record-keeping, and accordingly applied a reduction to the claimed amount.
31. It was stated by Mr. Mwangi that while the third adjuster made a recommendation for settlement, the defendant maintained that such recommendations were not binding and declined to pay on the basis that the plaintiff had failed to maintain proper records as required under the policy. It was DW1’s testimony that during the pendency of investigations, the plaintiff was not expected to dispose of the subject matter of the claim, although undamaged goods could be sold, albeit with proper documentation. He further stated that the defendant later requested for the plaintiff’s stock bin cards for verification and upon analysis, concluded that the documents presented as originals differed from those previously submitted to the first loss adjuster, thereby raising serious concerns about their authenticity. That consequently, the defendant formed the view that the plaintiff had not maintained proper and consistent records, and that Accident and General Investigations may have hastily made its recommendations without sufficient scrutiny.
32. In re-examination, DW1 testified that the plaintiff took the position that the report prepared by Accident and General Investigations was shoddy and unreliable, as reflected in its pleadings and conduct following its issuance. He acknowledged that an insurer is not strictly bound by the findings or recommendations of a loss adjuster and retains the discretion to accept or reject such reports. He testified that the subsequent report by Maritime Loss Adjusters further underscored concerns regarding the plaintiff’s claim, as it repeatedly indicated that the assessment of loss was largely based on estimates and memory recollection rather than on verifiable and contemporaneous records.
33. At the close of the defendant’s case, the Court directed parties to file written submissions. The plaintiff’s submissions were filed on 9th December 2025 by the law firm of C.B. Keya & Company Advocates, while the defendant’s submissions were filed by Danlex Partners LLP on 15th December 2025.
34. Mr. Keya, learned Counsel for the plaintiff submitted that the plaintiff’s claim ought to have been settled upon the first assessment by Accident & General Investigations (AGI), who had access to the premises, and to the original untampered bin cards, and recommended payment of approximately Kshs.12 Million. He contended that any subsequent discrepancies arose after the defendant unnecessarily demanded the documents again, despite the plaintiff having shifted warehouses following the floods, leading to temporary misplacement and later reconstruction of some bin cards. Counsel asserted that the replicated bin cards did not materially differ from the originals, which were eventually traced and availed, and that the defendant failed to demonstrate any substantive inconsistency. He claimed that the defendant acted in bad faith and with malice, motivated by reluctance to compensate the plaintiff twice within two consecutive years.
35. Mr. Keya argued that the appointment of multiple loss adjusters was a deliberate attempt to reduce or defeat the claim, noting that while the first and third adjusters recommended substantial payments, the defendant selectively relied on the lowest assessment. On the issue of utmost good faith, Counsel stated that the plaintiff acted transparently by providing original documentation and granting full access to the premises, and that there was no intention to misrepresent or suppress material facts. He relied on the book by J. V. N. Jaiswal, Law of Insurance, Eastern Book Company (2008) at page 495 and the case of Stebbing v Liverpool and London Globe Insurance Company Ltd [1916-17] ALL ER 248, and emphasized that the burden of proving alleged non-disclosure or misrepresentation lies with the defendant. He asserted that no such proof has been provided and that the alleged discrepancies are immaterial.
36. Regarding business interruption, Mr. Keya submitted that the loss was genuine and covered under the policy, as a similar claim had been honoured in 2018 under comparable circumstances. He questioned the defendant’s refusal to compensate this head of claim despite it being included in the claim form and not expressly rejected as improperly lodged. Counsel cited the case of Mcilkenny v Chief Constable of West Midlands, [1980] ALL ER 227, emphasizing on the principles of estoppel and consistency in conduct. In conclusion, Mr. Keya argued that the defendant unjustifiably repudiated the claim despite clear evidence of loss, proper documentation, and independent recommendations supporting payment. He contended that the continued filling of bin cards after the floods was a normal business practice to maintain operations and does not amount to fraud or tampering.
37. Mr. Ochieng, learned Counsel for the defendant submitted that while the occurrence of floods and resulting damage to the plaintiff’s goods is not disputed, the plaintiff’s entitlement to indemnity is conditional upon compliance with the terms of the insurance policy, particularly, the Safe and Books Clause. He contended that the said Clause, which is standard in the defendant’s policies, required the plaintiff to maintain accurate and complete records of stock and business transactions. He argued that although the plaintiff initially claimed to have provided original bin cards to the first loss adjuster, subsequent investigations revealed that the documents later submitted were reconstructed and were materially inconsistent with earlier records. He relied on the case of Silverstar Automobiles Limited v Fidelity Shield Insurance Co. Ltd [2014] KEHC 7510 (KLR), and the principles set out in the text by MacGillivray on Insurance Law 11th Edition at page 235 of Chapter 10, and maintained that the failure to produce original and reliable stock records amounted to a breach of a fundamental warranty, thereby entitling the defendant to repudiate the claim.
38. Mr. Ochieng further submitted that the plaintiff’s conduct also breached the doctrine of utmost good faith, as the plaintiff failed to provide accurate and truthful information necessary for the proper assessment of the claim. He relied on the Court of Appeal cases of Kinyanjui v Kenya Orient Insurance Company & another [2022] KECA 1333 (KLR) and Co-operative Insurance Company Ltd v David Wachira Wambugu [2010] KECA 481 (KLR), and argued that discrepancies in the bin cards, delays in producing records, and admissions by the plaintiff regarding reconstruction of documents demonstrate lack of candour and reliability. Counsel also cited foreign authorities such as Miller v Home Ins. Co. of N.Y., 96 A. 267 (Md. 1915) and Joffe v Niagara Fire Ins. Company 116 Md. 155, to emphasize that failure to maintain or produce required records constitutes a complete bar to recovery under such clauses.
39. Counsel referred to the Court of Appeal case of Mumina v Public Service Commission of Kenya & 2 others [2022] KECA 949 (KLR), and stated that the plaintiff is bound by the terms of the policy, whether read or not, and that Courts cannot rewrite contracts. Mr. Ochieng invoked the burden of proof principles espoused under Sections 107, 109 & 112 of the Evidence Act, as explained by the Court of Appeal in the case of Mbuthia Macharia v Annah Mutua Ndwiga & another [2017] KECA 290 (KLR). He asserted that the defendant had sufficiently demonstrated the plaintiff’s breach, while the plaintiff had failed to discharge its evidential burden. He maintained that the defendant lawfully repudiated the claim due to the plaintiff’s breach of the Safe and Books Clause and the principle of utmost good faith, and that it had fully discharged its obligations under the policy.
ANALYSIS AND DETERMINATION.
40. I have considered and analyzed the evidence above in line with the pleadings filed, together with the written submissions by Counsel for the parties. The issues that arise for determination are –
i) Whether the plaintiff suffered a loss covered under the insurance policy;
ii) Whether the plaintiff complied with the terms and conditions of the policy, including whether there was tampering, alteration, or inconsistency in the bin cards and whether there was a breach of the duty of utmost good faith;
iii) What is the evidential value of the loss adjusters’ reports and did the defendant lawfully repudiated the claim?
iv) Whether the plaintiff is entitled to the claimed sums for material damage and business interruption; and
v) Whether the defendant’s counterclaim is merited.
Whether the plaintiff suffered a loss covered under the insurance policy.
41. It is not in contest that flooding occurred at the plaintiff’s premises between late November and early December 2019 and as a result, the plaintiff suffered some degree of loss. DW1 expressly conceded that the plaintiff suffered loss following the flooding. Further, the appointment of multiple loss adjusters by the defendant to assess the loss is itself an acknowledgment that a potentially indemnifiable event had occurred under
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2. The plaintiff’s case is that it was a lessee of Godowns No. 6 & 9 situated on LR No. 209/8827 within Industrial Area, Nairobi. The plaintiff stated that the defendant had insured it under a Fire Industrial and Perils Policy No. 18/CP/IANB/04/F/R0339 (renewed as Policy No. 19/CP/IANB/04/F/R0393) for the period 16th June 2019 to 16th June 2020, and that it further provided a business interruption cover under Policy No. 19/CP/IANB/04/FCL/0024 valued at Kshs. 7,500,000/=. The plaintiff claimed that on or about 30th September 2019 through early December 2019, its premises were flooded, resulting in extensive destruction of goods and substantial loss. That subsequently, it lodged a claim initially valued at Kshs.16,058,666.50, which was later adjusted to Kshs.13,933,666.50 after excluding certain items.
3. The plaintiff averred that following the claim, the defendant appointed multiple loss adjusters whose assessments varied significantly, with recommendations ranging from Kshs.12,172,297.00 to Kshs.5,852,691.50 and later Kshs.9,354,15.00, the latter being after a disputed stock adjustment. It contended that it rejected the reduced offers and escalated the matter to the Insurance Regulatory Authority, but no resolution was achieved. The plaintiff claimed that the defendant acted in bad faith by appointing multiple adjusters, disputing stock records without basis, and ultimately repudiating the claim on untenable grounds, despite having settled a similar claim in the previous year. It further claimed that as a result of the defendant’s breach of the insurance contract, it suffered loss of business, profits, and financial hardship.
4. In opposition to this suit, the defendant filed a statement of defence and counterclaim dated 9th December 2022. In its defence, the defendant denied all the averments in the plaintiff’s plaint. While disputing the extent and particulars of the alleged loss suffered by the plaintiff, the defendant admitted receipt of a self-assessed claim for Kshs.16,058,666.50 following the alleged flooding and confirmed that it appointed licensed loss adjusters to assess the claim. The defendant acknowledged having appointed Accident & General Investigations, whose report recommended payment, but stated that both parties, particularly, the plaintiff, were dissatisfied with the report, leading to the appointment of a second adjuster, Safety Surveyors Company Limited.
5. The defendant asserted that the second adjuster identified material inconsistencies in the plaintiff’s documentation, including alleged tampering with stock records, incomplete and altered entries, discrepancies between documents, unsupported claims, and lack of audited financial records to substantiate business interruption. That consequently, the adjuster recommended repudiation of the claim, though the loss was nonetheless adjusted to Kshs.5,852,691.50, which the defendant offered in good faith on a without prejudice basis, but was declined by the plaintiff.
6. The defendant admitted that the dispute was referred to the Insurance Regulatory Authority, which led to the appointment of a third adjuster, Maritime Loss Adjusters, who also identified discrepancies, including outdated stock records, reliance on estimates, and disposal of damaged goods before verification, and adjusted the claim to Kshs.9,354,150.00. The defendant denied allegations of breach and asserted that the claim was lawfully repudiated due to the plaintiff’s breach of policy conditions, including failure to provide accurate and complete records, misrepresentation of material facts, lack of utmost good faith, and failure to exercise due care.
7. In the counterclaim, the 1st defendant averred that it issued a Fire Industrial - Fire and Perils Insurance Policy to the plaintiff, covering goods stored in Godowns No. 6 & 9 at Enterprise Road, Nairobi, for the period 16th June 2019 to 16th June 2020, with a total insured sum of Kshs.51,000,000/=. It stated that the policy covered various items including hardware, chemicals, MDF boards, gypsum, plywood and office equipment, and that it was subject to strict terms and conditions requiring the plaintiff to maintain accurate stock records, act in utmost good faith, and comply with all policy provisions.
8. It was stated by the defendant that following alleged flood damage reported in December 2019, the plaintiff submitted a claim for Kshs.16,058,666.00, prompting the defendant to appoint multiple loss adjusters whose assessments varied and revealed alleged discrepancies, including failure to properly store goods, inconsistencies in records, and suspected tampering with stock documentation.
9. He contended that while the first adjuster recommended Kshs.12,172,297.00, subsequent assessments reduced the claim and raised concerns about the legitimacy of the plaintiff’s documentation, with the second adjuster recommending repudiation and the third adjuster noting further irregularities, including disposal of damaged goods without authorization. The defendant stated that it lawfully repudiated the claim on grounds of fundamental breach of policy terms, including violation of the duty of utmost good faith, failure to maintain accurate records, and misrepresentation of material facts. The defendant maintained that due to the plaintiff’s alleged fraud and inaccuracies in the claim process, it bears no liability. It asserted that the plaintiff is in breach of contract and that it is not entitled to any of the reliefs sought.
10. The defendant in the counterclaim prays for a declaration that the plaintiff breached the fundamental warranties, terms, and conditions of the relevant insurance policies, a declaration that as a result of such breach, the plaintiff is not entitled to any compensation under the said policies, including both the primary fire and perils policy and the business interruption policy, a declaration that it is entitled to avoid liability and that it is discharged from any obligation in respect of claims arising from the flooding reported on 1st December 2019 and a declaration that the plaintiff is not entitled to damages for alleged loss of business and profits. The defendant also seeks orders for general damages and costs of the suit with interest.
11. Thereafter, the plaintiff filed a reply to the defence and a defence to the counterclaim dated 20th December 2022. In its reply, the plaintiff maintained that its claim is genuine and ought not to be partially settled if repudiated. The plaintiff denied liability of the claims raised against it by the defendant in the counterclaim and asserted that the insured premises had been inspected and approved by the defendant prior to issuance of the policy, thereby disputing the accuracy and motive of the loss adjusters’ reports. The plaintiff further contended that it provided all necessary documentation to the first loss adjuster and that any discrepancies, including reconstructed bin cards, were not indicative of fraud but arose from the adjusters’ handling of the documents. The plaintiff accused the defendant of deliberately complicating the claim to avoid full payment. It prayed for the defendant’s defence and counterclaim to be dismissed with costs and for judgment to be entered as sought in the plaint.
12. This matter proceeded to hearing where the plaintiff called one witness in support of its case, and the defendant also called one witness to ventilate its case.
PLAINTIFF’S CASE.
13. Mr. Shaista Kausar Sidi, the plaintiff’s Principal Officer testified as PW1. He adopted his witness statement dated 28th February 2024 as his evidence in chief, and produced the documents in the plaintiff’s lists of documents dated 1st November 2022 as the plaintiff’s exhibits.
14. The photographs on pages 114, 126, 142, 143, 144, 145, 162, 163, 172, 185 & 119 appearing on the plaintiff’s bundle of documents and the email dated 1st December 2019 at 1310 hrs from Mwangi of the defendant company addressed to Priti Patel and copied to Kalsi of the defendant company, were expunged from the record.
15. Mr. Sidi testified that the plaintiff had been consistently insured by the defendant over several years, including the 2017-2018, 2018-2019, and 2019-2020 policy periods, with the latter being a renewal cover. He recalled that in 2018, the plaintiff suffered flood damage for which a claim was assessed by Accident & General Investigations and subsequently settled by the defendant in the sum of approximately Kshs.18-20 Million.
16. He stated that in late November to early December 2019, the plaintiff’s premises were again affected by floods, with water levels reaching approximately four to five feet, submerging a significant portion of the plaintiff’s goods. PW1 asserted that the plaintiff promptly notified the defendant, completed a claim form for Kshs.16,058,666.50, and provided all original supporting documents, including stock/bin cards, to the loss adjuster for verification. He maintained that the godowns were left untouched pending assessment and that the documents provided to the defendants, accurately reflected the stock position at the time of loss. PW1 testified that following the assessment, Accident & General Investigations recommended payment of approximately Kshs.12.9 Million, although the plaintiff noted inconsistencies in the report, including instances where some items were undervalued or omitted altogether, such as SLES 70%, which he insisted was fully submerged (in water) but assigned a nil value.
17. Mr. Sidi stated that despite this recommendation, the defendant failed to settle the claim and instead appointed a second loss adjuster, Safety Surveyors Company Limited, who according to him, conducted minimal independent investigation and recommended a reduced figure of Kshs.5,852,691.50, alongside allegations of tampering with stock/bin cards. He stated that the plaintiff rejected the said offer as inadequate.
18. PW1 claimed that upon escalation of the dispute to the Insurance Regulatory Authority, a third loss adjuster, Maritime Loss Adjusters, was appointed and recommended a payment of Kshs.9,354,150.00, but this too was declined by the plaintiff as it fell short of the actual loss suffered. Mr. Sidi maintained that the plaintiff acted in utmost good faith throughout the claims process, having provided original documentation at the outset and only reconstructing certain bin cards after temporary misplacement during relocation from Godown No. 9 to No. 6 following the floods.
19. He explained that the reconstructed records were consistent with the originals and supported by invoices, and that continued entries in the bin cards after the floods were due to ongoing sales of undamaged stock in the ordinary course of business. He denied any tampering with documents and asserted that the defendant’s allegations are unfounded. Mr. Sidi contended that the repeated appointment of multiple loss adjusters and the shifting assessments demonstrate a deliberate effort by the defendant to reduce or avoid liability, allegedly influenced by the fact that a similar claim had been paid in the preceding year.
20. PW1 emphasized that the defendant’s failure to settle the claim, even at the level recommended by its own adjusters, caused the plaintiff severe financial distress, impairing its ability to sustain operations, pay staff, and meet its obligations. He testified that the plaintiff is entitled to compensation under the business interruption cover, in the sum of Kshs.7,500,000/=, as the floods significantly disrupted its operations. Mr. Sidi asserted that the plaintiff’s claim was valid, properly documented, and consistent with past practice, and that the defendant’s ultimate repudiation after initially offering partial settlement was unjustified.
21. During cross-examination, PW1 testified that the original stock/bin cards were handed over to Accident & General Investigators, as confirmed on page 4 of their report, but the plaintiff’s staff member who received them was not present to testify. He stated that the investigators reported that the insured goods were submerged in rainwater up to about four feet and were extensively damaged. Mr. Sidi stated that after the plaintiff disagreed with the valuation of Kshs.5,852,691.50 by Safety Surveyors Company Limited, the matter was escalated to the Insurance Regulatory Authority, which appointed Maritime Loss Adjusters. He explained that the stock/bin cards were recreated during the relocation from Godown 9 to No. 6, and that he could not recall specific provisions in Clause 49 of the policy.
22. Although PW1 claimed that there was disruption of business due to the floods, he had no documentation to show salary impacts or a separate claim form for business interruption, though communication in emails indicated financial strain, including unpaid rent and pending clearance of containers. Mr. Sidi acknowledged that Kshs.18,557,779.00 had been paid for the 2018 floods. He confirmed familiarity with loss adjustment procedures, noting that loss assessors rely on visibility and documentation and highlighted that the defendant repeatedly alleged tampering with the bin cards despite the originals having been provided. He asserted that after the original bin cards were temporarily lost and later found, the claim was reassessed by a third adjuster, but significant discrepancies remained between the valuations of different loss adjusters.
23. In re-examination, PW1 stated that the plaintiff had included a claim for loss of business in the 2019 claim form, prepared in the same manner as the 2018 claim. He confirmed that the defendant’s agent, Accident & General Investigations, was provided with original documents at the time of assessment, and noted that the report does not indicate that photocopies were supplied instead. Mr. Sidi maintained that the stock/bin cards were not tampered with and explained that any reconstruction of the bin cards occurred only after the original documents had been returned by the first loss adjuster. He emphasized that the recreated bin cards faithfully mirrored the originals. While acknowledging that there were discussions regarding business interruption, he stated that he was not aware whether compensation for the disruption of business had been made in the 2018 claim.
24. Upon being examined by the Court, PW1 clarified that before handing over the original stock/bin cards to Accident & General Investigations, the plaintiff had made photocopies of the same, and that the said photocopies were later used to recreate new bin cards after the plaintiff relocated its operations. He however testified that after settling into the new premises, the original bin cards were traced and the defendant was duly informed of their recovery.
DEFENDANT’S CASE.
25. Mr. Solomon Mwangi, a claims analyst at the defendant company, testified as DWI. He adopted his witness statement dated 21st June 2023 as his evidence in chief and produced the documents listed in the defendant’s list of documents dated 22nd June 2023 as defence exhibit Nos. 1 to 8. Mr. Mwangi testified that while it is not in dispute that the plaintiff suffered loss following heavy flooding at its premises, the claim was properly and lawfully repudiated due to fundamental breaches of the insurance policy. He claimed that upon notification of the loss, the defendant appointed Accident & General Investigations as the first loss adjuster, whose report adjusted the claim but was found by the defendant to be incomplete and containing anomalies in both methodology and figures. It was his evidence that the defendant prudently appointed a second loss adjuster, Safety Surveyors Limited, with instructions to independently verify all supporting documentation provided by the plaintiff.
26. DW1 stated that the second report significantly differed from the first, both in terms of quantum and liability, and the defendant concluded that there was evidence of tampering with stock records, thereby rendering the claim voidable. He further stated that despite the said findings, and in an effort to maintain goodwill with a longstanding client, the defendant offered an ex gratia settlement of Kshs.5,852,691.50 on a without prejudice basis, which the plaintiff declined, leading to the withdrawal of the offer. Mr. Mwangi testified that following escalation of the dispute to the Insurance Regulatory Authority, a third loss adjuster, Maritime Loss Adjusters, was appointed, who similarly observed that the plaintiff lacked proper and verifiable records, with much of the claim being based on estimates, memory, and reconstructed documentation. He asserted that across all assessments, a consistent concern emerged regarding the integrity of the plaintiff’s stock/bin cards.
27. Mr. Mwangi emphasized that under Clause 49 of the policy (the Safe and Books Clause), the plaintiff was obligated to maintain complete, accurate, and contemporaneous records of stock and business transactions as a warranty of the contract, but when the defendant requested for the original bin cards, the plaintiff initially claimed that they were in the possession of the first adjuster. He contended that upon inquiry, Accident & General Investigations confirmed that they had only taken copies and that they had returned the original documents to the plaintiff, thereby exposing inconsistencies in the plaintiff’s account. The defendant further contended that the plaintiff later produced purported “original” bin cards which materially differed from those submitted earlier, reinforcing the conclusion that the records had been altered or reconstructed.
28. DW1 highlighted that the plaintiff disposed of some of the damaged goods before the loss could be properly verified, further undermining the ability to accurately assess the extent of damage and prejudicing the defendant’s rights. In addition, he asserted that no proper claim for business interruption was lodged or substantiated. Mr. Mwangi contended that in light of these factors, including the failure to maintain proper records, submission of inconsistent and unverifiable documentation, and breach of the principle of utmost good faith, the defendant concluded that the plaintiff was in breach of the Safe and Books Clause, which breach went to the root of the policy and rendered it impossible for the defendant to ascertain the true extent of the loss. He also contended that the defendant was entitled to repudiate the claim and maintained that no liability arose under the policy.
29. During cross-examination DW1 confirmed that the plaintiff duly filed a claim form following the 2019 floods, which included a component for disruption of business under item No. 13, although it is unclear whether a separate claim form was required or submitted for that head of claim. He acknowledged that a similar flood claim in 2018 had been assessed by Accident and General Investigations and fully paid, though he could not confirm the completeness of that earlier report. In respect of the 2019 floods, he stated that Accident and General Investigations again assessed the loss and recommended payment of approximately Kshs.12 Million in a report issued in February 2020, about three (3) months after the incident, but the defendant declined to adopt this recommendation, noting that acceptance of a loss adjuster’s report is an internal decision of the insurer.
30. DW1 further stated that Accident and General Investigations did not raise issues regarding the plaintiff’s stock bin cards, and that concerns regarding those records arose from the defendant itself upon internal review. He testified that thereafter, the defendant appointed a second loss adjuster, Safety Surveyors Limited, whose report dated 20th May 2020 identified discrepancies and tampering in the stock records, leading to a significantly reduced assessment of approximately Kshs.5,000,000/=. DW1 further testified that although the defendant initially offered to settle at that figure, the plaintiff declined the offer, prompting its withdrawal, and the matter was subsequently escalated to the Insurance Regulatory Authority, which recommended the appointment of a third independent loss adjuster, Maritime Loss Adjusters. He stated that their report issued in December 2020, assessed the loss at approximately Kshs.9,354,150.00 but noted that the claim was largely based on estimates and memory due to inadequate record-keeping, and accordingly applied a reduction to the claimed amount.
31. It was stated by Mr. Mwangi that while the third adjuster made a recommendation for settlement, the defendant maintained that such recommendations were not binding and declined to pay on the basis that the plaintiff had failed to maintain proper records as required under the policy. It was DW1’s testimony that during the pendency of investigations, the plaintiff was not expected to dispose of the subject matter of the claim, although undamaged goods could be sold, albeit with proper documentation. He further stated that the defendant later requested for the plaintiff’s stock bin cards for verification and upon analysis, concluded that the documents presented as originals differed from those previously submitted to the first loss adjuster, thereby raising serious concerns about their authenticity. That consequently, the defendant formed the view that the plaintiff had not maintained proper and consistent records, and that Accident and General Investigations may have hastily made its recommendations without sufficient scrutiny.
32. In re-examination, DW1 testified that the plaintiff took the position that the report prepared by Accident and General Investigations was shoddy and unreliable, as reflected in its pleadings and conduct following its issuance. He acknowledged that an insurer is not strictly bound by the findings or recommendations of a loss adjuster and retains the discretion to accept or reject such reports. He testified that the subsequent report by Maritime Loss Adjusters further underscored concerns regarding the plaintiff’s claim, as it repeatedly indicated that the assessment of loss was largely based on estimates and memory recollection rather than on verifiable and contemporaneous records.
33. At the close of the defendant’s case, the Court directed parties to file written submissions. The plaintiff’s submissions were filed on 9th December 2025 by the law firm of C.B. Keya & Company Advocates, while the defendant’s submissions were filed by Danlex Partners LLP on 15th December 2025.
34. Mr. Keya, learned Counsel for the plaintiff submitted that the plaintiff’s claim ought to have been settled upon the first assessment by Accident & General Investigations (AGI), who had access to the premises, and to the original untampered bin cards, and recommended payment of approximately Kshs.12 Million. He contended that any subsequent discrepancies arose after the defendant unnecessarily demanded the documents again, despite the plaintiff having shifted warehouses following the floods, leading to temporary misplacement and later reconstruction of some bin cards. Counsel asserted that the replicated bin cards did not materially differ from the originals, which were eventually traced and availed, and that the defendant failed to demonstrate any substantive inconsistency. He claimed that the defendant acted in bad faith and with malice, motivated by reluctance to compensate the plaintiff twice within two consecutive years.
35. Mr. Keya argued that the appointment of multiple loss adjusters was a deliberate attempt to reduce or defeat the claim, noting that while the first and third adjusters recommended substantial payments, the defendant selectively relied on the lowest assessment. On the issue of utmost good faith, Counsel stated that the plaintiff acted transparently by providing original documentation and granting full access to the premises, and that there was no intention to misrepresent or suppress material facts. He relied on the book by J. V. N. Jaiswal, Law of Insurance, Eastern Book Company (2008) at page 495 and the case of Stebbing v Liverpool and London Globe Insurance Company Ltd [1916-17] ALL ER 248, and emphasized that the burden of proving alleged non-disclosure or misrepresentation lies with the defendant. He asserted that no such proof has been provided and that the alleged discrepancies are immaterial.
36. Regarding business interruption, Mr. Keya submitted that the loss was genuine and covered under the policy, as a similar claim had been honoured in 2018 under comparable circumstances. He questioned the defendant’s refusal to compensate this head of claim despite it being included in the claim form and not expressly rejected as improperly lodged. Counsel cited the case of Mcilkenny v Chief Constable of West Midlands, [1980] ALL ER 227, emphasizing on the principles of estoppel and consistency in conduct. In conclusion, Mr. Keya argued that the defendant unjustifiably repudiated the claim despite clear evidence of loss, proper documentation, and independent recommendations supporting payment. He contended that the continued filling of bin cards after the floods was a normal business practice to maintain operations and does not amount to fraud or tampering.
37. Mr. Ochieng, learned Counsel for the defendant submitted that while the occurrence of floods and resulting damage to the plaintiff’s goods is not disputed, the plaintiff’s entitlement to indemnity is conditional upon compliance with the terms of the insurance policy, particularly, the Safe and Books Clause. He contended that the said Clause, which is standard in the defendant’s policies, required the plaintiff to maintain accurate and complete records of stock and business transactions. He argued that although the plaintiff initially claimed to have provided original bin cards to the first loss adjuster, subsequent investigations revealed that the documents later submitted were reconstructed and were materially inconsistent with earlier records. He relied on the case of Silverstar Automobiles Limited v Fidelity Shield Insurance Co. Ltd [2014] KEHC 7510 (KLR), and the principles set out in the text by MacGillivray on Insurance Law 11th Edition at page 235 of Chapter 10, and maintained that the failure to produce original and reliable stock records amounted to a breach of a fundamental warranty, thereby entitling the defendant to repudiate the claim.
38. Mr. Ochieng further submitted that the plaintiff’s conduct also breached the doctrine of utmost good faith, as the plaintiff failed to provide accurate and truthful information necessary for the proper assessment of the claim. He relied on the Court of Appeal cases of Kinyanjui v Kenya Orient Insurance Company & another [2022] KECA 1333 (KLR) and Co-operative Insurance Company Ltd v David Wachira Wambugu [2010] KECA 481 (KLR), and argued that discrepancies in the bin cards, delays in producing records, and admissions by the plaintiff regarding reconstruction of documents demonstrate lack of candour and reliability. Counsel also cited foreign authorities such as Miller v Home Ins. Co. of N.Y., 96 A. 267 (Md. 1915) and Joffe v Niagara Fire Ins. Company 116 Md. 155, to emphasize that failure to maintain or produce required records constitutes a complete bar to recovery under such clauses.
39. Counsel referred to the Court of Appeal case of Mumina v Public Service Commission of Kenya & 2 others [2022] KECA 949 (KLR), and stated that the plaintiff is bound by the terms of the policy, whether read or not, and that Courts cannot rewrite contracts. Mr. Ochieng invoked the burden of proof principles espoused under Sections 107, 109 & 112 of the Evidence Act, as explained by the Court of Appeal in the case of Mbuthia Macharia v Annah Mutua Ndwiga & another [2017] KECA 290 (KLR). He asserted that the defendant had sufficiently demonstrated the plaintiff’s breach, while the plaintiff had failed to discharge its evidential burden. He maintained that the defendant lawfully repudiated the claim due to the plaintiff’s breach of the Safe and Books Clause and the principle of utmost good faith, and that it had fully discharged its obligations under the policy.
ANALYSIS AND DETERMINATION.
40. I have considered and analyzed the evidence above in line with the pleadings filed, together with the written submissions by Counsel for the parties. The issues that arise for determination are –
i) Whether the plaintiff suffered a loss covered under the insurance policy;
ii) Whether the plaintiff complied with the terms and conditions of the policy, including whether there was tampering, alteration, or inconsistency in the bin cards and whether there was a breach of the duty of utmost good faith;
iii) What is the evidential value of the loss adjusters’ reports and did the defendant lawfully repudiated the claim?
iv) Whether the plaintiff is entitled to the claimed sums for material damage and business interruption; and
v) Whether the defendant’s counterclaim is merited.
Whether the plaintiff suffered a loss covered under the insurance policy.
41. It is not in contest that flooding occurred at the plaintiff’s premises between late November and early December 2019 and as a result, the plaintiff suffered some degree of loss. DW1 expressly conceded that the plaintiff suffered loss following the flooding. Further, the appointment of multiple loss adjusters by the defendant to assess the loss is itself an acknowledgment that a potentially indemnifiable event had occurred under
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