Background
1. The dispute before this Court arose from an insurance policy agreement between the parties. In this arrangement, the plaintiff agreed to provide an insurance cover to the defendant’s motor vehicle registration Number KAP 590P Toyota Hiace (hereinafter ‘motor vehicle’), subject to payment of the agreed premium and conditions set out in the Policy of Insurance.
2. By a plaint dated 5th April 2011, the plaintiff instituted a suit against the defendant claiming breach of the insurance policy agreement. The defendant failed to enter appearance or file a defence despite effective service. Upon request, an interlocutory judgment was entered against the defendant and the suit set down for formal proof.
3. Nevertheless, on the date set for formal proof, the plaintiff made an application for leave to file an emended plaint vide its motion dated 20th November 2019. This application was heard unopposed and allowed on 27th February 2023.
4. By an amended plaint dated 9th December 2019, the plaintiff urges that by a proposal form and declaration dated 6th April 2010, the defendant requested the plaintiff to issue him a private hire motor vehicle policy of insurance against statutory liabilities under the insurance Act in respect of the motor vehicle. Consequently, upon consideration and compliance with the required compliances, the plaintiff pleads that it issued the defendant with a third-party motor vehicle insurance policy No. 022/084/1/175082/2010/05 limited to an indemnity for private hire-chauffer driven use limited only to four passengers.
5. It is the plaintiff’s case that in breach of express terms of the said policy, the defendant misrepresented or knowingly withheld information material to the insurance contract. Further that, his servant or authorised agent caused the motor vehicle to be driven, carrying fare paying passengers.
6. The plaintiff contends that in the period of breach, the motor vehicle was involved in an accident on Makongeni BAT -Delmonte road, and the said passengers sustained bodily injuries. It urges that after the accident, the passengers instituted various suits seeking compensation including Thika PMCC No. 718 of 2010; Thika PMCC No. 818 of 2010; and Thika PMCC No. 820 of 2010.
7. The plaintiff therefore seeks the following declarations;
a. A declaration that the plaintiff is and has at all material times been entitled to avoid the aforesaid policy of Insurance No. 022/084/1/175082/2010/05 and any provision contained therein on the ground that the terms of the policy had been breached by the defendant;
b. A declaration that the plaintiff is not liable to make payment under policy of Insurance No. 022/084/1/175082/2010/05 in respect of any claims against the defendant herein, arising out of the injuries sustained by any of the passengers involved in the accident on 14th April 2010 involving the motor vehicle registration number KAP 590P and/or from any accident involving the said motor vehicle during the pendency of the policy number 022/084/1/175082/2010/05;
c. Any other or further relief the court deemed fir to grant; and
d. Costs of the suit.
8. The defendant once more failed to enter appearance or file a defence to the amend plaint, despite sufficient service. As a result, the plaintiff requested for orders of interlocutory judgment on 16th May 2023 which was entered on even date and the matter fixed for formal proof in accordance with Order 10 Rule 6 of the Civil Procedure Rules.
9. Formal proof took place virtually on 15th February 2024, wherein the plaintiff, called two witnesses, Ms. Phyllis Kiragu, the plaintiff’s Legal Officer (PW1), who adopted her witness statement dated 20th September 2023, and Mr. George Muhia Ndegwa, the Principal Officer at Mchenry Loss Assessors and Investigators (PW2) who give oral evidence and produced the accident Assessment Report in respect to the motor vehicle dated 31st January 2011.
10. I shall not regurgitate the witness testimonies which are more or less along the lines that I have already stated, although I will refer to them in my analysis hereafter.
Analysis
11. I have carefully considered the pleadings, testimonies, and evidence by the plaintiff in support of its case. I also take note that the defendant did not attend court on the date set for formal proof. I am satisfied that the hearing notice setting the suit down for formal proof was duly served upon the defendant, as is evident in the affidavit of return of service dated 25th May 2023.
12. Now turning to the substantive questions before me, it is my view that three issues arise for determination;
a. whether there is a valid insurance contract between the plaintiff and the defendant;
b. if (a) is answered in the affirmative, whether the defendant was in breach of the insurance contract; and
c. if (b) is answered in the affirmative, whether the plaintiff is entitled to the reliefs sought.
13. In respect of the first issue, the plaintiff urges that subject to a proposal by the defendant dated 6th April 2020, it entered into a private car hire policy of insurance contract for motor vehicle registration No. KAP 590P. It also urges that it subsequently issued the defendant with a third-party motor vehicle insurance policy No. 022/084/1/175082/2010/05, and delivered a Certificate of insurance No. A4597002 in compliance with Section 7 of the Insurance Act.
14. In support of this assertion, PW1 corroborated the plaintiff’s arguments and urged this Court to rely on the Proposal Form dated 6th April 2010; Insurance Policy No. 022/084/1/175082/2010/05; Policy Schedule; and Certificate of Insurance No. A4597002 produced in court as Exhibit 9 and Exhibit 10 respectively.
15. Guided by this evidence, I find that there is uncontroverted proof that at the time of the accident, the plaintiff had insured motor vehicle registration No. KAP 590P Toyota Hiace as per the Insurance Policy No. 022/084/1/175082/2010/05 in line with the provisions of the insurance Act. It is also credibly evident that the plaintiff issued the defendant a Certificate of Insurance in line with Section 7 of the Insurance Act. In the premises, I find that there was a valid contract of insurance between the plaintiff and the defendant at the time of the accident.
16. Turning to the second issue, it is the plaintiff’s case that it was an express term of the insurance contract that the plaintiff would indemnify the defendant should the defendant become liable in the event of an accident while the car was being used exclusively for private hire purposes and not for fare paying passengers. It is emphasised that the defendant’s cover was strictly limited to private hire-chauffer driven.
17. Similarly, the plaintiff contends that as per the insurance policy, the defendant gave an undertaking that the information provided was true and that any non-disclosure or misrepresentation of material facts would invalidate the insurance contract.
18. It is the plaintiff’s further claim that in breach of these terms, the defendant, his servant or authorised agent used the insured motor vehicle to ferry fair paying public passengers, was involved in an accident and as a result the said passengers have instituted claims for compensation for their injuries including against the plaintiff. These claims are further supported by the plaintiff’s witnesses.
19. In addition, the plaintiff asserts that the defendant in further breach, misrepresented facts that he was using the motor vehicle for private hire-Chauffer driven, and this was material misinformation which negatively influenced the decision to provide the insurance cover and costing of the premiums payable.
20. I must now interrogate whether the insurance contract was voidable on grounds of breach. I am persuaded by the case of Kenyan Alliance Insurance Company Limited v. Rose Achieng Abdullah [2021] eKLR, where the High Court held that;
‘a contract of insurance is also voidable for misrepresentation of material facts which impairs the meeting of minds of the two contracting parties.’
21. The nature of an insurance contract, the place of good faith and the effects of misrepresentation of information was well settled in the case of Paul Mutisya v. Jubilee Insurance Company of Kenya Limited [2018] eKLR to the effect that;
“…The contract of insurance requires the utmost good faith; the insurer knows nothing; the assured knows everything about the risk he wants to insure and he must disclose to the insurer every fact material to the risk.”
22. Similarly, the Court of Appeal in Co-Operative Insurance Company Ltd v. David Wachira Wambugu [2010] 1 KLR 254 held that:
“There is an obligation to disclose what you know, and the concealment of a material circumstance known to you, whether you thought it material or not, avoids the policy…Contracts of insurance are contracts of utmost good faith and this gives rise to a legal obligation upon the insured, prior to the contract being made, to disclose to the insurer all material facts and circumstances known to the insured which affect the risk being run. …The policy would be equally void against the underwriter if he concealed. The governing principle is applicable to all contracts and dealings. Good faith forbids either party, by concealing what he privately knows, to draw the other into a bargain from his ignorance of the fact and his believing the contrary.”
23. I have also examined the pleadings, the evidence adduced by PW1 and PW2 and exhibits produced in this suit. As per the motor vehicle insurance proposal form dated 6th April 2010 for motor vehicle KAP 590P, which form was duly signed by the defendant herein, the cover is stated to be third party.
24. Whereas the usage of the insured motor vehicle is ‘private hire chauffer driven’. Similarly, as per the motor insurance policy by which the parties hereto agreed to be bound, the insurance cover was limited to private hire chauffer driven only.
25. Most importantly, Clause 0160 NP11(C) in respect thereof provides;
“Use for carriage of passenger for hire and reward as a private Hire with a minimum capacity of 4 passengers whilst chauffer driven.
The policy Does not cover;
- Use while drawing a trailer oy any mechanically disabled (propelled) m/vehicle
- Use for carriage of passengers for hire or reward other than private hire.
- Use for carriage of passengers for hire or reward whilst the m/vehicle is self-driven rather that chauffer driven
- Use for fare paying other than hire and for any use not declared, proposed, and paid for by the insured.”
26. This uncontroverted evidence establishes that the contract contained in the policy document excluded liability where the insured vehicle was found to have been used for the purpose for which it was not insured. To wit, ‘carriage of passenger for hire and reward as a private Hire with a minimum capacity of 4 passengers whilst chauffer driven’.
27. Put differently, the use of the insured motor vehicle was expressly restricted to private hire, chauffer driven and not for public use by fare paying passengers. Even in private care hire, the plaintiff’s liability or indemnity was restricted to four passengers only.
28. What is the effect of this conclusion? Per the investigation report compiled by PW2 dated 31st January 2011 and admitted as Exhibit 17, the police abstract admitted as Exhibit 11 and the Civil cases filed by the passengers in Thika Principal Magistrates Court, PMCC No. 718 of 2010; PMCC No. 818 of 2010; and PMCC No. 820 of 2010, it is proved that the vehicle was being used to ferry fare paying public passengers, exceeding four passengers.
29. Following from the above analysis, it is evident that the defendant breached the terms and conditions of the insurance proposal and policy between itself and the plaintiff, by using the motor vehicle contrary to the purpose insured.
30. Additionally, it breached the terms of contract by falsely representing to the plaintiff insurer that the motor vehicle in question would be used for private hire chauffer driven, with a minimum of four passengers.
31. Therefore, I find the Insurance policy was void against the underwriter on grounds of breach of the applicable terms and conditions of Insurance Policy No. 022/084/1/175082/2010/05 and Certificate of Insurance No. A4597002 respectively.
32. As pertains the last issues, having found that the defendant violated the terms and conditions of the insurance proposal and policy and insurance policy was voided, I now also find that the plaintiff is not under any legal obligation to honour and/or satisfy the claims arising from and/or to indemnify the defendant for the bodily injuries sustained by the passengers who at the time of the accident were in the defendant’s motor vehicle Reg. No. KAP 590P or to compensate any person for any damage or loss to property as a result of the said accident.
33. In conclusion, I find the plaintiff’s claim against the defendant for a declaration to repudiate the cover on liability against any risks or claims filed under the policy of insurance is merited.
34. As regards costs, I take judicial notice that the plaintiff sent a demand letter dated 23rd March 2011, which is a prerequisite of a prayers for costs. In the Supreme Court case of Jasbir Singh Rai & 3 Others v. Tarlochan Singh Rai Estate of & 4 others, SC. Petition No. 4 of 2012; [2013] eKLR, the apex court settled that as a general rule, costs follow the event and that the Court may only in appropriate cases exercise discretion and decide otherwise. So guided, I direct that the defendant shall bear costs of the suit.
Determination
35. Consequently, I grant the prayers sought in the plaint and make the following orders:
a. The Plaintiff’s suit against the defendant is successful;
b. A declaration is made that the plaintiff is and has at all material times been entitled to avoid the aforesaid policy of Insurance No. 022/084/1/175082/2010/05 and any provision contained therein on the ground that the terms of the policy had been breached by the defendant;
c. A declaration is made that the plaintiff is not liable to make payment under policy of Insurance No. 022/084/1/175082/2010/05 in respect of any claims against the defendant arising out of the injuries sustained by any of the passengers involved in the accident on 14th April 2010 involving the motor vehicle registration number KAP 590P and/or from any accident involving the said motor vehicle during the pendency of the policy number 022/084/1/175082/2010/05; and
d. Cost of the suit shall be payable by the defendant