G34/3314/2019

QUESTION ONE
Question One (a)
When determining whether the insurance company should defend Cain in the lawsuit, several
considerations should be taken into account:
(i) Coverage under the policy: The insurance company needs to assess whether the loss
is covered under the insurance policy. They should carefully review the terms and
conditions of the policy to determine if it covers the type of incident that occurred,
such as accidents resulting from negligence or reckless misconduct on the part of the
assured.

(ii) Duty to defend: If the loss falls within the coverage of the policy, the insurance
company should consider its duty to defend. This duty typically arises when the
allegations in the lawsuit potentially fall within the scope of coverage. It is important
to note that the duty to defend is broader than the duty to indemnify, meaning that the
insurance company may have an obligation to defend even if it is ultimately
determined that the policy does not provide coverage for the loss.

This duty is provided for under Section 10 of the Insurance (Motor Vehicles Third
Party Risks) Act which provides for the duty of an insurer to settle a decretal amount
where, for the purposes of this case, “after a policy of insurance has been effected,
judgment in respect of any such liability as is required to be covered by a policy is
obtained against any person insured by the policy, notwithstanding that the insurer
may be entitled to avoid or cancel, or may have avoided or cancelled, the policy.”
This position was affirmed by the court in the case of Muthui v Directline Insurance
Company Ltd & 2 others (Civil Suit 88 of 2019) [2022] KEHC 392 (KLR) (Civ).

(iii) Investigation findings: The preliminary investigation conducted by Haquim

Insurance Company is significant. The information gathered from witnesses can help
assess the validity of the allegations against Cain. The absence of any witness
indicating that Cain intentionally ran Abel down is a crucial factor. However, the fact
that the investigation was unable to speak to the SILK bar bartender may limit the
completeness of the findings.

In a civil suit, determination of a matter is on a balance of probabilities. Haquim

Insurance Company stands a good chance of proving the matter on a balance of
probabilities considering that there might not be any witnesses to testify against Cain.
 (iv) Policy exclusions and conditions: It is essential to carefully review the policy for
any exclusions or conditions that may affect the coverage or the insurance company's
duty to defend. If there are specific exclusions or conditions that apply to the
circumstances of the incident, they may impact the decision to defend Cain.

The court in Icea Lion General Insurance Company Limited v Chris Ndolo Mutuku
t/a Crystal Charlotte Beach Resort [2021] eKLR affirmed the right of an insurer to
escape liability to escape liability where an exclusion clause exists by stating thus:
“…there is an express exclusion clause for consequential loss in the insurance
contract between the parties which document is dated 12/07/2016 and relied on
by the respondent as his evidence. Accordingly, it is my humble view that the
trial court erred in granting the respondent damages for loss of user/earnings
as prayed as the same was strictly restricted by the insurance contract.”

(v) Legal implications: The insurance company should consider the potential legal
implications of the case, such as the likelihood of liability, the strength of the
evidence against Cain, and any applicable laws or legal precedents that may impact
the outcome. Evaluating these factors can assist in determining the potential costs and
risks associated with defending the lawsuit.

Based on these considerations, the insurance company can make an informed decision on
whether to defend Cain.

Question One (b)

Cain's admission that he purposely missed the brake when Abel stepped in front of his car has
significant legal implications. Although Cain claims that it is unlikely, he could have stopped in
time even if he had hit the brake, his admission of intentionally missing the brake raises
concerns.

(i) Negligence: Cain's admission suggests that he intentionally failed to take reasonable
precautions to avoid the accident. In negligence claims, the plaintiff typically needs to
establish that the defendant owed them a duty of care, breached that duty, and caused
the plaintiff's injuries. Cain's admission could potentially be used as evidence of his
breach of duty, as intentionally missing the brake could be considered reckless or
negligent behavior.

The court in Kenya Power & Lighting Co. Ltd v Mary Wambui Kiere [2020] eKLR
reaffirmed a road user’s duty of care to other road users by determining thus:
 “Any user of a highway is under an obligation to exercise reasonable
care to other road users, expected of a reasonable man/woman. The
rider having admitted that he actually saw the respondent crossing the
road, and having seen a truck on the right side, the rider was expected to
have foreseen that the pedestrian may suddenly jump onto the road
attempting to cross, and thus exercise more reasonable care.”
Having seen Abel step out onto the road, Cain bore a duty of care to him, and his
admission to purposely missing the break indicates a violation of this duty. When
presented with these material facts, a court of law will find no challenge in
finding in favour of Abel.

(ii) Contributory negligence: In some jurisdictions, including Kenya, the principle of

contributory negligence may apply. This principle allows for the apportionment of
fault between parties based on their respective degrees of negligence. If Cain's
admission is proven in court, it could result in a determination that both Cain and
Abel were partially at fault for the accident, affecting the quantum of damages each
party may be entitled to.

The court in the case of Alfred Chivatsi Chai & another v Mercy Zawadi Nyambu
[2019] eKLR addressed this issue in citing Lord Denning in Jones v Livox Quarries
Limited 1952 2 QB 608 where he stated:
“By reason of the said duty of care, the same standard of care underlying the
defence of contributory negligence is that people should take reasonable care
for their own safety as well that of others.”
The court also added:
“By reason of the said duty of care, the same standard of care underlying the
defence of contributory negligence is that people should take reasonable care
for their own safety as well that of others.”
Thus, Cain’s lawyer can raise a defense by stating that Abel did not fulfil his own duty
of reasonable care by stepping in front of a car in motion.
(iii) Insurance coverage implications: Cain's admission of intentional misconduct may
have implications for insurance coverage. Many insurance policies exclude
intentional acts from coverage. If Cain's intentional act is found to be the sole cause
of the accident, it is possible that the insurance company may argue that the policy
does not provide coverage for such acts, potentially leading to a denial of coverage.
It is important for Cain's advocate to carefully consider the legal implications of Cain's statement
and strategize accordingly to present a strong defense.

Question One (c)

Under Kenyan insurance law, when determining the amount payable for a totaled vehicle, the
insurance company typically considers the market value of the vehicle at the time of the accident.
The court of Appeal in Jimnah Munene Macharia vs. John Kamau Erera Civil Appeal No.
218 of 1998 was of the view that:
“Where there is no proof of actual repair the plaintiff is only entitled to the pre-
accident value less the salvage value.”
However, if Cain rejects the payment based on the market value and insists that the insurance
company should pay the original price he paid when buying the vehicle, the following advice can
be provided:

(i) Policy terms and conditions: The insurance company should review the insurance
policy to understand the specific provisions related to the calculation of the claim
amount for a totaled vehicle. The policy should outline the valuation method, which
is often based on the market value at the time of the accident.

(ii) Duty of utmost good faith: Both the insured (Cain) and the insurer (Haquim
Insurance Company) have a duty of utmost good faith under Kenyan insurance law.
Cain should have disclosed the original purchase price of the vehicle during the
insurance application process. If he failed to do so, it may impact his claim for the
original purchase price.

(iii) Depreciation and market value: Insurance policies generally take into account the
depreciation of a vehicle over time. The market value at the time of the accident
reflects this depreciation. Insurers typically do not pay the original purchase price
unless the policy specifically provides for it. In the case of Joseph Macharia Nderitu
v. Real Insurance Company Ltd [2014] eKLR, the depreciation value of the subject
matter was factored in when determining the amount of compensation.

(iv) Negotiation and dispute resolution: Finally, to avoid the tedious and costly venture
of legal proceedings, I would advise Cain to engage in negotiation with Haquim
Insurance Company to seek a mutually agreeable resolution. If Cain remains
dissatisfied with the insurance company's offer, he may consider exploring alternative
 dispute resolution methods, such as mediation or arbitration, if available under the
insurance policy or applicable law.

It is crucial for Cain to carefully review his insurance policy, understand the terms and
conditions, and consult with his advocate to determine the best course of action in pursuing his
claim.