Automated Summary
Key Facts
The case centers on whether an insurance company can be brought into a tort suit before a judgment is obtained against the insured. The appellant (insurance company) argued that under section 10(1) of the Insurance (Motor Vehicle Third Party Risks) Act, it only becomes liable after a judgment against the insured. The trial court allowed the 1st respondent to issue a Third-Party Notice against the appellant, but the appellate court overturned this, ruling the application was premature. The appeal was upheld, striking out the Third-Party Notice application with costs to the respondents. The court emphasized that insurance liability crystallizes post-judgment, aligning with precedents like Idris Faridi v Karithi Peter Murungi and Kenindia Insurance v James Otieno.
Transaction Type
Insurance policy dispute regarding liability timing under the Insurance (Motor Vehicle Third Party Risk) Act
Issues
- The primary issue was whether the trial court erred in rejecting the insurance company's preliminary objection that the application to be joined as a third party was premature, as per section 10(1) of the Insurance (Motor Vehicle Third Party Risks) Act. The court examined if the insurance company could be liable before a judgment against the insured, referencing established case law on preliminary objections.
- The second issue concerned the validity of the preliminary objection itself. The court analyzed whether the objection met the legal threshold for preliminary objections (pure point of law), referencing the Mukisa Biscuit Manufacturing Co. Ltd v West End Distributors Ltd case, which defines preliminary objections as points of law that may dispose of a suit if argued on the assumption that all pleaded facts are true.
Holdings
- The court upheld the appellant's preliminary objection dated 24.10.2022, finding that the application to issue a Third-Party Notice against the insurance company was premature under Section 10(1) of the Insurance (Motor Vehicle Third Party Risks) Act. The trial court's ruling dated 1.3.2023 was set aside, and the appeal was allowed with costs of Kshs 40,000 assessed against the respondents.
- The court ordered that the respondents jointly and severally pay the appellant's costs of the appeal (Kshs 40,000) within 60 days, emphasizing that the issue could have been resolved by parties familiar with the law.
- The court determined that the insurance company can only be brought into proceedings after a court has determined liability against the insured, as per Section 10(1) of the Act and cited legal precedents. The trial court's conclusion that factual evidence could resolve the issue was deemed incorrect.
Remedies
- Respondents ordered to pay Kshs 40,000 in costs to the appellant within 60 days, with the right to execute for recovery in default.
- The appeal is allowed; the application to issue a Third-Party Notice is struck out with costs to the appellant.
Legal Principles
- The court applied the principle that a preliminary objection must be based on a pure point of law that can dispose of the suit, as established in Mukisa Biscuit Manufacturing Co. Ltd v West End Distributors (1969) EA 695. This includes objections to jurisdiction, limitation, or contractual arbitration clauses, and cannot involve factual determinations or judicial discretion.
- The court held that an insurance company's liability under the Insurance (Motor Vehicle Third Party Risks) Act only arises after a judgment is obtained against the insured, not before. This was reinforced by cases like Laichard Shah & Another v Kenindia Insurance Company Limited (2005) eKLR, where insurers are not enjoined in tort suits until liability and quantum are determined by a court.
Precedent Name
- Laichard Shah & Another v Kenindia Insurance Company Limited
- Kenindia Assurance Company Limited v James Otieno
- Idris Faridi & 2 Others v Karithi Peter Murungi
- Mukisa Biscuit Manufacturing Co. Ltd v West End Distributors Ltd
- Pan Africa Company Limited v Grace Washo
- Josephat Njuguna Kariuki v Simon Karichu Irungu
- Independent Electoral & Boundaries Commission v Jane Cheperenger & 2 Others
Cited Statute
Insurance (Motor Vehicle Third Party Risk) Act
Judge Name
R.E. Aburili
Passage Text
- "a preliminary objection consists of a point of law which has been pleaded, or which arises by clear implication out of pleadings, and which if argued as a preliminary point may dispose of the suit. Examples are an objection to the jurisdiction of the court or a plea of limitation or a submission that the parties are bound by a contract giving rise to the suit to refer the dispute to arbitration"
- "If, after a policy of insurance has been effected, judgment in respect of any such liability as is required to be covered by a policy under paragraph (b) of Section 5 (Being a liability covered by the terms of the policy) is obtained against any person insured by the policy, then notwithstanding that the insurer may be entitled to avoid or cancel, or may have avoided or cancelled the policy, the insurer shall, subject to the provisions of this section, pay to the persons entitled to the benefit of the judgment any sum payable thereunder in respect of the liability; including any amount payable in respect of costs and any sum payable in respect of interest or that sum by virtue of any enactment relating to interest on judgments."
- "The insurance company according to Law are never enjoined as a party in a tort suit. This is because the cause of action against an insurance company arises after liability and quantum has been determined by a court of law..."
Damages / Relief Type
Costs Awarded: Kshs 40,000 payable by respondents to the appellant within 60 days