Appeals court upholds ruling holding APA Insurance liable for fire incident at firm

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The Court of Appeal upheld a High Court decision finding APA Insurance Limited liable for a fire that razed down the factory of Britind Industries Limited, but reduced the compensation from Sh82.3 million to Sh58.6 million.

A three-judge bench comprising Justices Wanjiru Karanja, Fatuma Sichale Tuiyott, and Pauline Nyamweya delivered the ruling in Nairobi, partially allowing APA’s appeal against the 2023 High Court judgment.

Britind, a Nairobi-based manufacturer of wooden pallets, toilet tissue, serviettes, and other paper-based products, had insured its factory and assets with APA against fire and business-related risks.

The policy was effective from November 12,2015 to November 11, 2016.

On the night of December 31, 2015 a fire broke out at the company’s factory, destroying the buildings, machinery, raw materials, and finished goods.

Director Santosh Kumar Singh testified that despite efforts to fight the blaze, the entire plant and office premises were gutted.

When Britind lodged a claim amounting to Sh82.3 million, APA declined to pay, alleging that the fire was an act of arson instigated by Singh and that the company had misrepresented ownership of the property.

In its defence, APA relied on a report by its investigator, McHenry Loss Assessors, which concluded that the blaze had multiple points of origin and was therefore deliberate.

The insurer’s letter of March 17, 2016, accused Singh of being responsible for the fire an allegation Britind described as malicious and defamatory.

The High Court had ruled in favour of Britind, holding that APA failed to prove the arson claim or justify its refusal to honour the policy.

Judge Alfred Mabeya ordered the insurer to pay the full insured amount plus interest.

On appeal, APA argued that Britind had breached the terms of the policy and that the High Court erred by awarding the entire sum.

The appellate judges agreed that the insurer was bound by the reasons stated in its declination letter and could not introduce new grounds including property ownership at a later stage, terming the argument “an afterthought.”

However, the court found that the High Court had overestimated some of the loss items and therefore adjusted the compensation.

“The upshot is that the appeal fails on liability and succeeds partially on quantum. The special damages shall be reduced to Sh58,608,224.00 with interest thereon at court rate from the date the suit was filed until payment in full. In view of the partial success of the appeal, we order that each party shall bear its own costs of this appeal,” ruled the court.

While the judges dismissed APA’s challenge on liability, they held that the insurer’s investigations were questionable, particularly after evidence emerged that its investigator had sent money to a key witness after the claim was rejected.

“The gesture, even if innocent, does not help DW4 shake off the accusation that he was not an impartial investigator. DW4 should have known better,” the judges said.