APA Insurance has lost its appeal against a manufacturing company after the Court of Appeal directed it to pay Sh58.6 million as compensation for a fire that razed the company’s factory barely two months after the insurance policy took effect.
The court upheld an earlier High Court decision in favour of Britind Industries Limited but reduced the compensation amount from Sh82.33 million to Sh58.6 million after reviewing expert valuation reports.
Britind, which produces wooden pallets, tissue paper, serviettes, and other paper-based items, had insured its business with APA against losses including fire and other risks.
The policy came into effect on November 12, 2015. On December 31 of the same year, the company reported a fire incident at its premises and later sought Sh83.45 million in compensation.
However, APA declined the claim in March 2016, alleging that Britind had intentionally caused the fire. The insurer maintained that the blaze was “deliberately or wilfully” started by the manufacturer, accusing it of breaching the terms of the policy.
Britind moved to the High Court, which in February 2023 ordered APA to compensate the company after finding no proof that Britind was responsible for the fire. The court ruled that the insurer had failed to demonstrate deliberate misconduct by the insured party.
Unhappy with the outcome, APA lodged an appeal, arguing that the High Court had failed to acknowledge that the company rightfully declined the claim due to alleged policy violations. The insurer also disputed the finding that Britind suffered total loss from the incident.
The appellate judges dismissed APA’s argument that Britind was the “author of its own misfortune” and maintained that the insurance firm was liable for the loss. However, they revised the compensation to Sh58.6 million after considering reports from valuers and structural engineers regarding the extent of the damage.
“It did not matter that the policy was only two months old and a valuation had been conducted at inception,” the Court of Appeal stated in its judgment.
The ruling brings to an end a long legal battle between APA and Britind, reaffirming the principle that insurers must provide clear evidence before denying claims based on alleged misconduct by policyholders.