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Post Reply: Court of Appeal Blames State for 18-Year Delay in Compensating United Insurance Victims

<blockquote><div class="quotetitle">Quote from <a class="profile-link highlight-moderator" href="https://lawguide.co.ke/understanding-law/legal-forum/profile/lawyer/">Lawyer</a> on October 8, 2025, 6:19 am</div><div id="pl-8193"  class="panel-layout" ><div id="pg-8193-0"  class="panel-grid panel-no-style" ><div id="pgc-8193-0-0"  class="panel-grid-cell"  data-weight="1" ><div id="panel-8193-0-0-0" class="so-panel widget widget_sow-editor panel-first-child panel-last-child" data-index="0" data-style="{&quot;background_image_attachment&quot;:false,&quot;background_display&quot;:&quot;tile&quot;,&quot;background_image_size&quot;:&quot;full&quot;,&quot;background_image_opacity&quot;:&quot;100&quot;,&quot;border_thickness&quot;:&quot;1px&quot;}" ><div
			
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	<p dir="ltr" data-pm-slice="1 1 []">The Court of Appeal has ruled against the government, citing its failure to promptly operationalize the Insurance Compensation Fund, which resulted in an 18-year delay in compensating victims of the collapsed United Insurance Company Limited. This landmark decision marks the conclusion of a prolonged legal battle between public service vehicle (PSV) operators and the state, delivering justice to policyholders who endured significant financial losses.</p>
<p dir="ltr">The case originated in 2007 when Kensilver Express Limited, alongside 192 other PSV companies, represented by lawyer Harrison Kinyanjui, filed a lawsuit against the Commissioner of Insurance. The legal action followed the collapse of United Insurance Company Limited, which was placed under statutory management due to alleged insolvency. The insurer's failure left PSV operators personally responsible for accident compensation claims, prompting accusations that the government violated their constitutional rights to property and fair administrative action under Article 46 of the Constitution and the Consumer Protection Act.</p>
<p dir="ltr">A three-judge bench, comprising Justices Daniel Musinga, Mumbi Ngugi, and George Odunga, upheld key findings from a prior High Court ruling by former Justice Mary Ang'awa. The court declared the appointment of Kenya Reinsurance Corporation Limited (Kenya Re) as the statutory manager of United Insurance illegal and void from the outset. The judges stated that the appointment of Kenya Re was null and void ab initio, highlighting a significant conflict of interest, as Kenya Re was a major creditor of the collapsed insurer.</p>
<p dir="ltr">The court further held the government accountable for the financial losses suffered by PSV operators due to its failure to operationalize the Insurance Compensation Fund, a statutory mechanism designed to protect policyholders from insurer insolvencies. The bench directed that compensation be calculated, accounting for any recoveries from United Insurance or the Fund itself, to address the losses incurred by the affected operators.</p>
<p dir="ltr">Lawyer Harrison Kinyanjui argued that Kenya Re's dual role as both reinsurer and statutory manager created an inherent conflict of interest, likening it to a creditor supervising its own debtor. The appellate judges agreed, ruling that the appointment was unlawful. However, they noted that nullifying all actions taken by Kenya Re before the 2007 High Court judgment would cause greater public harm. Consequently, the court limited the nullification to actions taken after the 2007 ruling, balancing legal accountability with public interest.</p>
<p dir="ltr">The judges also found that while Justice Ang'awa correctly identified the government's regulatory failures, she erred in converting the original petition into a winding-up cause, a decision the Court of Appeal corrected in its ruling.</p>
<p dir="ltr">The Court of Appeal dismissed the state's appeal, ordering each party to bear its own costs. This decision marks the resolution of one of Kenya's longest-running insurance disputes and represents a significant victory for policyholders who faced prolonged financial hardship due to the collapse of United Insurance in the mid-2000s.</p>
<p dir="ltr">In a related ruling in July 2024, Justice Alfred Mabeya ordered the winding up of United Insurance Company Limited. Policyholders swiftly challenged this decision, arguing that the company was illiquid but not insolvent, supported by asset valuations exceeding Ksh 3.5 billion. They also opposed the liquidator's proposal to cap compensation at Ksh 250,000 per claimant, deeming the amount arbitrary and insufficient to address their losses.</p>
<p dir="ltr">The collapse of United Insurance in the mid-2000s left thousands of motorists, passengers, and accident victims without compensation, exacerbating financial strain on policyholders. The appointment of Kenya Re, founded in 1970 as the region's oldest reinsurer, to manage the defunct insurer was controversial due to its creditor status, further complicating the resolution process.</p>
<p dir="ltr">The Court of Appeal's ruling underscores the government's responsibility to protect policyholders through timely regulatory measures, such as operationalizing the Insurance Compensation Fund. By holding the state liable for the financial losses suffered by PSV operators and declaring Kenya Re's appointment as statutory manager unlawful, the court has set a precedent for accountability in Kenya's insurance sector. This decision brings closure to an 18-year struggle for justice, offering hope to policyholders seeking fair compensation for their losses.</p>
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