Vicarious Liability- Imputing The Egent's Knowledge In Insurance
Generally, the law shall impute the agent’s knowledge upon the Insurer. This often arises where the insurer alleges that the insured did not provide material facts and the latter claims that he/she did provide them to the insurer’s agent. The Insurer is deemed to know what the agent knows.In Woollcott v. Excess insurance co. [1979] 1 lloyds rep 231, the court generally observed that the agent’s knowledge shall be imputed to the insurer because he will have been held out as having authority to receive it.
Refer to: Kenindia assurance co ltd v alpha knits ltd and another (2003) 2 ea 512
The first respondent had insured its factory against fire with the appellant. The policy had been issued through the second respondent as broker. The factory was destroyed by fire and the resulting loss was assessed at KShs 162 855 227.
The appellant agreed to pay for the loss and with the consent in writing of the first respondent paid KShs 155 625 577 to Kenya Commercial Bank which had a financial interest in the factory. The balance of KShs 7 229 650 was paid by the appellant to the second respondent, who used it to offset a liability it had with the first respondent.
This payment was made pursuant to a discharge voucher which the first respondent had signed, acknowledging receipt of the money which was to be collected by its brokers (that is, the second respondent).
The appellant issued the payment to the second respondent without the consent of the first respondent. The first respondent demanded payment of the balance from the appellant, arguing that it had not received the money, and instituted action in the High Court to recover the KShs 7 229 650. The appellant filed a defense arguing that payment was made to the second respondent pursuant to a course of business that had developed between the parties. The first respondent applied to strike out the defense on the ground that payment to the second respondent contravened provisions of section 105 of the
Insurance Companies Act (Chapter 487). The application was allowed and the defense was struck out. The appellant appealed to the Court of Appeal.
The Court Held (Per Kwach JA) – Pursuant to section 105 of the Insurance Companies Act, even if the first respondent owed the appellant any money on account of premiums or other debt, the appellant could not deduct it from any amount due to the first respondent under the claim except with the first respondent’s express consent. The payment to the second respondent by the appellant was clearly illegal because it was expressly prohibited by statute. Such defenses as implied authority, course of dealing or that the first respondents had represented the second respondent as its agent for purposes of receiving the money due to it arising from the claim, were patently bogus and were properly rejected by the High Court Judge.
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