The High Court has ordered Kenindia Assurance Company Limited to pay Mombasa Cement Sh1.64 billion over a collapsed blending silo and lost profits, ending a 12-year legal dispute.
The court awarded the cement manufacturer Sh664.7 million for damage to the silo and Sh982.4 million for lost profits, with interest at court rates from the filing of the suit in 2014 until payment, and costs.
The dispute started after the silo collapsed on August 1, 2011, at Mombasa Cement’s plant. The company held machinery and loss-of-profits insurance policies with Kenindia, valid from December 31, 2010 to December 31, 2011.
Mombasa Cement said the machinery policy covered its 3,000-tonne-per-day clinkerisation plant, including the blending silo.
Kenindia disputed this, arguing that the silo was a reinforced concrete structure and constituted civil works rather than insured machinery.
The insurer also argued that Mombasa Cement had failed to disclose material information about the silo’s construction and that exclusions and underinsurance affected the claim.
The court rejected that argument, finding that the silo formed part of the insured plant because it was integral to clinker production and expressly identified in the machinery schedule.
“The blending silo was not merely incidental to the plant, but formed an integral part of the insured installation expressly identified in the machinery schedule,” the court said.
It noted that evidence showed the silo incorporated mechanical systems for storing, circulating and homogenising raw materials used to produce clinker. The court found that the 3,000 TPD clinkerisation plant could not function independently.
The court also rejected Kenindia’s claim that Mombasa Cement had breached its duty to disclose material facts. The company had notified the insurer that its machinery list was not exhaustive and requested periodic risk surveys.
The court declined to apply the Average Clause, which Kenindia invoked to reduce the payout for alleged underinsurance. The insurer placed the replacement value at Sh3.6 billion against an insured value of Sh3 billion.
According to the court, Kenindia had not produced enough valuation material to allow the court to verify that figure. “This Court therefore declines to apply the Average Clause against the plaintiff,” she ruled.
On loss assessments, Mombasa Cement relied on Toplis & Harding International Limited, which assessed material damage at Sh664.77 million and business interruption losses at Sh982.43 million.
Kenindia’s experts had initially assessed substantially higher losses before adopting the position that the silo was outside the policy.
It appointed loss adjusters, including Milind Bhatawadekar and McLarens Young International Ltd, to conduct loss assessment. McLarens Young initially assessed material damage at about Sh1 billion and business interruption losses at about Sh600 million, while Milind Bhatawadekar initially assessed recoverable losses above Sh727 million.
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The court found the later reductions were substantially influenced by the coverage dispute. It accepted the Toplis & Harding assessment because it was supported by reconstruction contracts, invoices, supplier quotations, payment records and other records.
“The assessment by Toplis & Harding International Limited provides the more reliable evidential foundation for quantification of the recoverable loss,” the judge said.
The court also awarded the full 12-month indemnity period under the loss-of-profits policy. Although reconstruction took almost two years, the court said the contract expressly limited business-interruption cover to 12 months.
Kenindia had admitted liability for Sh393 million and issued a discharge voucher, but Mombasa Cement rejected the amount as inadequate.
The Insurance Regulatory Authority directed that the admitted amount be paid while the disputed portion was left for determination.
Mombasa Cement funded reconstruction from its resources while pursuing the claim. The court declined punitive interest, saying the dispute involved questions about policy interpretation, causation, exclusions and the amount payable.
