16th October 2026
In a judgment delivered on 9th October 2026 in Mayfair Insurance Company Ltd & another v Nakuru Polyplast Limited & 3 others, the Court of Appeal upheld an award of KES 64,850,000 under a Fire and Special Perils policy. An insurer that repudiates a claim on the ground of arson or connivance must prove it; inferences drawn from the insured’s debts, its trading outlook or the size of its claim will not do.
On 9th October 2026, the Court of Appeal at Nakuru (Mativo, Kairaria and Hassan, JJ.A.) dismissed, with costs, an insurer’s appeal against a judgment ordering it to pay KES 64,850,000.00 under a Fire and Special Perils policy. The decision is Mayfair Insurance Company Ltd & another v Nakuru Polyplast Limited & 3 others, Civil Appeal No. E048 of 2021, [2026] KECA 2162 (KLR).
The insurer had declined the claim on the ground that the fire was not accidental. The Court’s answer is a firm reminder that an insurer who repudiates on the ground of arson or connivance must prove it. Inferences drawn from the insured’s debts, its trading outlook or the size of its claim will not do.
The Facts
Nakuru Polyplast Limited operated a factory in rented premises along the Nakuru–Nairobi highway. Through Tevee Insurance Brokers Ltd, it insured its stock, plant and machinery, generators, transformer, spare parts and office equipment with Mayfair Insurance Company Ltd. The cover was first taken in October 2013 and renewed in 2014 and 2015. At the renewal on 1st October 2015, the sum insured was KES 64,850,000, and the insured paid a premium of KES 194,550.
On 31st January 2016, a fire gutted the factory, caving in the roof and destroying the property inside. The insured notified the insurer immediately, and the insurer appointed Safety Surveyors Ltd to investigate and assess the loss. On 19th February 2016, the insured lodged a claim of KES 68.5 million on a total loss basis.
On 17th August 2016, the insurer disclaimed liability on the ground that the fire was not accidental. On 23rd August 2016, the insured asked what that meant and requested the information on which the decision was based; neither the information nor payment was forthcoming. It was also undisputed that the insurer had compensated the landlord, under a separate policy, for the same fire.
The insured sued in Nakuru HCCC No. 41 of 2017. The insurer pleaded that the claim was fraudulent because the damage had been deliberately caused by the insured or persons acting for it, and alternatively that the policy was forfeited because of the insured’s wilful act or connivance. The broker denied liability for want of privity of contract.
The High Court
R. Ngetich, J. (as she then was) found no conclusive evidence of arson. The police had made no such finding, and the Government Chemist’s analysis of material from the seat of the fire was negative for accelerants. A hole in the factory wall was reasonably explained as ventilation, and there was no evidence of intrusion through it. The judge accepted that the higher figure given to the police reflected replacement value at the date of the fire, and took the view that the insurer had a duty to value the property before issuing the policy. Judgment was entered against the insurer for KES 64,850,000 and costs.
An Insurer Must Prove Arson, Not Infer It
Having re-evaluated the evidence, the Court of Appeal found no material proving that the fire was not accidental, and no cogent evidence that it was caused by the wilful act or connivance of the insured. The insurer was, in truth, asking the Court to draw inferences from four circumstances: a hole in the wall, the insured’s debt to Bank of Baroda, a poor business outlook, and a claim that exceeded the sum insured.
The direct evidence pointed the other way. A witness from Brinks Security Services Ltd, engaged by the landlord to guard the compound, testified that no intrusion was detected and that no one entered the guarded perimeter. A witness from Bob Morgan, which had installed the intruder alarm at the insured’s premises, testified that no sign of entry was detected. The insured had also reported its stock to its bank regularly, in writing; the last report, of 18th December 2015, valued raw materials and finished goods at KES 27,248,344. The Court found this “at odds with” the suggestion that the business was on the verge of collapse.
The Investigator’s Report Is Not Conclusive
The trial judge was entitled to weigh the opinion evidence in the investigation report against the direct evidence of the security firm that guarded the premises when the fire broke out. She was not bound to accept the report merely because the insured had not tendered a second opinion. That was all the more so because the investigators’ final report did not say the fire was arson; it described the cause only as a “suspected act of arson.”
Quantum: Insured Value and Residual Value
The Court found that it was the broker who had induced the insured to take the cover and who had assessed the value of the goods for computing the premium; the insurer based its premium on that value and accepted payment. On residual value, the claim was on a total loss basis, and the insurer did not show that what remained had any value to the insured. Its own investigators had reported that 90% to 95% of the contents of the production floor were damaged, and their final report adjusted the loss on a total loss basis without any provision for salvage. The appeal was dismissed with costs.
Reading the Judgment with Today’s Act and Guidelines
The fire, the repudiation and the suit all predate much of the framework that now governs claims handling. The Insurance (Claims Management) Guidelines, 2022 and the Insurance (Market Conduct) Guidelines, 2022, issued by the Insurance Regulatory Authority, and the insurance fraud and complaints provisions inserted into the Insurance Act in 2019, now address each of the Court’s holdings.
(i) A repudiation must now give reasons. Where an insurer considers a loss not covered, it must immediately notify the claimant explaining the reasons for declining the claim (paragraph 12(3) of the Insurance (Claims Management) Guidelines). Where investigation is needed to decide admissibility, it must tell the claimant so, and within seven calendar days of receiving the investigation report it must make an offer or communicate its declinature and the reasons (paragraphs 12(1)(d) and (e)). A bare statement that a fire “was not accidental”, followed by silence on a request for the basis of it, would today be measured against those requirements.
(ii) Investigation reports are now regulated and shared. Insurance investigators and loss adjusters are “service providers” under both sets of Guidelines, and must ensure that their reports meet the requisite professional standards (paragraph 10(d) of the Insurance (Market Conduct) Guidelines). Where an assessment of a claim has been carried out, a copy of the assessment report must be made available to the claimant (section 203(2) of the Insurance Act). The judgment adds the litigation consequence: a report that stops at suspicion will be weighed against the direct evidence, not accepted as the truth.
(iii) Fraud now has a statutory route, in both directions. Presenting a claim containing false or misleading information on a material fact is an offence of insurance fraud, punishable by a fine of ten times the amount defrauded or intended to be defrauded, imprisonment for up to five years, or both (sections 204B(1)(b) and (5)). Insurers must keep systems to detect fraudulent claims and report them to the Authority (paragraph 15 of the Insurance (Claims Management) Guidelines). The same section also makes it an offence for an insurer, or anyone involved in the claims process, knowingly and with intent to injure, defraud or deceive, to present false or misleading information affecting a claimant’s right to benefit (section 204B(3)). None of this lowers the bar the Court applied: an insurer that alleges arson in a civil claim must still prove it.
(iv) Values and salvage. An insurer must explain claim conditions such as depreciation, average, pre-loss value and reinstatement, and may not ask at the claims stage for information that ought to have been provided when the policy was issued (paragraphs 6(2) and (3) of the Insurance (Claims Management) Guidelines). It may not dispose of salvage before the insured is indemnified (paragraph 16). Both rules sit comfortably with the Court’s reliance on the values on which the insurer had priced the renewal, and its refusal to deduct a salvage value the insurer never proved.
(v) Time limits, penalties and a regulatory forum. Once the claimant has submitted all relevant documents, an insurer must admit or deny liability, determine the amount and pay within ninety (90) days of the reporting of the claim or, where liability is determined by a court, within ninety (90) days of that determination; the Commissioner of Insurance may extend this by up to thirty (30) days (section 203(1)). A penalty of 5% of the unpaid amount then becomes due, recoverable by the Policyholders’ Compensation Fund Board, and an insurer that fails to pay is deemed unable to pay its debts and liable to be wound up (sections 203(3) to (5)). An insured may also complain to the Commissioner, whose determination binds the parties, subject to an appeal within thirty (30) days to the Tribunal established under the Act (section 204A). Nakuru Polyplast’s claim took ten years to resolve in court; that route did not then exist.
(vi) Brokers. A claim notified to an intermediary is deemed notified to the insurer, and the intermediary must pass it on within two (2) working days (paragraphs 10(2) and (3) of the Insurance (Claims Management) Guidelines). The Court did not decide the broker’s own liability, since judgment was entered against the insurer alone, but its finding that the broker had assessed the insured values shows how much turns on that work.
In October 2025, the Authority also published draft replacements of both sets of Guidelines for public consultation. Until those replacements take effect, the 2022 Guidelines set the standard against which an insurer’s handling of a claim will be measured.
What the Judgment Means
For insurers. A repudiation on the ground of wilful act or connivance is an allegation of serious wrongdoing. It must be explained to the claimant when it is made, and proved with evidence that connects the insured to the loss if it is contested. Motive evidence, such as debt, weak trading or a large claim, is not proof, and an investigator’s report that stops at suspicion will not carry the defence.
For underwriters and brokers. Values assessed at renewal and used to compute the premium are difficult to dispute after a loss. An insurer that wishes to contest value should do so before it accepts the risk and the premium.
For insured businesses. The claim was won on contemporaneous evidence: the security firm, the alarm company and the stock reports sent to the bank weeks before the fire. Today, an insured that is refused a claim is also entitled to the reasons and, where an assessment has been carried out, to the assessment report, and has a regulatory complaint route alongside the courts.
Conclusion
This decision restates, at appellate level, a principle that is easy to state and often neglected in practice: suspicion is not proof. Read with today’s Insurance Act and the Authority’s guidelines, the lesson is sharper still. An insurer that declines a fire claim must give its reasons, share the assessment, pay within the statutory time if liability is established, and be ready to prove, on credible evidence, that the insured caused or connived in the loss.
Disclaimer: This legal alert is meant for general information only and should not be construed otherwise. You are hereby advised, in all circumstances, to seek clarification from Luka Ome (luka@oklawllp.com) or OK Law Advocates LLP (legal@oklawllp.com).