- According to the contract, the said premium payments were to be remitted in three equal instalments. AAR then remitted performance security from KCB. AAR later filed case CMCC no. 2688 of 2021 seeking an injunction to restrain Thika Water & Sewerage Company from realising the bond deposited with KBC but the trial court dismissed the suit and AAR filed an appeal at the High Court. Further, it was discovered that Thika Water & Sewerage Company on 24th February 2021 issued a notice to terminate the contract alleging a breach of terms and demanding a full refund of the premium paid
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AAR Insurance Kenya Ltd has suffered a devastating blow after the High Court dismissed Civil Appeal No. E412 Of 2021 in which they had appealed against Kenya Commercial Bank from making payments to Thika Water & Sewerage Company.
In the appeal, AAR had prayed to the court that KCB be restrained from remitting, making any payment or meeting any financial demand by Thika Water & Sewerage Company arising from the performance guarantee ref. no. MD2100600002C for Ksh. 1,591,402.70. According to available information, AAR entered into a medical insurance contract dated 14th January 2021 via tender no. THIWASCO/048/2020-2021 for a contract sum of Ksh. 15,914,027.00 for 12 months.
Unfortunately, there was a disagreement on the list of medical providers. Sources say the medical facilities AAR had identified to be used by Thika Water & Sewerage Company staff were not up to the standards hence the termination of the contract. It was the Thika Water & Sewerage Company staff who objected that the health facilities sub-contracted by AAR were small health facilities which lacked the professionalism and expertise to be sub-contracted by AAR.
According to the contract, the said premium payments were to be remitted in three equal instalments. AAR then remitted performance security from KCB. AAR later filed case CMCC no. 2688 of 2021 seeking an injunction to restrain Thika Water & Sewerage Company from realising the bond deposited with KBC but the trial court dismissed the suit and AAR filed an appeal at the High Court. Further, it was discovered that Thika Water & Sewerage Company on 24th February 2021 issued a notice to terminate the contract alleging a breach of terms and demanding a full refund of the premium paid.
The performance security was essentially supposed to cover losses incurred as a result of nonperformance of the contract and the nonperformance was occasioned by a disagreement on the list of medical providers. Following the termination of the contract, AAR argued that they should get Ksh. 2,033,749.90. However, in a letter dated 14th April 2021, Thika Water & Sewerage Company demanded payment from KCB saying that AAR was in breach of its obligation in pursuance of the medical cover.
In making the determination, the court found that Thika Water & Sewerage Company issued a notice to terminate the contract on 24th February 2021 and demanded a refund of the instalment of Ksh. 5,213,216.05 which was refunded by the AAR.
The court also found out that the fact that AAR refunded the 1st instalment of Ksh. 5,213,216.05 and agreed to nullify the contract on 3rd March 2021 indicates that there was a breach of the contract. Further, it was noted that KCB was supposed to pay upon demand if the contract was not performed. The ruling reads in part “I find that the balance of convenience in this case tilts in favor of the Respondent and I find that the Appellant was NOT entitled to an injunction against both the Interested Party and the Appellant”. In the final orders signed by Judge A.Ongeri on 17th march 2023, the judge ruled “This appeal lacks merit and the same is dismissed with costs to both the Interested Party and the Respondent.
