The Commercial Court has overturned an earlier decision ordering the National Insurance Corporation (NIC) to compensate Rock Global Oils (U) for more than Shs 45.8 million after it lost fuel in a road accident.
It all started in 2014 when Rock Global Oils, a company involved in transporting fuel from Kenya to Uganda, took out a goods-in-transit insurance policy with NIC covering the period from March 7, 2014, to March 6, 2015.
On February 10, 2015, one of the company’s fuel tankers set off from Eldoret, Kenya, carrying 29,997 litres of diesel destined for Gulu.
Two days later, on February 12, the tanker was involved in an accident along the Lira-Kamdini road at Wadama-Amar.
According to Rock Global Oils, the accident caused a spillage of about 18,000 litres of diesel valued at Shs 45.8 million. The company filed a claim with NIC seeking compensation under the insurance policy.
However, NIC rejected the claim. The insurer argued that Rock Global Oils had failed to provide essential documentation, including a weighbridge report confirming the exact quantities of fuel loaded and lost.
This refusal led Rock Global Oils to sue NIC in the Mengo Chief Magistrate’s Court in 2015, accusing the insurer of breach of contract.
In 2019, the magistrate ruled in favour of Rock Global Oils, finding that the company had sufficiently proved its loss. The court awarded Shs 45.8 million in special damages, Shs 2 million in general damages, and interest at 18% per annum, plus costs.
The magistrate held that the weighbridge report was not necessary and that NIC had a duty to investigate the claim independently.
Dissatisfied, NIC appealed to the High Court, arguing that the lower court had erred in law and fact.
The insurance firm said that the insurance policy required the insured to provide all information requested and that failure to do so amounted to a breach of the principle of utmost good faith.
NIC’s lawyers from KTA Advocates told the court that after the accident was reported, the insurer wrote to Rock Global Oils on July 27, 2015, requesting the weighbridge report.
In response, the company refused to provide it, insisting it was not required under the policy.
NIC also relied on its loss adjuster’s findings, which estimated the spillage at between 50 and 200 litres, far below the 18,000 litres claimed. The insurer argued that without the weighbridge report, the claim could not be verified and was likely exaggerated.
On the other hand, Rock Global Oils, represented by Byamugisha, Lubega, Ochieng & Co Advocates, defended its claim by presenting several documents, which included a fuel marking sheet, police report, accident sketch map, photographs, and invoices.
The company argued that the weighbridge report was not part of the policy requirements and that demanding it was “made in bad faith to defeat the respondent’s claim.”
It also told the court that the report had been lost in the confusion following the accident and that it was not necessary to obtain a replacement.
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After hearing both sides, Justice Stephen Mubiru explained that this duty does not end when a policy is signed but continues throughout the claims process.
He stated that “the duty of honesty and transparency is not limited to the pre-contractual negotiation phase but continues throughout the life of the insurance policy, including the claims handling process.”
Justice Mubiri emphasised that when an insurer requests relevant information, the insured must provide it fully and truthfully. Failure to do so can justify rejection of the claim.
He found that the weighbridge report was a critical document in determining the exact quantity of fuel lost because it provides an independent, calibrated record that removes guesswork and serves as the foundation for calculating the ‘net loss’ of cargo.
Justice Mubiru rejected the explanation given by Rock Global Oils for not producing the report. He noted inconsistencies in the company’s position, observing that it claimed both that the document was lost and that it was unnecessary.
“The more plausible explanation, therefore, is that the failure to submit the weighbridge report was not because the respondent had lost it but rather that the respondent considered it non-material to the claim,” he ruled.
He went further to conclude that Rock Global’s conduct amounted to deliberate non-disclosure of material information.
Justice Mubiru ruled that Rock Global Oils’ refusal to provide the weighbridge report was a serious breach of this condition.
“Failure of the assured to provide material information reasonably required in respect of the claim constitutes a breach of the policy and a bar to the claim,” he said.
On the issue of damages, he said that even if the cooperation clause had not been breached, the claim would still fail because the loss was not strictly proved.
He noted that without the weighbridge report, it was impossible to accurately determine the quantity of fuel lost.
In the end, Justice Mubiru allowed the appeal, quashed the magistrate’s decision, and dismissed Rock Global Oils’ claim.
The ruling means that NIC will not pay the Shs45,828,000 that had earlier been awarded in the Magistrates Court, nor the Shs2m in general damages, bringing a decisive end to the long-running dispute.
