Akili Mingi owns a house at Muthaiga in Nairobi valued at Sh. 20 million. He insured it against fire with Linda Mali Insurance Co. Ltd and...

Akili Mingi owns a house at Muthaiga in Nairobi valued at Sh. 20 million. He insured it against fire with Linda Mali Insurance Co. Ltd and Pokea Insurance Co. Ltd for Sh. 15 million and Sh. 10 million respectively. He also insured his household goods against burglary with Lipa Insurance Co. Ltd. for Sh. 5 million. One night while he was away, burglas broke into the house, stole all household goods and set the house on fire completely destroying it.
Akili Mingi claims the sum assured from the three insurance companies. Advise them.

- This problem is based on the twin principle of contribution and apportion of insurance
applicable in circumstances in which a person takes out more than one policy on the same
subject matter and risk.
- In this case Akili Mingi has taken out two policies on the house with different insurers and
has also insured his household goods for Kshs. 5,000,000 and risk has attached.
- My advise to the insurance companies is that since risk has attached Lipa Insurance Co. Ltd
is obliged to pay Akili Mingi Ksh. 5 million for the stolen goods.
- Linda Mali and Pokea Insurance companies are obliged to indemnify Akili Mingi for the loss
suffered on the basis of apportionment of liability depending on the sum assured with each
of them. Linda Mali Co. Ltd must pay
15,000,000/25,000,000 x 20,000,000 = Ksh. 12,000,000
While pokea insurance co. Ltd must pay
10,000,000/25,000,000 x 20,000,000 = Ksh. 8,000,000
- The total amount payable to Akili Mingi for the house is Kshs. 20,000,000.
- Our calculations are based on the assumption that he policies were not subjected to average
otherwise the amount recoverable by Akili Mingi would have been Kshs. 15,000,000 as the
house is under insured. In which case Lina Mali Co. Ltd would pay Kshs. 9,000,000 while
Pokea Insurance Company Ltd would pay Kshs 6,000,000.

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raphael answered the question on April 16, 2018 at 17:45

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