IN THE HIGH COURT OF ZAMBIA 2009/HN/316

HOLDEN AT NDOLA
(Civil Jurisdiction)
BETWEEN:
MUKUWE AKAMANA
PLAINTIFF
AND:
DIAMOND INSURANCE LIMITED DEFENDANT

CORAM: SIAVWAPA J.

FOR THE PLAINTIFF: MRS. CHABU OF MESSRS LUMANGWE

CHAMBERS
FOR THE DEFENDANT: MR. IMONDA OF MESSRS A. IMONDA &
COMPANY

J U D G M E N T

AUTHORITIES REFERRED TO:

(A) Cases
1. Equitable Fire & Accident Office V Ching Wo Hong
[1907] A. C. 96
2. Kelly V London & Staffordshire Fire Insurance Co.
(1888) 1 Cab & E. 47
(B) Statute
Insurance Act No. 27 of 1997 as amended by Act No. 26 of
2005
The Plaintiff’s claim is for the cost of reinstating or replacing his
Mitsubishi Canter light truck, damages for breach of contract, any
other relief, interest and costs. The brief facts of the case are that
the Plaintiff took out a comprehensive motor insurance cover for
his Mitsubishi Canter light truck with the Defendant at a total
premium of K2, 800, 000.00. The Defendant subsequently issued
a Certificate of Motor Insurance (Cover Note) effective 19 th June
2008 to 18th June 2009. The Plaintiff subsequently issued a
cheque dated 29th August 2008 to the Defendant in the full
amount of the premium.

On or about 9th November 2008, the Mitsubishi Canter light truck

was involved in a road traffic accident with a truck belonging to a
third party. On receiving a claim on the insurance cover from the
third party, the Defendant refused to indemnify the Plaintiff
stating that the cover was not effective for non-payment of the
premium by the Plaintiff.

In support of his claim, the Plaintiff gave evidence and called one
witness. In his evidence in chief, the Plaintiff stated that following
the road traffic accident, he received a phone call from the third
party whose truck was involved in the said accident with the
Mitsubishi canter light truck asking for the details of the Plaintiff’s
insurer. He furnished the third party with the details of the
Defendant which was, at the time, going under the name
Diamond Insurance Cavmont. He was later informed by the third
party that the Defendant had refused to indemnify the Plaintiff for
the reasons already stated earlier in the judgment.
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He then contacted his Insurance broker, PW2 who assured him
that the cover was valid as all the documents were in order. He
then went to the Defendant’s head office where an officer told
him that they had not received the premium hence the
Defendant’s refusal to honour the claim. When he informed the
officer that he had made payment by cheque to the Defendant
and further that he had been issued with a debit note and a cover
note, he maintained that the Defendant would not entertain the
claim for non-payment of the premium.

He further said that in December, 2008, the cheque he had issued

was presented to the bank by the Defendant and his account was
debited with the amount of the cheque. In January 2009, he
received a letter from the Defendant in which a refund cheque
was enclosed.

It was further his evidence that he was a credit customer and that
he made a deferred payment by cheque effective 28 th August
2008 while the cover was effective 19th June 2008. He also said
that the Defendant issued him with a debit note as
acknowledgment that he owed the Defendant money but that the
same did not suspend his entitlement.

In cross-examination, he stated that the insurance cover was

effective 19th June 2008 and that he paid the premium on 28th
August 2008 but that he was not issued with a receipt of payment
as it was a deferred payment. He further said that the debit note
indicated that he was a credit customer and that the insured

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party on the debit note was Express Insurance Brokers Limited.
He acknowledged that the Defendant receipted the cheque on
17th December 2008 after the accident which happened on 9 th
November 2008.

As regards a post-dated cheque, he stated that it was payment on

credit and that there was effectively no payment between 19 th
June 2008 and 28th August 2008. He said that the terms of
payment were mutually agreed upon. He further said that he
gave the post dated cheque to the broker in July 2008.

In re-examination he said that Express Insurance Brokers Limited

was mandated by the Defendant to conduct insurance on their
behalf and as such he did not doubt their credibility. He noted
that the cover note was issued by the Defendant and not Express
Insurance Brokers.

PW1 was the Insurance broker who handled the Plaintiff’s

insurance cover under Express Insurance Brokers Limited as
agent for the Defendant. He stated that he renewed the insurance
of the Plaintiff’s vehicle with the Defendant after the earlier one
with Zambia State Insurance Corporation expired. He confirmed
that payment was not made immediately as the Plaintiff promised
to pay by a post dated cheque. He said that when the Plaintiff
sent the cheque to him, he subsequently sent it to the Defendant
so that he could get the commission. It was his evidence that he
received the cheque before the end of July and the debit note was
issued on 3rd July 2008.

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He said that he was later informed of the claim upon which he
wrote to the Defendant who responded to the effect that no
payment had been made. The Defendant later sent a document
showing that the cover had been cancelled. He further said that
he was surprised at the turn of events as he had sent the cheque
and claimed for his commission. He added that he could not have
kept the cheque since it was not in the name of Express Insurance
Brokers Limited but in the Defendant’s name. He also said that
even if the cheque had been sent late, the Defendant had a duty
to honour the claim and later pursue the Broker.

In cross-examination he said that he did not remember the date

he received the post-dated cheque from the Plaintiff but
maintained that it was before the end of July 2008. He however,
said he had no evidence that the Defendant received the cheque
on an earlier date than 17th December 2008 as evidenced by the
receipt marked 2 in the Defendant’s bundle of documents.

In re-examination he said that the usual way of delivering

documents to the Defendant was by post and that he could not
ask for commission on a post dated cheque.

The only witness for the Defendant was Winfred Luchembe, the
Defendant’s underwriter who acknowledged dealing with the
Plaintiff’s case. He stated in his evidence that he received a
binder, which he said was a confirmation of cover, from Express
Insurance Brokers Limited but with no payment attached thereto.
The Defendant subsequently sent e-mails to Express Insurance

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Brokers limited asking for the premium in respect of the Plaintiff’s
cover but that they did not get a response.

He said that the Defendant therefore, refused to honour the claim

when notification was received on 9th November 2008 as no
premium had been paid since the inception of cover on 19 th June
2008. He stated that a post dated cheque was not payment and
that cover fell off thirty days after non-payment of the premium.
He said that they received the cheque after the accident under
unclear circumstances and that since they had already notified
the Broker of the cessation of the cover; they decided to refund
the premium.

As regards the debit note, it was his evidence that the same was
confirmation of someone’s indebtedness and that the Plaintiff was
not eligible for credit status because he was a first time client.

In cross-examination he said that the Broker should have advised

the Plaintiff of his ineligibility for credit status. He further said that
the cheque was deposited by mistake. He admitted that the e-
mails sent to the Broker did not make specific reference to the
Plaintiff’s case. He further admitted that the debit note was issued
by the Defendant and not by the Broker.

I received submissions from Mr. Imonda on behalf of the

Defendant while no submissions were received on behalf of the
Plaintiff. The thrust of Mr. Imonda’s submissions is that since the
cover note did not indicate the due date for the payment of the
premium and there being no agreement for deferred payment

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therein, the premium was due on the effective date of the cover,
the 19th June 2008. He therefore, concluded that in terms of
section 76 (1) of the Insurance Act No. 27 of 1997 as amended by
Act No. 26 of 2005, the cover ceased to operate thirty days from
the commencement date for non- payment of the premium.

The issue I need to resolve is whether or not Insurance cover is

dependent upon payment of the premium. There is no doubt that
insurance cover falls within the scope of the general principles of
the law of contract in which there must be an offer, acceptance as
well as consideration. In making the proposal, the insurer
undertakes to indemnify the assured against the risk proposed to
be covered by the policy. In turn, the insured must pay or
undertake to pay the premium which constitutes consideration for
his part while the insurer’s consideration is the risk of providing
the indemnity if the event insured against occurs.

As a simple contract not under seal, it is usual for a contract of

insurance to be governed by set out terms usually stipulated in a
standard form by the insurer. Almost invariably, the certificate of
insurance, which also denotes acceptance by the insured,
contains the said terms to govern the contract. This was certainly
the case in the case under consideration. It is clear that the
Certificate of Insurance or Cover Note also formed the full extent
of the contract stipulating the terms, conditions and extent of the
cover provided. It is common cause on the evidence that no other
document exists that provides additional terms to the ones in the
Cover Note.
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I will therefore, by and large, rely on the Cover Note to give the
most probable intentions of the parties at the time of making the
contract. According to PW2, his organization, Express Insurance
Brokers Limited, were requested by the Defendant to provide
them with business and the transaction involving the Plaintiff’s
vehicle was one of the new customers that Express Insurance
Brokers gave to the Defendant. Consequent to that, PW 2
prepared the Certificate of Motor Insurance No. 5906. In
undertaking the exercise, it is obvious that PW2, as an employee
of Express Insurance Brokers Limited, was acting as agent for the
Defendant. In terms of the Cover Note, the Insured is the Plaintiff
herein and the effective period of insurance cover is 19 th June
2008 to 18th June 2009.

It is not in dispute that no premium was paid as at the date of the

commencement of the cover. Subsequently, the Defendant issued
a Debit Note on 3rd July 2008 to acknowledge that the Plaintiff
owed it money in form of premium for the period of cover, as per
the exhibit marked 15 in the Plaintiff’s Supplemental Bundle of
Documents. This, in my opinion was further acknowledgement, by
the Defendant, that the Plaintiff was entitled to indemnity under
the contract except that consideration had not yet passed to it.
Consequently, the Plaintiff became a customer accorded a facility
on credit basis otherwise; the only way to avoid that situation was
to immediately reject the Cover Note for being not supported by
consideration rather than issue a Debit Note.

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It is therefore, my considered view that once the Defendant had
issued the Debit Note acknowledging the Plaintiff’s indebtedness
to it, the remedy was to sue for the unpaid premium and not to
repudiate the contract by refusing to indemnify the Plaintiff once
the event for which cover was provided occurred.

I further note that on the Cover Note which I have already stated
as containing all the terms of the contract, it is not a condition
precedent that the premium should be paid before the cover
takes effect. It further does not follow that the absence of such
stipulation makes the payment of the premium an implied
condition precedent to the effectuation of the cover. I take the
view that had it been the Defendant’s intention to make payment
of the premium a condition precedent to the effectuation of the
cover, it would have expressly so stated in its Cover Notes which
are on standard form. In the circumstances, the Plaintiff is on firm
ground to argue that he was treated as a credit customer without
losing the benefits of the cover.

On the second limb, the Defendant has strongly canvassed the

position that the cover fell off thirty days after the effective date
of the cover by operation of the law particularly section 76 (1) of
the Insurance Act No. 27 of 1997 as amended by Act No. 26 of
2005. This particular section provides as follows;

“A Contract of General Insurance shall cease to operate if a premium

is not paid within thirty days after the due date of the premium, or
within such period as the Contract may stipulate”

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That provision is as clear as it was intended to be and no stretch
of imagination or ingenuity can manage to do violence to its
meaning. Firstly, it is clear that it envisages a situation where the
due date of the premium is set out in the contract itself. If the
premium is not paid by the stipulated due date, then, thirty days
thereafter, the insurance ceases to operate. Secondly, the
provision concerns itself with contracts of insurance that stipulate
not a date but a period of time within which the premium should
be paid. For instance, if it is a term of the contract that the
premium should be paid within ninety days of the commencement
of the cover, then, if no premium is paid thirty day after the
elapsing of the ninety days from the date of the commencement
of the cover, the insurance automatically ceases to operate.

None of the above circumstances is provided for in the Cover

Note and as such, I can confidently state that the provision does
not apply to the case under consideration. In the ancient case of
Kelly V London and Staffordshire Fire Insurance Co ., it was held
that; “Prepayment of the premium is not in law a condition precedent to

the making of a complete contract of insurance.” That is why, in the

later case of Equitable Fire and Accident Office V Ching Wo Hong ,
it was held that; “but it is almost universal practice of insurers other
than marine to stipulate that the contract shall not begin to take effect

until the premium has been paid.” (As quoted from the learned
authors of Porter’s Laws of Insurance 8th edition by T.W. Morgan
(Sweet & Maxwell) London page 75

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In the absence of any stipulation as to the time or period the
premium is due; the insured remains a debtor to the insurer
without losing the benefits of the contract. It would therefore,
appear to me that if the event covered by the insurance occurs
before the premium is paid, as appears to have been the case in
the matter under consideration, the insurer has an obligation to
indemnify the insured and then claim the premium through the
normal channels of debt recovery. The same would be the case if
at the end of the cover period the premium has not been paid
notwithstanding that the event covered never occurred.

The Defendant, in this case, accepted payment of the full

premium before refunding it through a cheque to the Plaintiff
which the Plaintiff says he rejected. It appears to me that the
refund was an afterthought in order to avoid the claim on account
of late payment of the premium. I have however; already rejected
that position as it is not supported by law and neither was it a
term of the contract of insurance. I would accordingly hold the
Defendant to be in breach of contract. The Plaintiff fulfilled his
part of the bargain by making payment in full to the Defendant. In
refusing to indemnify the Plaintiff for the accident involving his
insured Mitsubishi Canter light truck, some quantifiable damage
was caused to the Plaintiff.

I therefore, award damages to the Plaintiff for breach of contract

to be assessed by the learned Deputy Registrar. The assessed
damages shall attract interest at the short term commercial
lending rate as approved by the Bank of Zambia from the date of
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the writ until judgment and thereafter at 10% until final payment.
Costs will be for the Plaintiff to be taxed by the Taxing Master in
default of agreement by the parties.

DATED THE ----------DAY OF JUNE 2011

J.M. SIAVWAPA
JUDGE

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