Understanding School Vehicle Insurance Policies in Kenya: Lessons from Old Mutual v Oder Boys
- Muhoro & Gitonga Associates
- Sep 18, 2024
- 5 min read
Updated: Dec 2, 2025
Table of Contents
1. Introduction
School transport safety is a sensitive and highly regulated aspect of the Kenyan education sector. For school administrators and boards of management, holding an insurance certificate is not enough. The validity of that coverage is contingent upon strict adherence to the policy terms, specifically the "Limitation as to Use" and the duty of disclosure.
A recent High Court judgment, Old Mutual General Insurance Kenya Limited v Board of Directors, Oder Boys Boarding Special School, highlights the legal risks schools face when insurance claims are repudiated. This decision serves as a critical reminder that insurance contracts are governed by the principle of Uberrimae Fidei (Utmost Good Faith) and that insurers have the right to avoid liability if policy terms are breached.
This article explores the implications of this judgment and outlines what Kenyan schools must do to ensure their vehicles remain fully covered under the law.
2. Case Analysis: Old Mutual v Oder Boys Boarding Special School
Citation: [2024] KEHC 9895 (KLR) (Civil Case E003 of 2023)
Date of Judgment: 8 August 2024
Court: High Court of Kenya
The Core Issue
This case involved a declaratory suit filed by the insurer (Old Mutual) against the insured (Oder Boys Boarding Special School). The insurer sought a declaration from the court that they were entitled to avoid the insurance policy and were not liable to satisfy any judgments against the school regarding a specific accident.
The Legal Argument
Under Section 10 of the Insurance (Motor Vehicles Third Party Risks) Act, an insurer can seek to avoid a policy if it was obtained through non-disclosure of material facts or if the vehicle was being used in a manner inconsistent with the policy schedule (e.g., carrying passengers for hire or reward when insured for private institutional use, or issues regarding the vehicle's roadworthiness).
The Judgment
The High Court ruled in favor of the insurer. The court confirmed that where there is a fundamental breach of the policy terms; such as a failure to observe warranty clauses regarding the vehicle's condition or usage, the insurer is entitled to repudiate the claim.
Key Takeaway: Courts in Kenya are increasingly upholding the sanctity of the insurance contract. If a school violates the conditions of the policy, the insurer can legally step away from liability, leaving the school to face massive compensation claims from third parties or injured students out of pocket.
3. Key Legal Principles in Motor Commercial Insurance
To navigate school transport insurance, administrators must understand three pillars of Kenyan insurance law:
A. Utmost Good Faith (Uberrimae Fidei)
Both the school and the insurer must be transparent. If a school fails to disclose material facts such as previous accidents, the actual mechanical state of the bus, or modifications made to the vehicle, the policy becomes voidable.
B. Limitation as to Use
Every commercial vehicle policy specifies what the vehicle can be used for. For schools, this is typically "Carriage of students and staff in connection with the insured's business."
The Risk: If a school bus is hired out for a wedding, a church rally, or public transport to generate extra income (without a specific endorsement from the insurer), the policy is automatically suspended during that trip.
C. The Indemnity Principle
Insurance is designed to restore the insured to the financial position they were in before the loss. However, this indemnity is strictly tied to compliance with the Traffic Act and NTSA Regulations.
4. Critical Compliance Requirements for Kenyan Schools
To ensure your insurance remains valid and to avoid the outcome seen in the Old Mutual case, schools must adhere to regulations set by the National Transport and Safety Authority (NTSA) and the Ministry of Education.
NTSA Inspection: School vehicles must undergo mandatory mechanical inspections. A lapsed inspection sticker can invalidate insurance in the event of an accident.
Driver Vetting: Drivers must hold valid PSV licenses and certificates of good conduct. Using an unauthorized driver is a standard exclusion in all motor policies.
Vehicle Specifications:
Must be painted yellow (Standard Code 1365).
Must have "School Bus" signage.
Must be fitted with a functional speed governor (max 80 km/h).
Seats must be fixed and fitted with safety belts.
5. Common Policy Exclusions Explained
Insurers in Kenya generally include specific clauses that exclude liability. Schools must be aware of these common pitfalls:
Overloading: If a 33 seater bus is carrying 50 students, the insurance coverage is compromised. The Traffic Act prohibits overloading, and insurance policies exclude liability for illegal acts.
Mechanical Failure: If an accident is caused by a mechanical defect that the school knew about (e.g., worn-out tires or faulty brakes) but failed to fix, the insurer may reject the claim based on the "unroadworthy condition" clause.
Unlicensed Drivers: Allowing a mechanic, turnboy, or teacher without the correct PSV class endorsement to drive the bus voids coverage.
6. Best Practices for School Boards and Administrators
School Vehicle Insurance Policies in Kenya. To mitigate liability and ensure financial protection, we recommend the following steps:
Conduct an Insurance Audit: Review current policies to ensure the "Limitation as to Use" clause matches the actual usage of the vehicle.
Strict Maintenance Logs: Keep detailed records of all services and repairs. This serves as evidence that the school maintained the vehicle in a roadworthy condition.
Driver Training: Invest in defensive driving training for staff and ensure their PSV badges are renewed annually.
No "Side Hustles" for Buses: Do not hire out school buses for non-school activities unless you have obtained a temporary additional cover or endorsement from your insurer.
Incident Reporting: In the event of an accident, notify the insurer immediately. Delays in notification can be grounds for claim repudiation.
7. Frequently Asked Questions (FAQ)
Q: Can a school bus be used to transport parents to a funeral?
A: Generally, standard school policies cover students and staff. Transporting parents or community members may fall outside the "Limitation as to Use." You must inform your insurer and arguably pay an additional premium for that specific trip to ensure coverage.
Q: What happens if the school bus was overloaded at the time of the accident?
A: The insurer may repudiate the claim entirely or seek a declaration to avoid liability. Overloading is a criminal offense under the Traffic Act, and insurance policies rarely cover liabilities arising from deliberate breaches of the law.
Q: Does comprehensive insurance cover mechanical breakdowns?
A: No. Comprehensive insurance covers accidental damage, fire, and theft. It does not cover wear and tear or mechanical failure (e.g., engine knocking). However, if a mechanical failure causes an accident, the resulting damage may be covered if the vehicle was generally well maintained.
Q: Why do insurers file "Declaratory Suits" like the Old Mutual case?
A: Insurers file these suits to legally establish that they are not obligated to pay a claim because the insured (the school) breached the contract terms. If successful, the insurer does not have to pay the third-party victims; the school becomes personally liable.
Q: Are speed governors mandatory for insurance validity?
A: Yes. Kenyan law requires all PSVs and commercial vehicles to have functional speed governors. If a bus is found to have a tampered governor during an accident investigation, the insurer can reject the claim.
Q: How often should a school bus be inspected?
A: Under NTSA regulations, school vehicles should be inspected annually. However, for safety and insurance warranty purposes, regular servicing (every 5,000km or as recommended) is essential.
To learn more, see the full judgement in Old Mutual General Insurance Kenya Limited v Board of Directors, Oder Boys Boarding Special School (Civil Case E003 of 2023) [2024] KEHC 9895 (KLR) (8 August 2024) (Judgment)
