Why insurers recommend short-term cover for ‘unauthorised’ school bus passengers
Individuals and institutions hiring school vehicles for transport will need to take out short-term cover if they are to receive compensation in the event of an accident.
Photo credit: Mwangi Ndirangu | Nation Media Group
Individuals and institutions hiring school vehicles for transport to events such as weddings, funerals and political rallies will need to take out short-term cover if they are to receive compensation in the event of an accident, insurers have said.
This follows a recent High Court ruling that protected insurers from being forced to pay liabilities arising from events not covered by an insurance policy.
As a result of the court ruling, insurance companies are urging schools to take out passenger liability insurance as a key measure when hiring out buses for private events such as church functions, weddings and funerals.
Association of Kenya Insurers (AKI) chief executive officer Tom Gichuhi said passenger liability coverage is the best option for schools looking to generate extra income by hiring out their buses.
“This is a temporary cover taken out for the period when the bus is hired for private use. It is essential because the insurance policy typically includes something called a limitation as to use. For a school bus, the policy usually states that the bus is used to ferry school children and staff. The moment you use it for another purpose, you are acting contrary to the terms of the insurance policy,” he told Business Daily on the phone.
“We advise that they buy a temporary cover for that period when the bus will be in use, which usually lasts for a week. You can obtain the cover from the same insurance company providing the main cover or from another company.”
He explained that temporary cover is far more cost-effective than permanent cover because such events tend to last less time than the authorised use for which they have permanent cover.
AKI's advice comes in the wake of the Kisumu High Court ruling that an insurance company cannot be compelled to pay claims arising from liabilities not covered by the insurance contract between the parties. The decision, delivered by Justice Roselyn Aburili, is expected to have a significant impact on the way school buses and company vehicles are hired out for private use.
In her judgment, Justice Aburili stated that insurers could not be compelled to settle such claims, as this would amount to allocating benefits to parties not covered by the insurance policy, while unfairly punishing the insurer.
“It would be erroneous to compel an insurance company to settle a judgment which arises from liability not contemplated by the legislature and even then, which is not the subject of an insurance policy between the parties involved,” said the judge.
The case before the court concerned the Oder Boys Boarding Special School, which had taken out an educational institution motor insurance policy with Old Mutual General Insurance.
The dispute arose on April 23, 2023 when Oder Boys hired out its school bus to members of the Seventh-Day Adventist Church to attend a function in Kakamega County. The church members were also sponsors of the school. Unfortunately, the bus was involved in a road crash and several passengers were injured. The injured filed cases in the Small Claims Court seeking compensation from the insurance company. Although the cases were eventually withdrawn, Old Mutual went to court to obtain a waiver preventing any of the parties from bringing similar claims in the future.
Old Mutual argued that the policy clearly stated that the company could not be held liable for the death or injury of any person other than a passenger being transported under a contract of employment at the time of the incident. In addition, the company would not be liable for any accident, loss, damage or liability arising from the use of the vehicle outside the specified limitations.
Justice Aburili noted that the insurance cover taken out by school buses only applies to students and staff, excluding any unauthorised passengers.
“When accidents occur, the policy is voided, leaving injured passengers or the families of deceased passengers with little recourse for justice, as schools are often unable to bear the burden of settling such claims.”
The court emphasised the importance of communicating this decision to school principals to ensure they are aware of the potential risks of hiring out their school buses. Similarly, Mr Gichuhi believes that public education is vital.
“It is all about public education. The Association of Kenya Insurers and the Insurance Regulatory Authority [should] conduct sensitisation campaigns explaining to Kenyans the various types of covers available, who is covered, who is not, and why it is important to read your policy document. We have the Bima Yangu mobile application that enlightens the public on insurance covers.”
