The High Court has ruled that certificate of good conduct is not a sufficient due diligence tool for companies such as banks to employ a worker and make insurance claim in case of theft.
The precedence was set last week in the case between African Banking Cooperation (ABC) and Saham Assurance, with the court clarifying what passes the test of “satisfactory conduct reference of employees” as contained in insurance contracts.
ABC had in September 2010 relied on a certificate of good conduct from the then Criminal Investigation Department (CID) in rehiring an employee who had earlier resigned from Equity Bank.
The court heard that the employee, Boniface Wainaina Kabue, conspired with a customer to carry out fraudulent transfers between April 2012 and August 2014 amounting to Sh35.88 million at ABC.
ABC, which had a blanket insurance policy from Saham, lodged a claim, but the insurer declined saying the policy had an express special exclusion on employee reference warranty.
This led to the suit that sought to find out if the bank had carried out enough due diligence when rehiring Mr Kabue, who had worked at the bank in junior role before.
ABC through its witness stated that because the CID gave Mr Kabue a certificate of good conduct, it was satisfied that he was not involved in criminal act.
“That point of view is a fallacy on the part of ABC. ABC has a legal department which would have advised it that every accused person has a right to a fair hearing which includes the right to be presumed innocent until the contrary is proved,” ruled the court.
“The CID’s certificate of good conduct could not have been expected to reflect the case that Boniface faced, as a result of the loss Equity Bank suffered in his hands until he had been convicted by the court,”
Mr Kabue joined ABC in May 2003 as management trainee but resigned in 2009 and joined Equity Bank where he worked until May 2010.
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