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Daily Nation : February 2nd 2014
34 | Business INDUSTRY | Society to oppose ‘unconstitutional law’ in the High Court Major win for insurance firms in new Act as lawyers cry foul Structured payment format for claims in legislation will render advocates redundant BY LILIAN OCHIENG’ @LilianMerab email@example.com L awyers have opposed a new insurance law likely to render them redundant. The new insurance law was assented to by President Uhuru Kenyatta on December 24 last year. The law provides for maximum compensation rates in cases of death, or fixed compensation for each body part, such as broken leg or lost finger. Payment will be based on an individual’s age, income, nature and extent of injury and number of dependants, among other considerations. Children up to five years will be paid a maximum of Sh300,000, those between 5-12 years will receive Sh450,000 while minors between 12 and 18 years will be compensated Sh600,000. For example, if a third-party ac- cident victim loses the tip of his thumb, he will be paid Sh150,000 in compensation, and in case of death, a maximum of Sh3 million may be paid to his family. However, the Law Society of Kenya says Parliament assumed judicial power in determining and legislating the amounts payable to the injured, which makes the law unconstitutional. “The court has to be involved because it uses a medical report presented by medical experts to assess damages payable,” said Law Society of Kenya chairman Eric Mutua. “Parliament ignored our advice regarding the legislation.” The new law, (Insurance Motor Vehicle Third Party Risks Amendment Act, 2013), comes as a relief LSK’S SUBMISSIONS Law unfair and open to abuse Parliament ignored advice of law society and assumed judicial role in and legislating amounts payable, which renders law unconstitutional Act denies victims of ac- cidents the freedom to chose between legal action and outof-court settlement Structure too complex and lengthy for the layman and is open to abuse as insurance companies are left in charge of compensation process to insurers who have been lobbying for it through the Association of Kenya Insurers since 2008. “It’s a big victory against corruption,” said Tom Gichuhi, association chief executive officer. Insurers have previously blamed the old system for loopholes often exploited by rogue lawyers, doctors and members of the Judiciary to settle fraudulent claims running into millions of shillings. As insurers celebrate the law, lawyers maintain that the Act denies accident victims the right to choose between filing a claim FILE | NATION Association of Kenya Insurers executive director Tom Gichuhi (left) with Pan African Life chief executive Tom Gitogo at a press briefing. A new law establishes terms and compensation caps for accident victims, which they said is a victory against fraud. in court or talking directly to the insurance company for settlement. This implies fewer grounds for a contested suit in court and leaves insurance companies in charge of the compensation process. “The compensation structure is unfair and too complicated for the average Kenyan and is open to abuse,” said law society chief executive officer Apollo Mboya. The society said it has instructed lawyer Fred Ngatia to move to the High Court to have the law declared unconstitutional. It will not be the first time lawyers will be going to court to challenge a law on third-party insurance claims. In 2008, lawyers opposed a similar law on the payment of compensation for injuries sustained at work on the same grounds. According to Jubilee Insurance chief executive Patrick Tumbo, insurers pays an estimated Sh16.1 billion annually in compensation for motor vehicle industry-related claims, more than 50 per cent of the total claims settled in other compensations. “About three-quarters of motor vehicle claims are fraudulent. This new law is here to streamline the industry through structured compensation,” said Mr Tumbo. Pan Africa Insurance chief executive Tom Gitogo defended the Act which he said offers a straightforward way of determining the amount of compensation to be paid out. Among other complaints law- yers have about the Act is that it is very lengthy, too structured, full of jargon and very confusing especially to a lay man. “Insurance companies are simply exploring ways of increasing premiums,” lawyer Mboya said. SUNDAY NATION February 2, 2014 Baringo steams up for ambitious geothermal plants BY WYCLIFF KIPSANG @wsang08 firstname.lastname@example.org Geothermal power plants will be set up in Bar- ingo County. Last week, the county government and the Geothermal Development Company sealed a deal to establish power plants with a capacity to produce 3,000 megawatts of electricity over the next nine years. The power company has identified Silale, Paka, Korossi/Chepchuk and areas around lakes Baringo and Bogoria as potential sites for construction of the plants. According to the geothermal firm managing director Silas Simiyu, this would be carried out in four phases, with the last phase scheduled for completion in 2023. He said the firm would spend Sh300 billion in the first phase from May. Speaking last week at a meeting with county leaders at the Kenya School of Government in Kabarnet, Dr Simiyu and Geothermal chairman Simon Gicharu said a call for bids for the construction of eight plants of 100MW each in the first phase has been advertised. Dr Simiyu said that on completion, more than Sh11.5 billion will be generated annually with 15 per cent of the total revenue being channeled to the county. “The electricity generated will also benefit Tur- kana County,” he said. Dr Simiyu said Kenya has a lot of potential in geothermal development with the possibility of producing more than 10,000 megawatts . When fully on stream, the company will channel condensed water from the power plants to irrigate fields for crop production. The chairman said 576,000 tonnes of water would be released every day to irrigate 57,000 hectares of land. He said industries would be encouraged to set up shop because electricity will be cheap. Although geothermal energy requires a large investment, mainly due to the expensive drilling of wells, it is more reliable than hydropower generation. Mr Gicharu said Geothermal was involved cor- porate social responsibility for the locals. “We will involve locals for them to be part of the plant. We are already drilling more than 10 boreholes. We will also set up feeder roads leading to schools and hospitals,” he said. Baringo Governor Benjamin Cheboi said the county government would provide an enabling environment for the investors by beefing up security. Canadian firm to lose oil exploration licence BY ANDREW TEYIE @Muholo email@example.com Energy Secretary Davis Chirchir has refused to renew the exploration licence of Vanoil Energy Limited on the grounds that it has no capacity to explore for oil in allocated blocks in northern Kenya, Sunday Nation has learnt. Documents seen by Sunday Na- tion show that Vanoil, a company whose financiers are registered in the Cayman Islands, had been allocated oil blocks 3A and 3B in Garissa. “Taking into account that Vanoil FILE | NATION Energy Cabinet Secretary Davis Chirchir. has not fulfilled minimum work and expenditure obligations for the initial exploration and that it also does not possess or has not demonstrated the financial ability required, I shall not be granting any further term extension for the block 3A and 3B respectively. The contract shall thus expire automatically,” Mr Chirchir said in a December 27 letter to Vanoil CEO Samuel Malin. Mr Malin did not reply to emailed questions, but his representatives came to the Sunday Nation asking that the story be delayed until Monday when Mr Malin would be ready to respond. “In Kenya, Vanoil holds a 100 per cent interest in onshore blocks 3A and 3B, acquired in October 2007 through the signing of a production sharing contract (PSC) with the government of Kenya,” says a document posted on Vancouver stock exchange website and signed by Vanoil chairman James Passin. Mr Passin further says the company anticipates ‘the receipt of its 10 per cent working interest in the highly prospective 5,110km sq block L9 alongside Dominion Petroleum Kenya limited and Far limited. This block lays directly south of Block 8 which hosts the Mbawa gas discovery made in 2012”. On its website, Vanoil describes itself as “a Canadian oil and gas company with a portfolio of assets in East Africa and in the Republic of Seychelles.” Cast doubt Mr Chirchir cast doubt on Va- noil’s exploration ability following an analysis of their financial statement. “Both the audited and manage- ment accounts provide a clear picture that Vanoil is in a difficult financial position, and this poses a serious challenge to the fulfilment of your minimum work and expenditure obligations,” Mr Chirchir said. Subsequently, he wonders whether Vanoil can complete their work on time considering that they have had four previous extensions in vain. “Vanoil signed the two PSC’s for block 3A and 3B on 16th October 2007 and since then, the duration of the PSC’s has been extended four times for various reasons as contained in our letter of December 11, 2013. The initial exploration was to run for three years and expected to come to an end on January 2011,” says Mr Chirchir. But on December 17, 2013, Mr Malin defended Vanoil’s position. He told Mr Chirchir in a letter that the company had been affected by factors beyond their control.
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February 3rd 2014