Nairobi, 26 January 2026

Third Party Liability (TPL) claims sit at the intersection of legal liability, factual investigation, and fair quantum assessment.

While often perceived as straightforward extensions of motor accidents, TPL claims frequently involve complex considerations around causation, proof of loss, depreciation, business interruption, and reasonableness of costs.

This article uses a real-life motor accident involving damage to third-party business premises as a contextual backdrop to highlight the principles and approach that guide sound third-party liability claims handling.

What Is a Third-Party Liability Claim?

A third-party liability claim arises when an insured party is legally liable for loss or damage suffered by another person or entity (the third party). In motor insurance, this commonly includes:

• Damage to third-party property
• Bodily injury or death to third parties
• Consequential financial losses arising directly from the insured event

The insurer’s obligation is not to pay whatever is presented, but to indemnify the insured for losses that are proven, reasonable, and legally recoverable.

Case Context: Damage to a Third-Party Business

The reference case arose from a road traffic accident involving a heavy commercial vehicle which lost control and caused damage to nearby third-party property at a trading centre.

The affected third party – being one of the many whose businesses were affected – operated a small commercial enterprise. As is common in such situations, the incident resulted in a combination of:

• Physical damage to business premises
• Damage to fixtures, fittings, and equipment
• Loss of stock
• Temporary disruption to normal business operations

Establishing Liability: A Necessary First Step

Before any consideration of quantum, liability must be reasonably established. In third-party motor claims, this typically involves:

• Confirmation of policy cover for third-party risks
• Verification of the insured vehicle’s involvement
• A causal link between the accident and the alleged damage

Where independent evidence, such as police records or investigation reports supports these elements, the claim can proceed to quantum assessment. Where liability is unclear, premature focus on quantum can expose insurers to unnecessary risk.

 Material Damage: Indemnity Over Replacement

A recurring challenge in third-party claims is the assumption that replacement cost equates to indemnity.

The correct approach is to restore the third party, as far as money can, to the position they were in immediately before the loss — not to improve it. This requires careful consideration of:

• Age, condition, and remaining useful life of damaged items
• Whether items were locally fabricated or bespoke
• Prevailing market rates rather than claimed figures

Where appropriate, depreciation should be applied to reflect prior use and avoid betterment.

Documentation Gaps and Market Verification

In many small and medium enterprises, formal documentation such as invoices and receipts may be limited or unavailable. While this does not automatically invalidate a claim, it increases the need for:

• Physical inspection
• Photographic evidence
• Independent market enquiries

In such cases, reasonableness — supported by local pricing and industry experience — becomes the primary test.

Repair and Labour Costs: Testing Proportionality

Labour and repair costs are often subjective and can vary widely. A key part of third-party claims adjustment is testing whether such costs are:

• Proportionate to the nature and extent of damage
• Consistent with local rates
• Supported by the scope of works undertaken

Adopting reasonable benchmarks helps ensure fair compensation without encouraging inflated claims.

Business Interruption and Loss of Profits

Claims for loss of profits require particular care. The fact that a business was disrupted does not automatically translate into a quantifiable loss.

Key considerations include:

• The duration of disruption attributable to the incident
• The business’s trading history and stability
• Availability and reliability of financial records
• The ability of the business to mitigate losses

Loss of profits should be based on demonstrable reduction in earnings, not assumed turnover or gross figures.

Why Independent Quantum Assessment Matters

Third-party liability claims often begin with broad or optimistic expectations. Independent assessment brings structure and objectivity by:

• Separating genuine loss from assumption
• Applying indemnity principles consistently
• Producing outcomes that are defensible in negotiation or court

The objective is not minimisation for its own sake, but fair, reasoned, and supportable settlement.

Key Takeaways for Claims Professionals

• Liability must be reasonably established before quantum
• Indemnity, not replacement, remains the guiding principle
• Documentation gaps increase the need for verification, not rejection
• Loss of profits must be evidenced and attributable
• Sound third-party claims handling balances empathy with discipline

Handled correctly, third-party liability claims protect the insured’s position while ensuring that third parties are compensated fairly — no more, no less.

Building Technical Depth in Third-Party Liability Claims

At Specialty Claims Academy (SCA), we view claims of this nature as clear reminders of the need for technical depth, procedural rigour, and professional independence in third-party liability claims handling. While such losses may appear routine, they frequently test an adjuster’s ability to apply indemnity principles, assess evidence objectively, and exercise sound judgment under legal and commercial pressure.

These are the everyday realities of third-party risk — where decisions around liability, quantum, documentation, and loss mitigation directly shape outcomes. They reinforce why continuous professional development and structured technical training remain essential to improving claims quality and maintaining industry standards.

Training & Capacity Development

SCA works with insurers, loss adjusters, and other claims stakeholders to design and deliver specialist training programmes covering:

• Third-party liability claims fundamentals
• Quantum assessment and indemnity principles
• Loss of profits and business interruption evaluation
• Evidence-based reporting and court-ready documentation

If your organisation is looking to strengthen its technical capability in handling third-party liability claims, we would be pleased to collaborate.

📧 training@specialtyclaims.co.ke
🌐 www.specialtyclaims.co.ke

Author:
Fredrick A. Oloo
BCom (Ins.), Dip CII, Dip CILA
Lead Trainer & Director – Specialty Claims Academy (SCA)

( Also: Managing Director – Niche Loss Adjusters & Marine Surveyors Ltd
Council Member – Institute of Loss Adjusters & Risk Surveyors (IARS – Kenya)
Committee Member – Chartered Institute of Loss Adjusters (CILA – UK)’s Future Focus Special Interest Group