A legal battle with major implications for Uganda’s banking and insurance sectors is unfolding in the courts, centred on whether a bank can benefit from a professional indemnity insurance policy issued to a surveying firm it contracted—after the firm admitted professional negligence.
The dispute involves Finance Trust Bank, represented by Muwema & Company Advocates, and Sanlam General Insurance, represented by AF Mpanga Advocates. Sanlam provided professional indemnity cover to Katuramu & Company Consulting Surveyors, whose valuation reports formed the basis of loans issued by Finance Trust.
How it started
Finance Trust lodged a complaint before the Insurance Regulatory Authority (IRA) Tribunal in 2023, arguing that it hired Katuramu & Company to inspect properties, open boundaries and conduct valuations for loan applicants.
As a condition of the engagement, the surveyors were required to maintain professional indemnity insurance from a reputable insurer.
The surveyors obtained cover from Sanlam under policy P/100/5011/2019/001, valid from March 2019 to March 2020, and renewed until September 2022.
Relying on their valuation reports, the bank issued loans—many of which later went into default. A subsequent revaluation revealed severe inaccuracies, including assessments of wrong properties, undisclosed graveyards, and claims of nonexistent developments.
The bank said these errors hindered recovery efforts and sought compensation of more than Shs300 billion.
A letter dated October 4, 2023, from Katuramu & Company acknowledged negligence, admitting that reports were approved without proper verification. But Sanlam rejected the bank’s claim, arguing that the admission was made in bad faith.
The insurer further accused Finance Trust of contributory negligence for failing to conduct its own due diligence before lending.
The tribunal dismissed Sanlam’s objections, ruling that Finance Trust reasonably relied on professionals hired for their expertise.
It ordered Sanlam to compensate Finance Trust with Shs1.9 billion, concluding that the loss directly resulted from the surveyors’ professional negligence.
Commercial Court overturns tribunal decision
Sanlam challenged the ruling before the High Court’s Commercial Division, where Justice Patricia Kahigi Asiimwe overturned the tribunal’s decision. She ruled that Finance Trust had no legal standing to enforce an insurance contract to which it was not a party, citing the doctrine of privity of contract.
Although the Contracts Act provides exceptions for third-party beneficiaries, Justice Asiimwe found no clause in the Sanlam policy explicitly extending enforceable rights to Finance Trust.
She held that the indemnity was intended solely to protect Katuramu & Company from financial consequences of claims by its own clients—not third parties such as the bank.
Finance Trust appeals
Finance Trust has appealed to the Court of Appeal, arguing that the judgment undermines the purpose of professional indemnity insurance and exposes banks and the public to risk.
The bank warns that the ruling could disrupt key sectors that rely on insured professional services—including valuers, lawyers, engineers and surveyors—thereby affecting lending, investment and public confidence.
The Court of Appeal’s decision is expected to set a precedent with significant implications for how professional indemnity insurance functions in Uganda and the extent to which third parties can rely on it in the event of professional malpractice.
