A case with far-reaching implications for Uganda’s banking and insurance industries is unfolding in the courts, centered on whether a bank can claim compensation under a professional indemnity insurance policy issued to a surveying firm it hired—and which has since admitted professional negligence. The dispute pits Finance Trust Bank, represented by Muwema & Company Advocates, against AF Mpanga Advocates, representing Sanlam General Insurance.
Sanlam provided professional indemnity cover to Katuramu & Company Consulting Surveyors, whose valuation reports were relied upon by the bank when issuing loans.
How the dispute began
Finance Trust filed its initial complaint in 2023 before the Insurance Regulatory Authority (IRA) Tribunal. The bank argued that it contracted Katuramu & Company Consulting Surveyors to inspect properties, open boundaries and value land offered as collateral by loan applicants. As a condition of their engagement, the surveyors were required to maintain professional indemnity insurance from a reputable insurer. Katuramu & Company duly obtained cover from Sanlam under policy number P/100/5011/2019/001, valid from March 2019 to March 2020, and renewed twice until September 2022.
Relying on the surveyors’ reports, the bank disbursed credit to various borrowers—many of whom later defaulted. During recovery attempts, Finance Trust commissioned fresh valuations, which revealed glaring inaccuracies in the earlier assessments. These included valuation of the wrong properties, failure to disclose graveyards, and reporting developments on land that was actually vacant. The bank claims these errors undermined its ability to recover loans and foreclose on securities, prompting a compensation claim exceeding Shs300 billion.
In a letter dated October 4, 2023, Katuramu & Company Consulting Surveyors admitted professional negligence, acknowledging that they approved valuation reports without independently verifying their contents.
However, Sanlam refused to settle the bank’s claim. In submissions to the IRA Tribunal, the insurer argued that the surveyors’ admission of negligence was made in bad faith. It additionally accused Finance Trust of contributory negligence, asserting that the bank failed to conduct basic legal due diligence before lending.
The tribunal dismissed Sanlam’s arguments, ruling that Finance Trust was entitled to rely on the expertise of the surveyors it had contracted. “The due diligence function had been outsourced to the insured, who possessed the necessary professional competence,” the tribunal held, ordering Sanlam to compensate Finance Trust Bank with Shs1.9 billion. The tribunal found that the bank’s loss flowed directly from the surveyors’ admitted professional negligence. Sanlam, dissatisfied with the ruling, escalated the dispute to the High Court’s Commercial Division.
Justice Patricia Kahigi Asiimwe set aside the tribunal’s decision, holding that Finance Trust had no legal standing to enforce the insurance contract between Sanlam and Katuramu & Company due to the doctrine of privity of contract. Under this principle, only parties to a contract can enforce it.
Though Section 64 of the Contracts Act provides exceptions allowing third parties to benefit from certain contracts, the judge ruled that the Sanlam policy did not expressly confer rights on Finance Trust. “In the present case, I have reviewed the policy agreement, and I have not found any clause that expressly allows the respondent to enforce the contract,” Justice Asiimwe stated. She further concluded that the indemnity extended only to Katuramu & Company as the insured party—not to the bank. As such, Finance Trust could not claim compensation directly from Sanlam.
Finance Trust Bank has now appealed to the Court of Appeal, arguing that the High Court’s ruling threatens the very purpose of professional indemnity insurance. The bank says the judgment has created a “public crisis” with wide implications for the financial sector, since banks routinely rely on external professional services—including valuers, surveyors, engineers and lawyers—whose work must be insured to protect the public.
“The judgment has raised serious concerns of great public importance regarding the enforcement of professional indemnity policies, which are essential for the provision of many professional services to the banking industry,” the appeal states.
The outcome at the Court of Appeal is expected to set a critical precedent for how professional indemnity insurance operates in Uganda—and whether banks and other third parties can meaningfully rely on it to safeguard against professional errors.