Insurance Assignment Appeal

On 15 February 2018 the Court of Appeal will hear the appeal from the High Court decision in Xu & anor v IAG & anor [2017] NZHC 1964 about the ability of an assignee of insurance policy rights to enforce a reinstatement entitlement.

Failed EQC repairs

Here is a link to my interview with John Campbell on Checkpoint about issues with EQC work and claims.

EQC & New Apportionment of Damage Method

Under the Earthquake Commission Act 1993, EQC has to apportion the damage/cost between earthquake events as there is a cap per event that is usually $100,000 plus GST per event.  Where there were damage inspections between quakes then it is straight forward to apportion based on actual damage.  In the past EQC has apportioned damage in the absence of inspections based on damage % in the area.  It has now taken to apportioning based purportedly on remedial costs on properties  in the area.  It is important to get from EQC in relation to apportionment the addresses of the properties used by EQC, details of the method of construction of the properties and details of the remedial costs and method that it assessed the apportioned repair cost.  It must provide this information.  The court has ordered it to provide this information in cases.

Southern Response- Buy another house policy

In Southern Response Earthquake Services Ltd v Shirley Investments Ltd [2017] NZHC 3190 the High Court (Thomas J) decided that the costs of enhanced foundations and demolition were not to be included in the calculation of an insured’s entitlement under the insurance policy as these were additional costs that were only payable when incurred.  These costs would not be incurred on the “buy another house” option.  The Court also confirmed that the amount payable under the “buy another house” option can be no greater than the actual cost of the bought replacement house, excluding the land cost.  Thomas J gets a bit creative with her interpretation of Avonside in reaching her conclusions.  Highly likely that the decision is appealed.

When 2 insurers apparently cover the same date (4 September 2010)

In BC 74246 v QBE Insurance (International) Ltd & Allianz Australia Insurance Ltd [2017] NZHC 1473 the High Court (Whata J) resolved a dispute between QBE and Allianz about who was liable for the 4 September 2010 earthquake where the relevant QBE insurance policy expired at 4pm on 4 September 2010, but there was also an Allianz policy for the same property that stated the period of insurance “effective date” 4 September 2010 and expiry date of 4pm on 4 September 2010.  The 4 September 2010 earthquake occurred at 4.35am.  QBE asked the Court to order Allianz to be equally liable on the basis that the Allianz policy commenced at 12am on 4 September 2010.  The Court dismissed the QBE claim because the clear intention was that the Allianz policy commence when the QBE policy expired at 4pm.  It was to be seamless cover.  The Court implied the 4pm commencement as a term and also said that the objective interpretation of the policy was that it was to commence at 4pm.

Insurance assignment problems for lawyers

The High Court judgment in Doig v Tower Insurance Ltd [2017] NZHC 2997, delivered 5 December 2017 by Mander J, highlights that lawyers that handled the purchases of earthquake damaged properties with assignment documents may have liability issues if they did not advise the purchaser(s) that based on the current law in Bryant v Primary Industries Co Ltd [1990] 2 NZLR 142 the purchaser(s) would not acquire the right to reinstatement and would only be entitled to indemnity value.  The Doigs argued that Tower had represented to them by an email on 2 October 2012  that the Doigs would get replacement value and that they relied on the representation to their detriment.  The claim had serious problems because any representation was after the Doigs had agreed to purchase the property, the Doigs took legal advice and any competent lawyer would have known of the law from Bryant, any representation was not equivocal, there was no detriment because the evidence was that the Doigs had still profited from the purchase once you added together insurance and EQC payments with the current property value.  The Doigs also claimed interest from January 2014 on the Tower indemnity payment.  The problem was that the claim was under cap until July 2016 so Tower had no liability before then.  Tower paid indemnity in November 2016 which the Court held was within a reasonable time.  A total failure for the Doigs who will now have a costs liability to Tower and may want to look at recovery from lawyers involved.

Under insurance & Replacement Value- Myall v Tower Insurance

In Myall v Tower Insurance Ltd [2017] NZCA 561 the Court of Appeal considered an appeal about the full replacement cost of “Riverlaw” mansion payable by Tower.  The calculation of the cost was complicated by the insured area being 650m2 when the actual area was 799m2.  The judgment exemplifies the need to call appropriate evidence at a trial court.  Mr Myall appears to have been prejudiced by the choice of witnesses made in the High Court.  The Court of Appeal decided the High Court was correct to apportion the rebuild cost pro rata rather than by elements.  It also decided that Tower could use materials in common use rather than more expensive materials and that it was permissible to use timber framing with brick veneer rather than the original brick interior and exterior walls.  The finding about the walls was a legacy of the choice not to call a witness about the performance differences of the walls.  Mr Myall succeeded in having the tile costs increased because Tower had used old rates.  Tower cross appealed on the use of a 10% contingency.  The Court dismissed the cross-appeal and confirmed 10% as a standard contingency allowance.

EQC claim assignments

The recent case of Xu & anor v IAG & anor [2017] NZHC  1964 said that an insured home owner could not assign to a new owner the reinstatement rights under an insurance policy.  The decision is subject to an appeal to be heard May next year.  EQC in this publication on its website confirms that

Where an EQC claim is assigned, the assignee (the person receiving the benefit of the claim, for example a purchaser) will have the same entitlement(s) under the Earthquake Commission Act as the original owner. That means they will receive any remaining entitlement up to EQC’s cap for an event.