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.

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.

Insurance recovery for Southland Stadium

In Southland Indoor Leisure Centre Charitable Trust v Invercargill City Council [2017] NZSC  190 the Supreme Court allowed the appeal by the Trust against the dismissal of its claim by the Court of Appeal, but reduced the recovery by 50% for the Trust’s contributory negligence in not acting on engineering advice to investigate roof construction issues.  The original judgment was for about $15M.  The Supreme Court said that the Court of Appeal was wrong in characterising this case as one of negligent misstatement when it was a simple negligence case based on negligent issue of a code compliance certificate, however, it was correct to reduce any recovery by 50% for contributory negligence.

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.

Earthquake damage or Pre-existing.

In He v Earthquake Commission and ors [2017] NZHC 2136 the High Court (Dunningham J) had to decide whether the damage to Mr He’s property at 377 Selwyn Street, Addington was caused by the earthquakes or not.  The judgment records that over the life of the proceeding Mr He had engaged 6 different structural engineers.  The judgment also records that the tenant of the property at the time of the earthquakes supported EQC and the insurer that the damage existed before the earthquakes.  Predictably Mr He lost.  A surprising case to run to trial.

AMI Insurance – Exclusion clause application

In AMI Insurance Ltd v Legg & ors [2017] 321 the Court of Appeal upheld AMI’s appeal that it was liable to indemnify the Leggs for damage/costs from a rubbish heap fire on their Selwyn property in January 2013.  Some of the material in the heap came from the Leggs’ lifestyle block and some from a separate landscaping business run by their company Evolving Landscapes Ltd.  Legg insured the lifestyle block with AMI and ELL insured the business with Lumley.  In the High Court Nation J held both insurers liable.  Contrary to Nation J’s findings the Court of Appeal held that there was an effective causal connection between the ELL material on the heap and the resultant fire.  The Court applied the principle from Wayne Tank & Pump Co Ltd v Employers Liability Assurance Corporation Ltd [1974] 1 QB 57 that states where a loss has two effective and interdependent causes one within the policy and one excluded by it, the exclusion prevails.  The AMI policy excluded liability in connection with any business.  The ELL was an effective and interdependent cause of the fire so AMI was not liable to the Leggs.