Business interruption insurance policies usually contemplate the loss of premises by physical damage.  Typically, the Covid 19 pandemic does not physically damage premises, however, the loss of uses of premises is arguably “physical damage”.  In a decision released 30 March 2020 the Ontario Supreme Court in MDS Inc & anor v Factory Mutual Insurance Company, 2020 ONSC 1924  decided that loss of use or function of premises could be “physical damage” for the purposes of the insurance policy.  To interpret “physical damage” as requiring tangible damage was inconsistent with the purpose of the insurance policy.  The case involves the pre-emptive shut down of a nuclear reactor with a heavy water leak that produced isotopes that were then sold by MDS.  It claimed lost profit of about $121M by reason of the regulator imposed shutdown of the premises for 15 months.  This decision will be helpful to insureds in bringing successful claims for losses as result of Covid 19 enforced closures and losses.

In its first substantive judgment in Houston v Southern Response Earthquake Services CEI-OOXX-2019 the Canterbury Earthquakes Insurance Tribunal has shown that it will be a waste of time and money for homeowners.  The decision by the chairperson of the tribunal, a former family court judge, CP Somerville, fails to follow an applicable Court of Appeal case about the policy standard of remediation and does not decide any super-structure repair scope or whether the insurer strategy complies with the Building code.  Mr Somerville surprisingly approves a jack/pack repair for a house with a heavy roof and heavy cladding on TC3 land adjacent to a stream with a floor level differential of 72mm as being “as new”.  Mr Somerville refused to get involved in deciding technical engineering issues and building code compliance.  These are the issues in most earthquake disputes.  Hopefully the judgment is successfully appealed.

In Bruce & ors v IAG New Zealand Ltd [2019] NZCA 590 the Court of Appeal allowed the homeowners’ appeal and dismissed the IAG cross appeal in a case about IAG’s post earthquake remedial work.  IAG elected to repair the house and spent $1.4M doing so.  IAG’s engaged builder, Jim the Builder, did not repair the house so that it was “as when new”.  At issue at trial were the floor levels, wall verticality and internal finishes.  The High Court Judge, Mallon J, found that IAG had not restored to the three items to the policy standard, but puported to limit the remedy available to the homeowners.  The Court of Appeal set aside the limits on recovery and dismissed the cross appeal about the lack of damage by wall leans. There is to be a second hearing about remediation and cost of remediation.  This case is important for its finding that IAG is liable for the defaults of its builder when IAG elected to repair the house.

Vero, AMI and AA Insurance refused to pay $4.9M of rental hire costs claimed by not at fault drivers where their insured drivers were at fault.  Right to Drive funded the rental cars in return for rights against the insured driver(s) and their insurers.  It sued to recover from the insurers.  The insurers denied liability for many reasons.  The insurers lost in the High Court.  In Frucor Beverages Ltd & ors v Blumberg & ors [2019] NZCA 547 the Court of Appeal dismissed the insurers’ appeal(s) and commented about the lack of merit of the appeals.  Previous Australian and United Kingdom cases were similar.  The Court of Appeal makes very critical comments about the insurers in paras [151] to [162] of the judgment.

In Birchs Road Ltd v EQC & anor [2019] NZHC 2439 the High Court (DunninghamJ) considered  an application to transfer a court proceeding in process for 3 years with a trial date commencing 21 October 2019 where the defendants had concerns about their ability to recover costs from the homeowner if the claim was transferred to the Earthquake Tribunal.  In Fraser v EQC & anor [2019] NZHC 2768 the High Court (Lester AJ) decided that the High Court retained jurisdiction to deal with costs in respect of a proceeding transferred to the Earthquake Tribunal.  Fraser is notable for a wasted costs order against the homeowner for changing lawyers and engineers.

In Pinot Properties Ltd v Vero Insurance New Zealand Ltd [2019] NZHC 2244 the High Court (Osborne J) dismissed an application to transfer an earthquake court proceeding to the Earthquake Insurance Tribunal as the Court decided that the relevant building at 205 Manchester St was not a residential building, nor residential property, so was not eligible.  The Court reached this conclusion notwithstanding that EQC paid claim(s) and the properties had been used for residential purposes.  Vero insured the property under a commercial property.

In Dewes & ors v IAG New Zealand Ltd & ors [2019] NZHC 2270 the High Court (Lester AJ) considered an application by home owners to transfer a claim about a defectively repaired earthquake damaged house where IAG had joined Hawkins and Hawkins’ insurer, QBE.  QBE did not want the claim against it transferred to the Tribunal and said that it was a separate proceeding not within the Tribunal jurisdiction.  The High Court disagreed with QBE and said the entire dispute could be transferred, which it did.

In Settlers Crescent Partnership v IAG New Zealand Ltd [2018] NZHC 2775 the owners of 4 adjoining buildings at 14 Settlers Crescent, Ferrymead (funded by Risk Worldwide) sued to recover for damage in the June 2011 earthquake notwithstanding that they had cash settled for $10,233,973.80 with IAG for damage to the buildings in the September 2010 and February 2011 earthquakes on the basis that those buildings were recommended for demolition as being destroyed. The Court in a judgment 25 October 2018 unsurprisingly found that the partnership suffered no further loss in the June 2011 and the claim failed.  A year later the High Court on 17 September 2019 in Settlers Crescent Partnership v IAG New Zealand Ltd [2019] NZHC 2341 ordered the owners to pay costs of $51,067 together with disbursements  of $111,147.76.  IAG had claimed $297,621.72.

The Court of Appeal dismissed the appeal by Xiaoming He in relation to earthquake damage to his house at 377 Selwyn Street, Christchurch.  In He v EQC & anor [2019] NZCA 373 the Court of Appeal said that the High Court was correct to find that Mr He had not proven earthquake damage to his property.  The damage appears to have pre-dated the earthquakes and evidence from the tenant to that effect did not assist Mr He.

Kitchen v AA Insurance Ltd [2019] NZHC 1902 is the second High Court judgment where the High Court has granted an application to transfer a High Court earthquake proceeding over the objection of the defendant insurance company.  In this proceeding the Court transferred the claim notwithstanding that there was a 10 day Court trial scheduled for December 2019.  It said that it was in the interests of justice to transfer the claim as court fees would be avoided, there would be no duplication of work, the Tribunal was more flexible and any complexity could be dealt with by the Tribunal.