On 16 July 2024 Grant Shand commenced proceedings in the Napier High Court against the Hawke’s Bay Regional Council for damage caused in the flooding on 26 June 2024 that damaged about 500 properties. Here is the website with information about the claim. The intent is for this to be an opt out class action. People who are insured for the loss and damage will need to check their policy wording to establish whether the insurer may have rights to bring proceedings and give notices in any class action.
Govt to support councils with buyout and better protection of cyclone and flood affected properties
The Government will enter into a funding arrangement with councils in cyclone and flood affected regions to support them to offer a voluntary buyout for owners of Category 3 designated residential properties. It will also co-fund work needed to protect Category 2 designated properties.
“From the beginning of this process the Government has supported a locally-led response to the North Island weather events, as requested by councils and communities in affected regions,” Grant Robertson said.
“The facilitation work that the cyclone taskforce has been engaged in to undertake risk assessments has been completed. From here the councils will lead engagement with their affected property-owners.
“Today’s announcement will help councils get the right solution in the right place and avoid significant financial hardship for property owners.”
The Government is committed to providing funding to support councils and will work through the details with them on how that will work in practice for both Category 2 and 3 properties. We expect to have those details resolved in June.
For properties designated Category 2 (where it is determined community and/or property level interventions are feasible to manage future severe weather event risk) the Government will work with councils to help them build flood protection and other resilience measures. The initial support for this is already in place with $100 million initial funding announced in Budget 2023.
People in homes designated as Category 3 properties (where future severe weather event risk cannot be sufficiently mitigated) will be offered a voluntary buyout by councils – the costs of which will be shared between the Government and councils.
Decisions on the details how the voluntary buyout process will work will be made in the coming weeks. This will include the criteria for valuation of Category 3 properties, the split of costs between councils and central Government and the treatment of uninsured properties.
“The focus of today is on residential properties. We are working with sectors, such as the horticulture sector on possible targeted support for commercial operators, and on regional plans that will provide overall support for recovery and rebuild,” Grant Robertson said.
A parallel process is also underway to engage with Māori, including on appropriate processes for whenua Māori. Engagement with those communities will be led by the Cyclone Response Unit, Te Arawhiti and local councils. The process will ensure that there are equitable outcomes for these communities.
“The Government welcomes announcements from councils in Hawke’s Bay setting out which properties are in Category 1 and indicative assessments of which are in Categories 2 and 3.
“Our understanding is Auckland Council will be talking to property owners from June 12 and Tairāwhiti has already begun contact with property owners in Category 3, with the remainder to be finalised over coming weeks,” Michael Wood said.
“It is also important to note that there may be some properties in other cyclone-affected regions like Northland and Wairarapa that are designated as Category 2 and 3. The Government will support councils in those regions in the same way.
“Initial indications are that across all regions there will be about 700 Category 3 properties, and up to 10,000 homes in Category 2 areas,” Michael Wood said.
“The weather events saw property damaged across multiple areas of the North Island. There is no precedent for the response required, but we do know that with climate change there will be more events like this in the future,” Grant Robertson said
“The Government is committed to assisting local councils to find solutions for those who have been affected. As I have said many times we cannot meet all the costs, particularly knowing that we will see more extreme weather events like this.
“As a Government we have to strike a careful fiscal balance between supporting affected communities and not making all tax-payers bear the cost. But the affected communities can be assured we are committed to making this approach work.”
In February 2017, a large number of residential properties located around Worsley’s Road in the Port Hills of Christchurch were badly damaged by fire. Some were completely destroyed. About 80 owners claimed their properties would never have been damaged or destroyed had it not been for the actions of the appellant Leisure Investments NZ Limited Partnership (Leisure Investments), the owner and operator of a nearby adventure park. The High Court entered judgment for the plaintiffs against the Adventure Park for d damages totalling $10,296,041 together with interest and costs . In the judgment 31 March 2023 in Leisure Investments NZ Ltd Partnership v Grace & ors [2023] NZCA 89 the Court of Appeal dismissed the appeal and confirmed the liability in negligence, under the Forest and Rural Fires Act 1977 and in nuisance. It confirmed awards for damages based on reinstatement costs, alternativc accommodation and general damages.
Homeowners with fire insurance are covered under the Earthquake Commission Act 1993 for damage to house and land by a natural landslip. For house damage EQC pays the first $172,500 under s18 of the EQC Act. For land damage EQC pays up to specified amounts under s19 of the Act for land damage plus the indemnity value of any bridges, culverts and retaining walls. Separate house insurance policies may provide additional cover for retaining walls and the house. The application of the EQC Act to land damage is not straightforward. So expert advice will help.
In Napier City Council v LGMFL [2022] NZCA 422 the Court of Appeal allowed an appeal by the Council on its ability to recover from its insurer (“Risk Pool”) for its contribution of $12.355M to settle a leaky building claim about Waterfront Apartments. The Waterfront plaintiffs claimed about $20M of which $16.2M comprised costs of remediation. The relevant insurance policy excluded cover for claims about weathertightness. The insurance policy did cover non-weathertightness defects. Contrary to the High Court decision the Court of Appeal decided that the exclusion removed cover only for Council liability from weathertightness defects. The Council could recover from Risk Pool for non-weathertighness defects. The dispute was sent back to the High Court for it to apportion the settlement between weathertight and non-weathertight defects and to determine whether the settlement was reasonable.
By a judgment delivered 16 December 2021 by Osborne J in Ross v Southern Response Earthquake Services Ltd [2021] NZHC the High Court has granted the representative plaintiffs (Ross) permission to end the group action against Southern Response on terms that the Southern Response package is open to eligible homeowners until at least April 2023; dissatisfied homeowners can sue Southern Response without Southern Response raising a limitation defence for a further 18 months after discontinuance and oversight/reporting by a committee to the Court. All eligible homeowners are now free to take up the package offer and the $2000 legal fee subsidy or to sue Southern Response. Southern Response is to pay a confidential sum of money to the litigation funder CFA.
In the Sleight v Beckia Holdings Ltd & ors [2021] NZHC 456 judgment about costs and interest Gendall J ordered IAG to pay interest at 5% pa from June 2015 under s87 of the Judicature Act 1908 on the costs to repair the Sleights’ house at 24 Kinnaird Place, Christchurch. He ordered interest from the date that IAG was made aware that its original earthquake repairs were defective in June 2015. He awarded interest on the cost of the repairs as quantified in mid/late 2020. Homeowners with failed earthquake repairs ought to seek interest from when EQC/Insurer should have know about the problem. As the Sleights commenced the proceeding pre 1 January 2018 the Interest on Money Claims Act 2016 did not apply. IAG has appealed this judgment.
The High Court in Sleight v Beckia Holdings Ltd (in liq) & ors [2020] NZHC 2851 has found all defendants liable for $389,848 being the costs to repair an earthquake damaged house at 24 Kinnaird Place, Christchurch to the policy standard of “when new”. IAG insured the earthquake damaged house. IAG purported to repair the house as part of its managed repair programme with Hawkins as the project manager. Hawkins, now in liquidation, was insured by QBE. Farrells, now known as Beckia, was the builder that did the repairs. The house was defectively repaired. The build contract for the repairs was between Sleight and Farrells, but it referred to IAG and Hawkins performing roles. The Court decided that the defendants were liable because the work done did not meet the policy standard and/or the standard required by the Consumer Guarantees Act. The Court did not award any general damages. Based on the written agreements between IAG and Hawkins, Iag was required to indemnify QBE for $260K of the judgment. This is an excellent result for homeowners. Likely to be appeals.
The recent High Court judgment 15 September 2020 in the UK test case of The Financial Market Authority v Arch Insurance (UK) Ltd & ors [2020] EWHC 2448 (Comm) is all bad for insurers of business interruption insurance claims in NZ. It says that disease extensions provide cover as do some Government authority extensions, but most importantly it says that the case of Orient-Express Hotels Limited -v- Assicurazioni Generali S.p.A. [2010] EWHC 1186 (Comm) that insurers rely on to limit liability is wrong.
FCA is the regulator of the insurers in the UK. It brought a test case on various specimen wordings by underwriters of business interruption insurance arising in the context of the Covid 19 pandemic. The trial took place over Skype in front of a 2 Judge divisional court. It considered 21 lead policies underwritten by 8 insurers. 700 types of policies by 60 insurers are affected by the test case.
The test case was a policy interpretation exercise. It considered the application of policy clauses about indemnity for disease, government authority, trends clauses and causation. Firstly it looked at disease clause extensions that provide cover for business interruption arising from the occurrence of a notifiable disease within a specified radius of the insured premises. It said that there needs to be a causal connection to the business interruption, but less than proximate/but for causation. It is enough if there is a case within the required radius.
It looked at hybrid clauses – disease combined with government restrictions. Inability to use following restrictions following disease. Must be enforceable restrictions. Guidance is not enough.
It looked at prevention of access clauses. This is prevention of access by government restriction. Prevention is greater than hinderance. It must be legally enforceable restriction.
The final issue was causation. Insurers relied on the Oriental Express case – OEH owned a hotel in French quarter of Louisiana damaged by Hurricane Katrina. Since hurricanes damaged the rest of New Orleans OEH still would have suffered loss even if hotel was undamaged. So the Court then said Orient Express would have suffered the business loss even if its own building was not damaged. Adopted “but for” causation. The Court now said Orient Express did not apply and was wrongly decided. It adopted too narrow a view of insured peril. The insured peril was damage and hurricane. So the building damage and other hurricane effects could not be excluded.
Hopefully this case encourages more people to bring BI claims against insurance companies.
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.
