In Myall v Tower Insurance Ltd  NZHC 528 the High Court (Dunningham J) considered whether an insured should account for interest to the insurer on a partial claim payment; whether Tower must pay the full replacement value in cash now and any interest payable on the full replacement value fixed by the Court. Myall insured his house at 81 Ainsley Terrace, Christchurch for a floor area of 650m2. The house was damaged beyond repair in the earthquakes. It turned out the house was actually 799m2. After hearings in the High Court and Court of Appeal the full replacement value was fixed/agreed to be $5,273,021.71. Tower made interim payments of $1,359,000 in January 2012 and $1,612,644.12 in April 2013. It asked the Court to order Myall to account for interest of $431,138.71 on the part payments when/if Tower ultimately paid full replacement value. The Court declined to order interest as the policy did not provide for it and Tower did not specify it before it made the payments. Mr Myall said that because Tower had elected to cash settle it was liable to pay now even though Mr Myall has not replaced the house. The Court disagreed and said that the election was made under the policy which required the insured to reinstate, or replace, the house before payment. The Court did not consider the argument that any replacement house had to be in NZ. It did not award interest on the full replacement value. The judgment also records that Mr Myall is to pay Tower $32,000 for costs on the first High Court hearing.
In Richmond Hill Holdings Ltd v IAG New Zealand Ltd  NZHC 380 the High Court (Lester AJ) refused to enter summary judgment against IAG for cash settlements on 2 properties where the owners claimed that IAG was estopped from resiling from its promises in letters September 2013 that IAG would cash settle based on rebuild costings by a named quantity surveyor. IAG later said that it would cash settle, but exclude from the cash sum amounts for retaining walls, demolition and professional fees until they were incurred. The Court decided that IAG had represented that the cash settlement figure would be the rebuild cost without exclusions, however, it was uncertain of reliance on the representation(s) by the owners and decided that it was not shown that would be unconscionable for IAG to change its position. So the claim continues.
The application of the 6 year limitation period under the Limitation Act(s) to claims arising out of the Canterbury earthquakes has resulted in differing positions by insurers and EQC as to how they will respond to claims. Some take the view that the 6 year period starts on the date of the property damage; whereas others say that it is not until there is a denial of liability or purported settlement. In Globe Church Incorporated v Allianz Australia Insurance Ltd & anor  NSWCA 27 the New South Wales Court of Appeal by a 3:2 margin said that the cause of action accrued on the damage to the property. This was supposedly consistent with the UK position. The Court expressly identified that there could be circumstances where liability had a pre-condition. It is arguable that in relation to an insurer it is a pre-condition that EQC meet its liability.
The High Court (Davidson J) decision in Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Co Ltd & anor  NZHC 277 considered whether cracks to a concrete slab were “damage” under a material damage policy; what was required to remediate the cracks, and what the insurers were liable for when repairing insured earthquake damage also affected undamaged property. The buildings at issue were Rydges and the adjoining carpark. Each was damaged, but not destroyed in the February 2011 earthquake. The policy required restoration of the damaged portion of the property to a condition substantially the same as, but not better or more extensive than, its condition when new. There was agreement that there were pre-earthquake slab cracks and slab sagging. The insurers accepted that exterior cracks of .3mm and interior cracks of .4mm were damage. Insurers said that the insured had to prove damage crack by crack. This required proof that the earthquake caused the crack and the crack involved physical change to the extent that it impaired capacity with engineering consequences compared with its pre-earthquake condition. The Court decided that the policy required assessment of portions of the property- not crack by crack. So experts had to look at portions of the property ie. there may be parts with multiple cracks of lesser width. This required engineering judgment. The Court said that repair of each crack in the top horizontal concrete element required epoxy injection over the full length of the crack. Standard industry practice is to repair cracks of widths .2mm and above. Pre-existing cracks suffered loss of strength as a result of being worked during cyclic loading. A degree of loss of aggregate interlock was probable and the cumulative effect may constitute impairment so as to be damage.
In Bruce & ors v IAG New Zealand Ltd  3444 the High Court (Mallon J) decided that IAG had not complied with its obligations to reinstate the earthquake damaged house to “as when new”. So it is liable to pay the costs of reinstating the house and/or loss in value of the house by reason of certain defects. Quantum is to be determined at a later hearing. IAG originally spent about $1.4M to rebuild the foundation, but post work the floor level differential was 46mm and there were 8 areas with slopes of more than .5%. The Court confirmed that where an insurer elects to repair that the policy becomes a repair contract and the insurer is liable in damages. The standard of repair was to be an equal condition as it was when it was built in 2006. The owners claimed general damages for distress, inconvenience and mental anguish caused by IAG’s conduct. IAG said that general damages are not available in New Zealand for breach of an insurance obligation. The Court found that the Bruces’ were entitled to general damages that were to be quantified at a later hearing.
Lyttleton Port settled its insurance claims against its insurers for about $450M for earthquake damage caused by the 4 September 2010 earthquake. It then sued its insurance broker, Aon, claiming a further $170M alleging that Aon was negligent in not obtaining full replacement cover of the Port’s assets without sub limits. Aon joined Colliers and Opus as third parties. Aon also asked the court to join as a third party the Port’s solicitor, Tony Paterson, alleging that he had failed to give advice to the Port about the relevant insurance policy. The High Court twice refused to join Mr Paterson. In Lyttelton Port Company Ltd v Aon New Zealand & Ors  NZHC 2809 the Court granted Aon leave to appeal to the Court of Appeal.
The Court of Appeal decision in Joint Action Funding Ltd v Eichelbaum  NZCA 249 said that for a person to recover costs under the High Court Rules that person needed to have personally incurred those costs with a lawyer and been invoiced for them by that lawyer. JAFL was concerned with a claim for costs by a barrister acting for himself. Unsuccessful defendants in claims brought via litigation funders have argued since JAFL that because the legal costs are not incurred by the actual party then no costs are recoverable. Fortunately the Supreme Court in McGuire v Secretary for Justice  NZSC 116 has said that JAFL was wrongly decided.
In Fitzgerald & ors v IAG New Zealand Ltd  NZHC 3447 the High Court (Gendall J) considered whether IAG’s proposal to epoxy rubble foundation cracks and jack/pack piles/perimeter to relevel a floor with a differential of 58mm complied with its insurance policy obligation to reinstate the earthquake damaged house to a condition as similar as possible to when it was new. The Fitzgeralds own 111 Innes Road, St Albans. It is TC3. The house built in the 1920’s is 2 storey with timber frame, weatherboard cladding and metal roof built on an unreinforced rubble perimeter foundation with internal piles. After the earthquakes the floor level differential is 58mm in the house. The earthquakes also caused some cracks to the perimeter foundation. The Court decided that the policy standard of”when new” involved a comparison to the state of the house when it was built. So any foundations must provide that level of support. Gendall J decided that repairing the foundation cracks with epoxy met the policy standard and so did the proposed jacking and packing of piles and perimeter. This would not meet the standards for a newly built home, but met the insurance policy standard that required the comparison to as built in the 1920’s. The conclusions were premised on IAG being able to obtain building consents (or exemptions) and code compliance certificates for the work. If it could not do so, then IAG would be required to replace the entire foundation.
A demolition contractor, Nicon, has sued Tower Insurance/Stream Group for allegedly unpaid fees on post earthquake demolition work and quote provision. Nicon claims $350 plus GST for each of the 1083 quotes it gave to Tower/Stream ($379,050). It also claimed that Tower was obliged to give it the work for any actual demolition carried out on the quoted jobs. In Nicon Ltd v Tower Insurance Ltd & anor  NZHC 2005 the High Court (Gendall J) decided four preliminary questions about the alleged agreement with Tower/Stream. The Court decided that a written heads of agreement between Nicon and Stream was binding and it required Tower/Stream to offer Nicon first the demolition work on jobs it quoted on. Tower/Stream did not do so. The Court decided that the evidence did not prove the existence of a $350 quote fee. The claim likely continues now as one for loss of profit by Nicon on demolition jobs that Nicon was not given in breach of the agreement.
In Hoju & anor v EQC & anor  NZHC 2138 the High Court (Osborne AJ) awarded costs of $12,934 and disbursements of $15,537.28 in favour of Southern Response Earthquake Services Ltd against homeowners that claimed to recover repair costs of $472,604 from Southern Response, but later accepted the claim was under cap and discontinued against Southern Response. EQC quantified repairs at $12,154.60 and Southern Response at $13,442. For the homeowners their lawyer, Stephen Rennie (Rhodes & co), argued that the homeowners should not pay any costs because deciding costs should wait until the claim against EQC is determined and that EQC and Southern Response should have used the same lawyer. Mr Rennies also wrongly suggested that Southern Response had not engaged with the homeowners prior to the court proceedings and that the claim was necessitated by limitation. All of these arguments failed. Southern Response recovered all disbursements on experts (less GST) and costs on 2B basis apart from band A for 4 conference memoranda and discovery.
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