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 Bruce & ors v IAG New Zealand Ltd  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  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  to  of the judgment.
In Birchs Road Ltd v EQC & anor  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  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 Settlers Crescent Partnership v IAG New Zealand Ltd  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  NZHC 2341 ordered the owners to pay costs of $51,067 together with disbursements of $111,147.76. IAG had claimed $297,621.72.
In Dodds v Southern Response Earthquake Services Ltd  NZHC 2016 the High Court (Gendall J) ordered Southern Response to pay Dodds $178,894.30 plus interest from 23 December 2013 because Southern Response misrepresented the cost to rebuild the house at 9 Errol Lane, Huntsbury damaged in the earthquake on 22 February 2011. Southern Response provided a Detailed Repair/rebuild Analysis to Dodds that excluded demolition, professional fees and contingency that totalled $895,937.78 whilst at the same having a full costing at $1,186,920.75 that it did not provide to Dodds. Dodds entered into a settlement agreement based on the lesser figure. The High Court decided that SR was guilty of misrepresenting the rebuild cost and engaging in misleading and deceptive conduct. It also said that Southern Response breached good faith obligations. The High Court ordered Southern Response to pay the difference in the 2 costings less the cost of demolition that Southern Response paid and some Arrow costs. It did not award general damages.
In Tower Insurance ltd & anor v Nicon Ltd  NZCA 332 the Court of Appeal dismissed Tower’s appeal of a High Court decision that it was obligated to offer demolition work to Nicon where Nicon had done a demolition assessment. Nicon said that it did 1376 assessments, but was only allocated 186 demolition jobs. It claimed lost income of more than $4M from Tower/Stream. The issue was whether a written heads of agreement between Nicon and Stream/Tower was a legally binding contract. Tower said it was not binding. The High Court and Court of Appeal disagreed. There will now be a trial about the amount of money Tower/Stream must pay Nicon for lost demolition work.
Here is the Grant Shand EQC & Insurance Newsletter #22.
In Biggins & anor v Southern Response Earthquake Services Ltd  NZDC 25609 the District Court considered an application by an insured home owner for summary judgment for the cost of a carport that was not included when SR rebuilt the insured’s house. There were also claims for general damages and the owners’ share of liability for a common driveway. The insured house had a carport. The house rebuilt by Southern Response after the earthquakes did not. SR said it was not liable because the cost of a carport was included in the costing for the rebuilt house. Southern Response lost. There were no documents that supported the SR position. SR also lost on the driveway share issue, but avoided a liability for general damages.
Fitzgerald & ors v IAG New Zealand Ltd  NZHC 3447 was a High Court judgment by Gendall J about the repairability of a rubble foundation damaged in earthquake(s). The Fitzgeralds appealed the judgment to the Court of Appeal, but also applied to have Gendall J recall his judgment on the grounds that the Court had relied upon incorrect evidence by IAG’s expert engineer, Craig Lewis, about similar repair strategies being performed on other houses in Christchurch. Apparently one house relied upon by Mr Lewis was TC2 and not TC3 and did not get a building consent as an exemption was granted. In Fitzgerald & ors v IAG New Zealand  NZHC 632 The High Court (Gendall J) dismissed the recall application. The judgment says that it relied on evidence other than from Mr Lewis and expressly referred to the failure to cross examine IAG’s builder who said he had seen the repair done 20 times and evidence from Fitzgerald’s own geotechnical engineer about consent. It also noted it would generally not be appropriate for a Court to recall its judgment once an appeal had been lodged.