Napier Council Wins Insurance Appeal

In Local Government Mutual Funds Trustee Ltd v Napier City Council [2023] NZSC 97 the Supreme Court dismissed the LGMFT appeal about its liability for a $12M building defects settlement paid by the Council about Waterfront Apartments.  The relevant insurance policy excluded liability from weathertightness defects.  The apartment owners alleged both weathertightness defects and non-weathertightness defects.  About $4.4M of the $12M paid related solely to non-weathertightness defects.  In this situation, where the Council faced liability for separate and divisible loss arising from breaches of the weathertightness and non-weathertightness aspects of the Building Code, only the former are excluded from cover notwithstanding that the claim was presented on a mixed basis.  The Wayne Tank principle that where there were two “equally efficient” causes of the loss, one within the policy and the other excluded, the exclusion applies.does not assist RiskPool here.  It is irrelevant to liabilities which, like the fire defects, result solely from non-weathertightness issues simply because those liabilities are a result (and only a result) of a non-excluded cause. In contrast to the position in Wayne Tank, it is possible in this case to apportion loss as between that caused by weathertightness (or by a mixture of weathertightness and other issues) and that not caused by weathertightness.