6th April 2013
A Christchurch couple appear to have won the battle to have their insurer rebuild their house but lost the war to give all red-zoners a similar deal.
The High Court has ruled Tower Insurance should pay Matt and Valerie O’Loughlin a yet-to-be determined full replacement value of their Dallington home, after the pair disputed their provider’s initial claim it only needed to pay $138,000 for repairs.
However, Justice Asher stopped short of a landmark decision that could have led to all red-zoners successfully arguing for the full insured value of their properties.
He ruled that “Tower is bound to make a payment for the full replacement value of the O’Loughlins’ house on another site, calculated at its option on a rebuild or replacement basis”.
Tower’s proposed repair method of injecting a grout into the damaged concrete base of the house did not meet its policy obligations, he found.
“[It] may well encounter serious problems and not secure a building consent.”
Counsel for the O’Loughlins had argued because the house had been red-zoned it was, by definition, not repairable.
However, the judge found that “the creation of the red zone did not constitute or cause physical loss or damage . . . to the O’Loughlins’ house”.
If Justice Asher had ruled the zoning itself caused loss, it could have triggered a flood of red-zoners arguing repair settlements from their insurers were invalid, and policies should be paid out in full.
The O’Loughlins had sought $620,000 in relief but the figure was based on rebuilding on their red-zoned Dallington section and should have been calculated for a “sound site” elsewhere at a maximum of $540,000, the judge ruled.
He asked for submissions on the issue from both sides, who planned to meet to discuss a settlement amount.
Valerie O’Loughlin last night said she was “pretty chuffed” with the decision.
“We’ve definitely been vindicated. We’ve always maintained that the house couldn’t be repaired, especially not at the hypothetical price Tower gave us,” she said.
The couple had been flooded with phone calls from their supporters yesterday.
Lawyer Grant Shand said the ruling was “very positive” for his clients.
“They’re going to get a replacement house, not a lesser amount of money based on an unproven repair.
“It essentially said the replacement policy means replacement and if an insurer wants to try to settle for less it’s going to have to stack it up.”
Tower group managing director Rob Flannagan welcomed the decision.
“We’re not uncomfortable with [full replacement settlement] at all,” he said. We would hope we could reach an agreement much more quickly than that [the six-week time frame].”
“Tower will just pay it.
“They’ll think, ‘so the court said we can’t do grout injection on this property. . . that has no precedent value, it relates only to this property . . . [if] we have to pay another $120,000 or whatever it is, we’ll pay it’.”
The two sides have six weeks to provide submissions.