Tower Insurance & Reinstatement

The Supreme Court in the decision in Tower Insurance Ltd v Skyward Aviation 2008 Ltd [2014] NZSC 185 on 15 December 2014 dismissed the appeal by Tower Insurance about the interpretation/rights under Tower’s home insurance policy.  Tower had sought to impose on Skyward in settlement of its insurance claim either a second hand house chosen by Tower Insurance or to pay as a maximum the value of a comparable second hand house, rather than pay  the full replacement value for the property being the cost to rebuild the insured house.  The Supreme Court decided that where the house is damaged beyond economic repair and Tower has not chosen to rebuild or replace the house Tower’s payment obligations are based upon whether the insured chooses to build or buy another house, but it cannot be liable to pay more than it would have cost to rebuild the insured house on the insured site and if the purchased house costs less that is all that Tower is required to pay.    There is also no requirement that any purchased house be comparable to the insured house.  This was another loss for an insurance company in an appeal court.  It is consistent with the Court of Appeal decision in Avonside Holdings.