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EQC & Insurance Newsletter #4 - December 2014

EQC Appeals Cost Decisions

In three separate High Court judgments the High Court has ordered EQC to pay legal costs and disbursements to homeowners who had commenced court proceedings against EQC and insurers during which EQC changed its position and paid its cap liability.  Hopefully all 3 proceedings are heard by the Court of Appeal in March 2015

No Supreme Court Appeal for reinstatement cases

In QBE Insurance (International) Ltd v Wild South Holdings Ltd [2014] NZCA 447 the Court of Appeal dealt with 3 appeals about the interpretation of reinstatement clauses in commercial insurance policies.  QBE Insurance filed an application for leave to appeal to the Supreme Court, but later abandoned it.  

Vero Insurance did not seek leave to appeal.  Lloyds Underwriters applied for leave to appeal to the Supreme Court, however, in the judgment released 16 December 2014 in Certain Underwriters at Lloyds & anor v Crystal Imports Ltd [2014] NZSC 186 the Supreme Court refused leave to appeal.  The underwriters wished to argue that the effect of the reinstatement clause is that cover reinstates only from the date on which payment is made by the insurer for the loss, rather than from the date of the event which caused the loss, as the Court of Appeal found.  

The Supreme Court decided that the argument did not meet the test(s) required for leave in that there had been no miscarriage of justice and there was not point of principle or issue of commercial significance.


Avonside Holdings
After losing in the Court of Appeal in Avonside Holdings Ltd v Southern Response Earthquake Services Ltd [2014] NZCA 483, Southern Response filed an application for leave to appeal to the Supreme Court.  Both parties have now filed submissions with the Supreme Court and it will now decide the leave application.  Over 2 months after the Court of Appeal judgment and after service of a statutory demand Southern Response paid the increased judgment sum by paying a further $215,308.66.  Notwithstanding the comments from the Court of Appeal, Southern Response then refused to pay any costs for the High Court hearing.  By a judgment on 19 December 2014 the High Court has ordered Southern Response to pay a further $83,637.43 in costs and interest.  Hopefully it pays the award promptly.
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.
EQC Declaratory Judgment
EQC asked the High Court to make various declarations in relation to whether a property’s increased vulnerability to flooding after the earthquake(s) was land damage and, if so, approval to settle the claim by paying the diminution in value of the property rather than the cost to remediate the damage.  The declarations changed over time and by the end of the Court hearing on 31 October 2014 there were also declarations sought that a property’s increased vulnerability to liquefaction was land damage; that the vertical movement of a house was land damage and not building damage and that the only method of claiming against EQC was by judicial review.  EQC originally chose only to involve the Insurance Council as a defendant.  The Christchurch City Council and Southern Response Earthquake Services Ltd were later added as defendants and two intervenors became involved to represent the interests of actual Christchurch homeowners affected by EQC’s proposals.  These were the Flockton Cluster Group represented by Lane Neave (Duncan Webb) and Donna Culf, a red zone property owner represented by Grant Shand.     By the judgment released 10 December 2014 in EQC v Insurance Council of NZ Incorporated [2014] NZHC 3138 a full Court of the High Court (Heath, Kos & Gilbert JJ) decided that EQC could have policies on IFV and ILV, but the Court would not endorse any particular policy.  It decided that IFV and ILV was land damage under the EQC Act.  It also decided that a property’s increased vulnerability to flooding by vertical land movement was not building damage and that EQC could settle land claims by paying diminution in value where reinstatement cost was not the appropriate measure.  Most importantly for the many claimants currently with claims against EQC in the Court system it decided that homeowners could sue EQC as a normal claim to enforce the rights under the EQC Act.  It is currently unknown whether any party will appeal.

Noor Hamid - Solicitor

Noor graduated with BA/LLB (hons) from the University of Auckland in 2013.  She was admitted December 2013. 

Before working at Grant Shand Barristers and Solicitors, Noor worked at an Immigration Law Firm in Epsom, Auckland. In 2014 Noor completed her LLM in International Law.

I would like to take this opportunity to thank you for your support in 2014. I wish you a Merry Christmas and a Happy New Year - enjoy the summer break - Grant Shand