Insurance lawyer takes aim at litigious claimants who 'provide the insurance industry with ammunition, and judges with scepticism'

By Andrew Hooker*

As lawyers representing people suing their insurance companies, we are often critical of insurance companies and their delay or other tactics to defeat what we see as legitimate claims. In particular, in Christchurch, many hundreds of court cases are being contested through the High Court in which there are disputes over repairs or rebuilding of houses damaged in the earthquakes.

Certainly, the approach that we take is that if you present a well-reasoned and evidentially supported case, there is no need for it to go to trial, because they will usually be resolved without the cost and delay of a full Court hearing. Less and less of the simple residential cases are going to trial. This is primarily because most of the legal principles have been determined by the Courts over the years since the earthquakes, and both insurance companies and lawyers representing both insurance companies and insured people understand the likely position a judge is going to take on a particular case. 

However, it is always of serious concern to see some of the judgments that come out where according to the information in the judgment, the insured person has taken an unmeritorious or greedy approach to the insurance claims, often driven by other parties who may have a financial interest in the outcome of the case. These do nothing to help the hundreds, possibly thousands, of genuine people who have genuine disputes that need to be resolved. 

Two recent examples of cases that are somewhat cringe-worthy have come to light in recent months. 

The saddest case involves Mr and Mrs Sadat - recent immigrants to New Zealand who had a claim against Tower Insurance. According to the judgment, they claimed for significant damage that they said was caused in the earthquake. But during the trial, evidence was produced of inspection reports carried out well before any earthquakes that identified much of the damage that was being claimed for. In our line of work, we often are faced with claims by insurance companies or EQC that certain damage is not earthquake related because it existed before the earthquake. This can be an area of contention, with evidence often being speculative or unreliable. But when there is an actual building inspection report by an expert that pre-dates the earthquake, it is hard to imagine how anyone could go to Court and argue against this evidence. It must be like the Holy Grail to an insurer.

The case went to Court, and Mr and Mrs Sadat lost in a monumental way. It is unclear from the judgment the basis on which Mr and Mrs Sadat believed that they could overcome that report, but this and other grounds only serve to give a bad reputation to people who are trying to pursue legitimate disputes with their insurance companies. 

In this case, Mr and Mrs Sadat’s expert in Court was severely criticised by the Judge. The Judge described the rationale of Mr and Mrs Sadat’s expert as “neither logical nor professional justified”. The Judge also described the way that the Sadat’s engineer used information from a pre-earthquake report as “both selective and arbitrary” and reflecting “a desire to justify the end conclusion to which he came in favour of the Sadat’s argument”. The Judge further commented that the engineer’s approach was “not consistent with an independent objective assessment of what damage had been done to the home before the September 2010 earthquake”.

In New Zealand, our judges typically are conservative in the way they address the reliability of evidence, and the words that I have just quoted, for a High Court Judge, are strong words indeed.  

Another case is the case of He v The Earthquake Commission and Lloyds. In this case, there was also a dispute about whether certain damage had occurred in the earthquake. The tenant gave evidence to the Court that he had not noticed any change in the levels of the floors as a result of the earthquake and that the shaking in the September 2010 and February 2011 earthquakes did not cause significant damage to the interior of the building. There was a dispute in evidence between the tenant and Mr He.

The Judge noted in her evidence that “on the Sunday afternoon before the hearing, Mr He communicated by mail” with the tenant, saying “I do not mind you giving evidence to the Court, your right, must honest. If you or your brother gives the Court wrong evidence, for the moment you might feel okay on a liability, but I must tell/remind you that EQC might put all the liability to you or ask you to pay all the Court costs ($300,000-$400,000) once fail, talk to your lawyer John first”. 

The Judge noted that Mr He sent a similar email shortly afterwards to the tenant again threatening that evidence “might cost you very big dollars”. He also sent an email to the tenant’s lawyer. The Judge concluded that this action “was consistent with the overriding impression [her Honour] gained of Mr He which was that he appeared to be willing to do whatever was in his power to advance his claim, whether justified by the facts or not”. 

Again, damning comments by a Judge about the conduct of the case by the insured person. 

Needless to say, Mr He’s case against EQC and Lloyds substantially failed. 

I do not pull my punches when it comes to commenting or criticising the way insurance companies operate, and in the way, they treat their customers. I see many cases that illustrate a brazen and sometimes bullish approach to the handling of claims by insurance companies. But when cases come out of our Courts that show such apparently appalling (and frankly amateur) attempts by claimants to pursue what appear to be totally unmeritorious claims all the way through Court, it certainly does concern me. 

There are many suffering and ill-treated people who need a robust judicial system to obtain from insurance companies what they are entitled to. People who bring cases like these do nothing to assist other claimants to obtain justice. All they do is provide the insurance industry with ammunition, and judges with scepticism. 


*Andrew Hooker is the Managing Director of Shine Lawyers NZ Limited practices as a specialist insurance lawyer in Albany on Auckland's North Shore. He also runs an insurance information website - www.claimshelp.co.nz

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3 Comments

from the Sadat case:

"[2] The Sadats were refugees from Afghanistan. In 2006 they purchased what
they regarded as their dream family home at 3 Victors Road, Hoon Hay, Christchurch
for $235,000."

"[298] ...Given the good
faith obligations inherent in an insurance contract, with an appropriate adjustment
for the under-insured area, the Sadats would still have been entitled to $659,488.64
had they been able to prove Tower were liable for a complete rebuild, including the
garage and external paving."

Damn, no wonder the insurance companies are fighting tooth and nail to avoid payouts...

Unfortunately it is fair to say that there have been more than enough of opportunistic, unsound and false EQ claims. But just like all claims for all insurance in general the Insurers are highly geared and experienced in sorting these out. On the other side of the coin though, the average legitimate claimant does not have the expertise and financial resources to combat any Insurer who decides not to play fair themselves.

I'm interested that these recent refugees who presumably arrived with nothing, were able to fund an expensive legal case, especially given they had lost a significant amount of their equity when forced to sell 'as is' , at a heavy discount. Who knows - their lawyer may have taken the case on a contingency or pro bono/social justice basis, the Sadats may have done well in business or got a lucky break or two; good on them if so. But as someone involved in EQ insurance resolutions, it seems to me that it should have been obvious this case had a very low chance of success, even without the benefit of hindsight.

It is common knowledge that CHCH suburban houses being rendered total losses by the September EQ alone (as they claimed - Tower went off risk before February), was rare.

Andrew Hooker stops short of directly criticising these vulnerable recent Kiwis's advisers, confining himself to describing the situation as 'sad' , but I believe further questions should be asked of them.