sign up log in
Want to go ad-free? Find out how, here.

As quake claim desperation sets in, recent Court decisions are favouring claimants. Andrew Hooker says insurers should follow the law

Personal Finance
As quake claim desperation sets in, recent Court decisions are favouring claimants. Andrew Hooker says insurers should follow the law

By Andrew Hooker*

While the insurance company and government spin doctors paint a rosy picture of progress in the Christchurch rebuild, on the ground people are losing their patience with insurance companies and EQC.

The Courts have utilised some helpful processes to expedite cases.

But the backlog grows nevertheless.

As set out in an earlier article, insurance companies are continuing to invent the most “ingenious” ways to repair the unrepairable.

Some recent examples include:

1. In a Duplex home in which two separate dwellings are divided only by a concrete firewall with each half insured separately, one insurer declared its half damaged beyond repair and the other insurer declared that it could repair its half.  This of course raises the interesting question of how you repair “half a house” and comparisons with those famous NZI “half a pyramid” television advertisements are irresistible. 

2. An insurer who stated that a house that had subsided 40mm did not need to be re-levelled because the Department of Building and Housing say that such subsidence is within acceptable tolerances.  Of course, the insurance policy in question was underwritten by an insurance company not the Department of Building and Housing, and it is the policy that states that the insured is entitled to get “new for old”.  The insurance company has failed to respond to requests for examples of new houses that were built with 40mm out of level floors.

3. One commercial insurer that has rejected documented engineering and building evidence as to the nature of damage and relied on somewhat dubious extrapolations from aerial photographs to reject evidence of damage in a particular earthquake. 

4. Many cases in which insurers are refusing to pay for a rebuild of a commercial building because of the insured has not started rebuilding, notwithstanding that the insurer has refused to accept the insured’s scope of works. 

These are just some examples. There are many to choose from.

Many insurance companies have moved from considering ways to decline claims (such as the “depopulation arguments”) to considering ways to settle claims for as little as possible. 

In the recent McLean v IAG case, IAG (that is NZI) tried to argue that the common law principles of indemnity applied to a claim where the policy specifically defined the basis of settlement.

Insurers have for many years repeatedly enhanced the policy coverage, presumably in an effort to obtain market share, but when it comes to paying out they want to ignore these benefits and slip back into the old 19th century insurance principles they abandoned years ago.

In this particular case IAG tried to argue that a calculation of “Present Value” which was defined as cost of replacement less depreciation did not include in its calculation the unavoidable architects and engineers’ costs.  IAG simply wanted to depreciate the physical build cost.

The High Court rejected that argument and ruled in favour of the insured. 

In another case, widely publicised, the O’Loughlin v Tower Insurance case, the High Court considered a number of important principles. In particular, the Court rejected an argument that the mere fact that a property was within the red zone amounted to damage.

But the High Court ruled that when an insurance company submits to its customer a proposal to reinstate damage, it must do more than provide a hypothetical or unproven proposal.

It must provide a proposal that is going to succeed and, most importantly, obtain the necessary consents.

This will hopefully quell the tide of cases in which insurance companies, knowing they will never have to repair because the property is in a red zone, propose repairs that will simply never succeed or are impossible.

Perhaps the insurer with the “half a house” problem might like to read this decision carefully.

Those who visit Christchurch regularly to assist people with insurance problems feel the mood becoming more and more tense.

People are either crumbling and accepting low-ball offers, or digging in for the big fight.

The Courts have stepped up and streamlined the processes to resolve these disputes, and people need to know that they do not have to accept the proposals that are put to them.

If the insurance companies promise the world, that is what they must deliver.


*Andrew Hooker practices as a specialist insurance lawyer in Albany on Auckland's North Shore. He is also director of Claims Information Specialists Ltd, an insurance information website.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


As always Andrew, good work.


I understand new policies for those in the wgtn marl region include clauses making the homeowner liable for the first 5% of damage costs resulting from an this true...what does it mean...are people being told...are all the companies acting the same...who made this policy up????


The Courts have stepped up and streamlined the processes to resolve these disputes, and people need to know that they do not have to accept the proposals that are put to them.


Andrew your sentiment belong to era of morality and attention to duty that no longer applies- this government will legislate it's way around access to legal redress in the courts.


Stephen Hulme: big difference. that reference you link to represents the farce that is the government band-aiding its own mess that it created for itself. The legislation limits the liability of the Government.

It would be very difficult for the New Zealand Government to legislate away centuries of common-law principles and make a mockery of Lord Justice Denning


What is the role of the Insurance Council of New Zealand in all this shemozzle?
They have been totally silent. Not one peep


What does the Insurance Council do?
The Insurance Council plays an active role in representing the insurance industry. Our members are all licensed under the Insurance (Prudential Supervision) Act 2010 and are signatories to the Fair Insurance Code that requires insurers to act ethically. The Council also performs an important role in informing and educating consumers about key insurance issues and risks.


The Insurance Council is a lobbyist. Compare the recent pronouncements of the NZ Bankers Association who are vociferous by comparison.


Nice article Andrew, the confidential settlement by Tower with the O'Loughlins hides the questions of Interest and Damages, will you include the relevant facts that would enable much delayed claims to be enhanced by interest at least and what would constitute a breach of contract or other situation to incur damages?


Exactly - Damages - How and what neeeds to be shown for damages to be awarded?

We know that this is a complex issue but an award of damages would be a game changer for many in ChCh.

Andrew, what situation/s do you think a Court would find difficult to decline a award for damages if asked?


You didnt know this did you

The Reserve Bank of New Zealand is the prudential regulator and supervisor of all insurers carrying on insurance business in New Zealand and is responsible for administering the Insurance (Prudential Supervision) Act 2010.


Wherever the RBNZ is involved there is sure to be a problem somewhere