The first of the NZ court decisions arising from the Canterbury/Christchurch earthquakes handed down.

Many of us have been waiting with interest to see how the New Zealand courts deal with a number of issues that have arisen out of claims following the New Zealand earthquakes.

The first decision centres on a material damage issue. The case is Ridgecrest NZ Ltd v IAG NZ Ltd [2012] NZHC 2954. The question that was being determined was whether an Insured was entitled to claim for damage caused by an earlier earthquake and which had not been repaired could be claimed in addition to the total Policy Limit which was claimed and paid by the insurer after the building was all but destroyed in a subsequent earthquake.

Justice Dobson found against the Insured. His position was that although the strict contractual terms of the IAG NZ policy meant that technically the Insured was entitled to treat each loss as a seperate event and the Limit of Liability was available after each happening due to an Automatic Reinstatement clause, the obligation of an insurer to meet the first claim was frustrated by the subsequent earthquake and damage. Under these circumstances, the judge found that the Insured was not entitled to any further payment beyond the limit of the Policy.

It is going to be interesting to see if this decision is appealed. The Insured may not do so in view of the costs associated with such an appeal but there are a number of other Insureds and Insurers that have been watching this case with interest. If it is not appealed then insurers will naturally follow this ruling.

While this matter is interesting, the one of greater interest to me centres on the issue of closure by public authority and whether those insurers who have failed to pay the full claim for loss of rent or loss of insurable gross profit but rather a much smaller sub-limit where the building owned or used by the Insured was destroyed or made untenantable in the earthquake are correct. A decision on this issue will be of great interest all around the world as many feel that the way the single judge ruling in the Orient -Express Hotels Limited v Assicurazioni General S.p.A (UK Branch) Trading as Generali Global Risk [2010] EWHC 1186 (Comm), is being incorrectly applied in New Zealand.

You can obtain a copy of the Orient-Express Hotels judgment via this link: OEHvGenerali.

 

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