Inicio Ltd v Tower Insurance Ltd

• Jurisdiction: New Zealand
• Judge: Paulsen
• Judgment Date: 07 February 2020
• Neutral Citation: [2020] NZHC 90
• Docket Number: CIV-2019-409-000176
• Court: High Court

Between

Inicio Limited

Plaintiff

and

Tower Insurance Limited

Defendant

[2020] NZHC 90

Paulsen

CIV-2019-409-000176

IN THE HIGH COURT OF NEW ZEALAND

CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA

ŌTAUTAHI ROHE

Civil Procedure, Consumer, Insurance — claim for damages for breach of insurance policy — when does time start to run — acknowledgment or part payment — Fair Trading Act 1986 — Limitation Act 2010

Appearances:

R J Hargreaves for Plaintiff

M C Smith and H E Savage for Defendant

JUDGMENT OF ASSOCIATE JUDGE Paulsen

This judgment was delivered by me on 7 February 2020 at 12.30 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Introduction

1 The plaintiff, Inicio Ltd (Inicio) owned a house damaged beyond economic repair in the 22 February 2011 earthquake. The house was insured with the defendant, Tower Insurance Ltd (Tower) for its full replacement value. Tower contributed its assessment of its full replacement value liability under the policy towards the building of two new units (the units) on the same property for Inicio under a construction contract dated 18 September 2012. The units were completed in April 2013. Inicio says that Tower undervalued its insurance claim. It seeks to recover as damages the unpaid balance of what it alleges was the full replacement value of the house.

2 Tower applies for summary judgment. Tower argues that Inicio's causes of action are time-barred and, in so far as that is not the case, the allegations made do not give rise to a valid claim. Inicio opposes the application.

Facts

3 Inicio was the owner of 531 Cashel Street. The house on the property was extensively damaged in the 22 February 2011 earthquake. It was insured with Tower. The terms of Inicio's Provider Rental House policy with Tower included:

• (a) The insured property was Inicio's “house”:

  House means the domestic building(s) shown in the certificate of insurance you own at the situation, including its fixtures and fittings (other than floor coverings not permanently fixed or glued in place, blinds and drapes), walls (other than retaining walls), gates, fences, underground and overhead services extending to the public mains, permanent swimming pools and spa pools and any other domestic structure on the same site (other than metal driveways or paths).

• (b) The “house” was insured against “sudden and unforeseen accidental physical loss or damage” save as excluded under the policy. The “house” was insured against natural disaster damage on the following basis:

  If your house suffers natural disaster damage, we will pay the difference between the amount paid under EQCover and the sum insured shown in the certificate of insurance.

• (c) The terms that applied to settlement of claims under the policy included the following:

  We will arrange for the repair or replacement or payment for the loss, once your claim has been accepted.

  We will pay either:

  • • the full replacement value of your house at the situation; or

  • • the present day value;

  As shown in the certificate of insurance.

  […]

  In all cases:

  • • if, as a result of changes in government or local body by-laws, you are not able to rebuild or repair the damaged part of your house to the same specifications as before the loss or damage occurred, we will pay any additional costs incurred to rebuild the damaged part; […]

  • • we have the option whether to make payment, rebuild, replace or repair your house; […]

  • • we will pay architects', engineers' and surveyors' fees in respect of the rebuilding or repairs where authorised by us;

  • • we will pay the cost of demolition and removal of debris including the contents;

  • • we will use building materials and construction methods commonly used at the time of loss or damage; […]

  We are not bound to: […]

  • • pay more than the present day value if you have full replacement value until the cost of replacement or repair is actually incurred. If you choose not to rebuild or repair your house we will only pay you the present day value; […]

  • • pay the cost of replacement or repair beyond what is reasonable, practical or comparable with the original;

  • • repair or reinstate your house exactly to its previous condition.

  […]

  Full replacement value means the cost actually incurred to rebuild, replace or repair your house to the same condition and extent as when new and up to the same area as shown in the certificate of insurance, plus any decks, undeveloped basements, carports and detached domestic outbuildings, with no limit to the sum insured. […]

4 In August 2011, Tower assessed the house a total loss. The parties exchanged rebuild estimates. In September 2012, Tower assessed the full replacement value of the house on a notional basis to be $321,797. Tower agreed to contribute this amount towards the cost of the units. As Inicio was not rebuilding the house this was beyond what Tower was required to do under the policy.

5 Initially, Stonewood Homes was to be the builder of the units and the project was to be managed by Tower's external loss adjuster and project manager Stream Group. However, ultimately, John McMillan Builders was contracted to undertake the building works. The construction contract was signed on 18 September 2012. It provided for a build cost of $546,295. Tower would contribute $321,797 (including EQC payments of $128,686) and Inicio would contribute $224,498. 1

6 Inicio paid its contribution and EQC payments to Tower. Tower managed the payments to the builder. Some minor variations were approved. The practical completion certificate was issued on 14 April 2013. Tower did not require Inicio to sign a final settlement and discharge agreement.

7 The evidence of Catherine Dwan, a director of Inicio, is that before the construction contract was signed the company's directors expressed concern that Tower's costings were deficient and that Bill Ogg, of Stream Group, told them they should not complain as they were “lucky to get a new house out of it” and “don't even think about it, that's all you're getting” (or words to that effect). Mrs Dwan alleges that Mr Ogg also said that Inicio's claim would only be resolved and settled once construction was complete. This evidence, concerning what Mr Ogg said, is disputed.

8 In December 2015, Tower issued a public statement concerning claims arising out of the Canterbury earthquakes. It stated that Tower's interpretation of the law was that the six-year limitation on legal action applied from the time a claim was “settled

or rejected” rather than from the “original incident”. Tower said it would not plead a limitation defence for any claim relating to the earthquake events where proceedings were filed in the courts before 4 September 2017

9 On 22 August 2017, Tower received an email from Mrs Dwan, that Inicio did not believe that its claim had been settled in full by Tower. On 17 October 2017, Mr and Mrs Dwan met with Tower. Following the meeting, Tower instructed an independent quantity surveyor to provide a rebuild estimate for the house at 2012 rates. Based on this, Tower offered Inicio a further $55,030 in settlement of its claim.

10 Tower formally made its offer in a letter of 2 February 2018. I set out the letter below in full:

TOWER

Insurance

2 February 2018

Customer reference: 21373112

Catherine and Matthew Dwan

PO Box 76–232

Northwood

Christchurch 8548

Dear Catherine and Matthew,

Claim reference: 27907031

Description of damage: Earthquake damage at 531 Cashel Street, Linwood,

Christchurch

We have reviewed your concern that your claim for earthquake related damage to your property at 531 Cashel Street, was settled (by way of a managed rebuild) without taking into account the special features in the damaged property. These special features relate to ornate/leaded windows, rimu joinery and other features that were documented in a report by AP Design dated 16 May 2011 and supplemented with a document that you provided to us at our meeting on 17 October 2017. Specifically you have noted that reinstatement of these features was not available to you by pursuing a Stonewood Home rebuild as was offered to you by Tower.

Following our meeting with you we have engaged a quantity survey, Rapid Project Solutions, to itemize and quantify the special features that were not included in the Stonewood Home cost that formed the basis of Tower's settlement to you. These items have been costed with reference to rates that were current in 2012. The Rapid Project Solutions report is attached, and quantifies these additional features at $55,030.08.

Based on the legal advice we have received this represents the extent of Tower's outstanding liability with your claim. Please note we have not factored in consideration for deduction of additional professional fees that we believe we are entitled to on the basis of the additional fees incurred for design of the two replacement units.

Tower is prepared to make payment to you of $55,030.08 in full and final settlement for the earthquake related damage to your property at 531 Cashel Street. The offer is open until 23 February 2018.

We enclose a discharge document and Deed of Assignment of EQC Claims for you to sign and return if you wish to accept the offer. These documents contain other important terms of the offer and Tower encourages you to take independent legal and other professional advice before accepting or rejecting the offer.

We look forward to hearing from you whether you wish to accept our cash settlement and to resolving your claim.

Yours sincerely,

“Emily Riley”

Emily Riley

Claims Settlement Manager — TOWER Insurance

Ph: 0800 369 939 ext 36651

Emily.Riley@tower.co.nz

11 Tower extended the offer on three occasions. It was not accepted. Tower withdrew the offer on 28 March 2018. In a letter of the same date, Tower made a further settlement offer of $28,216. Tower reduced its previous offer by removing...