Mathieson v Tower Insurance Ltd
| Jurisdiction | New Zealand |
| Judge | Dunningham J |
| Judgment Date | 11 February 2020 |
| Neutral Citation | [2020] NZHC 136 |
| Docket Number | CIV-2019-409-000572 |
| Court | High Court |
| Date | 11 February 2020 |
[2020] NZHC 136
Dunningham J
CIV-2019-409-000572
IN THE HIGH COURT OF NEW ZEALAND
CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA
ŌTAUTAHI ROHE
Contract, Insurance — property damaged in sequence of three earthquakes — whether the maximum sum insured could be claimed once or in each earthquake event — if it could be claimed more than once, whether the market value of the house was an overall cap on the insurer's liability — Canterbury Earthquakes Insurance Tribunal Act 2019
G Jones and L Hill for Plaintiffs
M Smith for Defendant
This judgment was delivered by me on 11 February 2020 at 3.30 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
The plaintiffs own a large, century-old home, known as “Stoneycroft”, which was significantly damaged by three successive earthquakes in the Canterbury earthquake sequence of 2010–2011. They have made claims against their insurer, Tower Insurance Ltd (Tower), in respect of each event, for the cost of repairs, up to the cap set in the policy.
However, Tower says it is only required to make one payment up to the cap set by the policy, which it has done.
The claim by the plaintiffs for additional payment under the policy is being pursued in the Canterbury Earthquakes Insurance Tribunal. 1
The primary dispute between the parties turns on interpretation of the insurance policy. For that reason, the Tribunal has referred the following questions to this Court for its opinion, pursuant to s 53 of the Canterbury Earthquakes Insurance Tribunal Act 2019 (the Act):
The proceeding in the Tribunal is adjourned until this Court provides its opinion on the case.
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(a) The policy contains a warranty that the “maximum sum insured is $455,000” (the $455,000 Cap). Is the $455,000 Cap (less EQC payments) an overall cap on the amount that the Trust can recover under the policy or does it apply as a cap per earthquake event?
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(b) The policy limits the present day value recovery under the policy to “the market value of the property less the value of the land as an unoccupied site” (the Market Value Cap). Is the Market Value Cap (less EQC payments) an overall cap on the amount that the Trust can recover under the policy, or does it apply as a cap per earthquake event?
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(c) Or, does the policy apply in some way other than as set out in (a) or (b)?
The plaintiffs accept that if the question is answered in Tower's favour, the claim in the Tribunal cannot go further. If, however, the question is answered in the plaintiffs' favour, there may be additional issues of quantification to resolve in that forum.
The case stated for the opinion of this Court was accompanied by an agreed statement of facts. For the purpose of this case, the following background is relevant.
The plaintiffs are the current trustees of Clan Mathie Trust (“the trustees”), a family trust which owns the house that is the subject of the claim. The house is a large two-storey residential building of 490 square metres situated in Seamount Terrace, Mount Pleasant, Christchurch.
The trustees insured the house with Tower during the relevant insurance periods, being 6 May 2010 until 6 May 2011, and again from 6 May 2011 to 6 May 2012. The house was insured under a Tower Insurance Provider House Policy. The same policy wording applied in both policy periods.
Particulars of the cover stated in the policy schedules were as follows:
The terms of the policy were otherwise as provided in the standard Provider House Policy terms and conditions.
| (a) Name of insured | Clanmathie (sic) Trust |
| (b) Situation: | 22A Seamount Terrace, Mount Pleasant, Christchurch |
| (c) Sum Insured: | Present Day Value |
| (d) Cover selected: | House Maxi Protection |
| (e) Excess | $150.00 |
| (f) Interested Parties: | Kiwibank Ltd; Clanmathie (sic) Ltd as trustee of the Clanmathie (sic) Trust being the owners |
| (g) Standard clauses and warranties: | Warranted that the maximum sum insured is $455,000. |
The term “present day value” which was identified as the sum insured was defined in the policy as follows:
Present Day Value means the cost at the time of the loss or damage of rebuilding, replacing or repairing your house to a condition no better than new and up to the same area as shown in the certificate of insurance, plus any decks undeveloped basements, carports and detached domestic outbuildings, less an appropriate allowance for depreciation and deferred maintenance, but limited to the market value of the property less the value of the land as an unoccupied site.
On 4 September 2010 the house suffered damage as a consequence of the earthquake centred near Darfield in Canterbury (the September earthquake). The trustees lodged claims with the Earthquake Commission (EQC) and Tower in respect of the damage caused by the September earthquake. EQC initially assessed the cost to repair the damage at $48,840, but has since accepted that the damage was over the statutory cap of $100,000 plus GST, and has paid the trustees up to the cap.
Except for minor emergency repairs, the damage from the September earthquake remained unrepaired when the house suffered further damage from the 22 February 2011 earthquake. Again, claims were lodged with EQC and Tower, and EQC paid the trustees up to the statutory cap of $100,000 plus GST. On 6 May 2011, the Tower policy was renewed until 6 May 2012.
The house was still not repaired when, on 13 June 2011, the house suffered further earthquake damage. Again, claims were lodged with EQC and Tower, and again EQC paid up to its statutory cap of $100,000 plus GST.
The damage from all three earthquakes remains unrepaired, although the house is not damaged beyond repair.
The trustees have engaged independent experts to assess the damage and the cost to repair it. They conclude that it would cost $3,030,028.48 plus GST, as at 2 August 2017, to repair the damage.
The market value of the house (that is, the market value of the property less the value of the land as an unoccupied site), as at 3 September 2010, was $580,000.
In a letter dated 9 July 2019, Tower advised its position on the claim as follows:
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(a) the insurance policy was a “present day value policy” and that meant that the cover available was the lesser of:
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(i) the cost at the time of the loss or damage of repairing the house to a condition no better than new, less an appropriate allowance for depreciation and deferred maintenance; or
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(ii) the market value of the property less the value of the land as an unoccupied site.
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(b) Tower's liability therefore is, at most, market value less the amount the trustees have already received from EQC;
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(c) The policy stipulation that “warranted that the maximum sum insured is $455,000” could further restrict the trustees' recovery rights.
The primary issue in dispute is whether the maximum sum insured, $455,000, can be claimed once or in each earthquake event. Related to that is whether, if it can be claimed more than once, the market value of the house, as defined, is an overall cap on the insurer's liability?
The trustees' case, in summary, is that:
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(a) the Market Value Cap sets a limit on Present Day Value;
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(b) the $455,000 Cap also sets a limit on the sum insured, but does not render it a “valued policy”;
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(c) both the $455,000 Cap and the Market Value Cap reset after each loss;
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(d) the $455,000 Cap, being the lower amount, sets the relevant limit of Tower's liability to indemnify for each loss;
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(e) the $455,000 Cap is net of EQC payments so Tower's liability is to pay a contribution of up to $340,000 (less excess) in respect of each loss.
The trustees accept that the policy is an indemnity policy. Thus, unlike many New Zealand house insurance policies, it does not provide cover for full replacement value, or for reinstatement to a condition “as when new”. 2 Because it is an indemnity policy it precludes the trustees from recovering more than the loss caused by the insured event. 3
However, Mr Jones submits that in accordance with the findings in Ridgecrest NZ Ltd v IAG New Zealand Ltd, the trustees are entitled to claim for all three sets of damage subject to the following three limits: 4
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(a) there should be no double-counting;
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(b) each event gives rise to an entitlement to claim up to the specified cap on liability; and
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(c) the total of all claims can not exceed the replacement cost of the building.
While accepting this is an indemnity policy the trustees submit that there is a difference between the measure of indemnity as between “valued” and “unvalued” policies. The phrase “sum insured” does not amount to an agreed valuation thereby rendering this a valued policy, but merely fixes the maximum sum for which the insurer can be liable on a claim. As a consequence, the sum insured represents the
To support the argument on how an indemnity policy should respond to loss Mr Jones also refers to the decision in Prattley Enterprises Ltd v Vero Insurance New Zealand Ltd, where the Supreme Court found:
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(a) what is required by way of indemnity will vary depending on the circumstances; and
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(b) where the property is to be repaired or reinstated, the estimated costs of repair would usually provide a better basis for calculating loss, and any betterment to the insured can be avoided by an allowance for depreciation. 5
Mr Jones then relies on the approach adopted by the Court of Appeal...
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