The Court of Appeal has delivered its judgment in New Zealand Fire Service Commission v Insurance Brokers Association of New Zealand Inc & Vero Insurance Ltd  NZCA 179 (joint judgment given by Wild J). In doing so, it upheld the decision of Heath J in the High Court concerning the correct method of computing levies under s 48 of the Fire Service Act 1975 with regards to split tier insurance policies and multi-insured policies.
With regards to the (sample) split-tier policies in evidence, the Court of Appeal confirmed that (para 45):
- If a contract of fire insurance provides for the settlement of any claim for damage to or the destruction of the property upon a basis no more favourable to the insured person than its indemnity value, and specifies a sum insured for all claims during the period of the contract of fire insurance that is lower than its indemnity value, the fire service levy payable under s 48(1) of the Act is to be computed on the sum insured;
- For a policy that: (a) provides cover for the indemnity value of the property; and
(b) contains a capped sum insured, the maximum levy is that computed on the sum insured. However, if the sum insured exceeds the indemnity value of the property, and the insured provides compliant declarations or valuations under s 48(6)(c), the levy is payable on the indemnity value;
- If a contract or any portion of a contract of fire insurance provides for the settlement of any claim for damage to or the destruction of any item of insured property limited to that part of its value in excess of its indemnity value, then pursuant to s 48(7) of the Act, no fire service levy is payable on that contract or portion thereof;
- To be exempt under s 48(7) it is not necessary that the insured hold a policy that insures all or any part of the indemnity value of the property. It is sufficient if the excess of indemnity policy only insures part or all of the difference between the “as new” replacement value and the indemnity value of the property.
It is worth noting that Court expressed some uneasiness about reliance on sample, rather than actual, policies, although it stopped short of refusing to say there was no jurisdiction. It commented, obiter, at paragraph 14 “had we been sitting as a court of first instance, we would probably have declined to make declarations, at least in relation to the split tier policies. That is simply because there was no actual policy or policies to rule on.” The respondents were fortunate that the Court elected not to take what may be described as a narrow approach.
With regards to the multi-insured policy in evidence, issued to the New Zealand Ports Collective, the Court was essentially asked to decide whether there was one contract of insurance (with eight policyholders) or eight separate contract of insurance. The Court placed emphasis on the fact that the policyholders were jointly liable for the premium and that the policy could only be terminated by all eight policyholders in concert. The Court of Appeal reviewed the authorities on the nature of joint, and several, obligations in an insurance policy and noted recent academic comments that the approach take in certain English decisions is wrong, and that a composite contract should ordinarily be treated as contained in a single indivisible contract, rather than in multiple contracts. As a consequence, only one fire service levy was payable, calculated with reference to the sum insured, which was $250m.
The Court of Appeal was not prepared to make any order as to costs, on the basis that it was a test case.