Tag Archives: Canterbury Earthquakes

Court of Appeal dismisses policyholders’ Canterbury earthquake appeal

The Court of Appeal has dismissed an appeal by a policyholders in relation to their insurance claim against Lumley arising out of the Canterbury Earthquakes: Jarden v Lumley General Insurance (NZ) Ltd [2016] NZCA 193.

A point of particular interest arises in the decision. The Court determined that Lumley’s “top-up” cover to pay for damage caused by a natural disaster which was stated to be in excess of cover provided under the relevant provisions of the Earthquake Commission Act 1993 was for cover in excess of EQC’s actual (statutory) liability. This is not always the same amount the EQC actually pays to policyholders, and was not in this case. Lumley was entitled to be satisfied that any sum paid by the EQC equated with its liability under the legislation (refer paragraph [26]).

With regards to this issue, the Court accepted a submission from Lumley  that its cover and premiums are fixed on the basis of EQC’s actual statutory obligation and that it is not open for the policyholder to alter unilaterally the basis upon which Lumley’s liability arises under the policy (refer [27]).

Steve Keall
Barrister
23 May 2016

 

Recent case: Tower v Domenico [2015] NZCA 372

In a recent decision the NZ Court of Appeal allowed an appeal and set aside a decision of the High Court: Tower Insurance Ltd Domenico Trustee Ltd [2015] NZCA 372.

Tower was the insurer and Domenico was the insured making a claim in respect of damage to a residential dwelling resulting from the 2010/ 2011 Canterbury earthquakes.

One of the central issues for determination at the High Court trial before Gendall J was whether Tower had made a binding election to make a cash settlement to Domenico of the full reinstatement costs in resolution of Domenico’s insurance claim.

Gendall J found on the facts of the case that Tower had not made any such election. In describing the law, he stated that any exercise of a power of election must be made within a reasonable period of time, and further that if the election is not made within that time frame, the Court may make the election in substitution for the electing party. In this case, the relevant election was between the various settlement options open to Tower. Gendall J held that Tower had failed to make a relevant election within a reasonable period of time, and accordingly determined that the Court would do so, holding that Tower was liable to make immediate payment to Domenico of the indemnity value of the property.

At the appeal hearing, counsel for Tower, who was also trial counsel, noted that at trial he elected not to call any evidence at the conclusion of Domenico’s case in reliance on the pleadings.  He stated that if election through delay had been pleaded he would have led evidence on the subject.

The Court of Appeal held that  election through delay was not open on the pleadings and was not raised in argument. The Court stated that if the Judge was contemplating a finding that was outside the pleadings and argument, he ought to have given the opportunity to both sides to address the issue and to seek an amendment to the pleadings. This being the case, the Court allowed the appeal and set aside the High Court’s judgment.

The Court stated that “the proceeding is remitted to the High Court for rehearing in light of the judgment of this Court” (emphasis added). This rider would appear to indicate that that only the issue of the alleged delay needs to be adjudicated, with the required related procedural steps also taking place, such as the formal pleading of the argument in a statement of claim, a response in a statement of defence and the exchange of evidence in relation to this issue.

At the hearing, no doubt counsel for Tower will also have something to say about Gendall J’s analysis of the law as described above. It is questionable whether it is correct to say that a Court may make an election for a party where it has failed to do so. That said, it is undoubtedly the case that where a contracting party is required to make an election for the benefit of the other party, if the electing party simply fails to act, it will be in breach of the obligation to make that election. In assessing the consequences of that failure, the Court must decide what would have happened if that party had done what it ought to have done. It will make that decision based on the evidence before it. It would be wholly unsatisfactory for the relevant remedy to be for the Court to order the party to make an election (which seemed to be what the Court of Appeal indicated as a possibility in its judgment, without deciding it). Where delay is the problem, that would only postpone the problem further. The Court’s customary approach to problems of this kind is to make a conclusive determination that leads to a final resolution of all issues.

Steve Keall
Barrister
12 September 2015