Dismissed
by insurer IAG as being merely an unenforceable “agreement to agree”, the High
Court enforced a mediated agreement over a Christchurch earthquake payout as a
binding contract to pay the cost of a rebuild, not a repair. Francis and Barbara Gidden were awarded
damages of $707,610 plus $37,400 interest for late payment.
Frustrated with IAG vacillating for four
years whether to repair or to rebuild their damaged Wainoni Road home, the
Giddens upped the ante, planning to sue.
IAG responded with a letter apologising for the “misunderstandings”
which had arisen, managing to misspell their name in the process. A meeting was held in October 2014 between
the Giddens and representatives of IAG with a facilitator present to
assist. IAG’s representatives confirmed
thay had authority to reach a binding agreement. Discussions resulted in a signed memorandum. Tellingly, this memorandum stated the
principal issue to be resolved was a proposal “to rebuild” the Wainoni Road
home. The rest of the memorandum set out
a timetable for settling on a rebuild figure.
The IAG policy, issued on its behalf by State Insurance, gave the
Giddens a number of options. They opted
to take a cash payout and to manage any rebuild themselves.
The court was told IAG subsequently
withdrew offers of a cash payout, stating it had decided to repair the damage
instead. IAG representatives at the
October 2014 meeting said the insurer’s Cash Settlement Panel had ruled against
a cash payout because increased building costs now resulted in a rebuild
estimate at double the estimated cost of repair.
Associate judge Osborne ruled IAG was
committed to paying the cost of a rebuild. The October 2014 agreement gave IAG no right
of veto should rebuild costs increase or should its Cash Settlement Panel take
a different view. The whole purpose of
the October 2014 mediated agreement was to bring to an end IAG’s unacceptable
delay, he said.
Gidden
v. IAG – High Court (11.05.16)
16.081