Speculators
buying Christchurch earthquake-damaged properties on an “as is where is” basis
have struck a snag with a High Court test case deciding they cannot claim on
the vendor’s replacement insurance when the vendor never intended to repair.
Pricing for an “as is
where is” purchase is affected by insurance considerations. Being able to recover on the vendor’s
insurance policy for pre-existing damage adds more to the pot for the
purchaser. Faced with a series of
Christchurch earthquake claims where a house purchaser has taken over the
vendor’s insurance rights led to a test case on insurers liability to pay out. For the purposes of the test case specific
facts were agreed: the vendor had no intention to repair the property when
selling and assigning to the purchaser the right to claim on the vendor’s insurance
policy.
Justice Nation said
insurance law treats insurance cover as one of personal indemnity; cover is for
the benefit of the named policy-holder only.
But this general rule could be varied by the specific wording of a
policy. The IAG policy before the court
did provide an exception, but only for the short period between the time there
is an unconditional contract for the sale of the insured property and the sale settles. IAG’s permitted exception did not extend to
circumstances where damage had arisen before the sale, Justice Nation said.
The test case before
the High Court concerned a Wainoni property sold in December 2014 after the
2010-11 series of Christchurch earthquakes.
After buying for $217,000, the purchaser sued IAG for $353,800 claiming
on the vendor’s replacement insurance.
Xu v.
IAG – High Court (17.08.17)
17.103