A speculative insurance claim by litigation funder Risk Worldwide New Zealand that commercial buildings in Christchurch could be destroyed twice over in successive earthquakes was dismissed by the High Court.
IAG Insurance was left defending its pragmatic 2011 decision settling claims for damage to two buildings, part of four adjoining buildings in Ferrymead owned by Settlers Crescent Partnership. All were damaged to varying degrees during the initial sequence of Christchurch earthquakes in 2010/2011. In what was a pragmatic commercial decision, IAG agreed to pay $10.2 million as if the buildings were destroyed leaving Settlers Crescent to decide whether they might be repaired or replaced.
Some three years later, Risk Worldwide sued in the name of Settlers Crescent arguing IAG assumed further risk when Settlers renewed its insurance policy and this risk eventuated when the June 2011 earthquake in fact destroyed unrepaired buildings on site. Settlers claimed $1.12 million for further damage. IAG described this claim as opportunistic; money claimed for a loss which had already been paid. Settlers said the earlier deal was for anticipated repair costs only.
Justice Gendall ruled the earlier $10.2 million payout was agreed to be in full settlement of Settlers Crescents’ claim as if the buildings were a total loss and would be replaced. This figure was calculated on an assumed rebuild cost though both parties knew some repair might be possible. A further payment would amount to double recovery, he said. The buildings could not be treated as destroyed twice over. It made no difference damage from the June 2011 earthquake occurred under a new policy, Justice Gendall said.
The site is currently vacant. The buildings in dispute, a large warehouse and a Les Mills gym, were demolished in 2013.
Settlers Crescent Partnership v. IAG New Zealand – High Court (25.10.18)
18.208