Insurance companies have drawn the line on Christchurch property owners gaming insurance payouts for earthquake damaged homes by now refusing to make upfront lump sum payments for owners opting to manage their own repairs; reimbursement will be made only as and when invoices are submitted for repairs completed.
Settlement of Mr Degen’s NZI insurance claim was much delayed with a dispute whether his property could be repaired or required demolition and a rebuild. Their dispute reached the Canterbury Earthquakes Insurance Tribunal, set up in 2019 to provide a speedier and more flexible judicial forum to settle insurance disputes.
A 2022 Tribunal ruling found in favour of NZI: Mr Degen’s house could be repaired; a rebuild was not necessary.
But NZI objected to the Tribunal’s ruling that NZI’s owner, IAG Insurance, make a lump sum payment as soon as Mr Degen had signed a building contract for repair.
The insurance industry has faced a pattern of property owners gaming upfront payouts for owner-managed repairs. A promised repair contract might be cancelled or heavily amended after a cash payout is made, or no repairs made at all. Christchurch property marketing campaigns frequently advertise properties selling on an ‘as is, where is’ basis; often a case of the vendor having taken a cash payout for owner-managed earthquake repairs, undertaking little or no repairs, then later selling.
In the High Court, Justice Hinton ruled IAG was not required to make an upfront cash payout on Mr Degen’s claim. Payment was due only after Mr Degen had incurred costs of repair, had submitted invoices and IAG was satisfied the costs are reasonable and relate to the risk insured.
It is implicit in any insurance contract promising ‘cover’ for insured risks that any payment must relate to making good the loss, Justice Hinton ruled.
In passing, the High Court was asked to consider the legal effect of wording in the Fair Insurance Code requiring insurers to ‘settle all valid claims quickly and fairly.’ Justice Hinton emphasised the key word is valid. No valid claim requiring ‘quick’ payment exists where there is an ongoing dispute with the insurer over the extent of coverage and the amount to be paid.
IAG New Zealand Ltd v. Degen – High Court (6.03.24)
24.069