Some of Auckland City’s building-defect insurance compensation claims were struck out by the High Court following confusion over which lawyers were acting for Lloyds syndicates providing cover.
Being the only solvent party left standing after developers go bust, local authorities like Auckland City have forked out hundreds of millions of dollars over two decades in compensation remediating faulty buildings.
Auckland City carries insurance cover reimbursing its compensation costs.
In dispute was insurance cover for the 2016-2017 year.
The High Court was told Auckland had several layers of cover for this period, collectively totalling 29 separate underwriters, all but one based overseas.
Legal action has followed insurers’ denial of cover, relying on a ‘weathertightness’ exclusion in their policies.
Insurers claimed all cover, even for non-weathertightness defects, was excluded if there was a weathertightness issue in any building where Council has paid compensation.
A 2022 Napier City Council appeal decision ruled otherwise; a weathertightness exclusion did not exclude claims for non-weathertightness defects.
A host of Auckland City claims left hanging from the 2016-2017 period suddenly became a live issue.
Some underwriters argued the game was over; delays by Auckland City meant they were no longer liable.
At issue was whether they had been served in time with notice of Auckland City’s legal action.
There was no dispute that three insurers providing primary cover for the 2016-2017 period had been properly served with notice of legal proceedings.
These claims are still under negotiation.
But no proper notice had been given to some insurance syndicates operating out of Lloyds in London, providing a second layer of cover.
The High Court was told of Auckland City’s solicitors Minter Ellison liaising with lawyers acting for the three primary insurers on what turned out to be a mistaken assumption that the primary insurers’ lawyers had authority to act also on behalf of sundry other Lloyds’ syndicates also being sued.
They did not.
Consequently, these Lloyds’ syndicates did not have formal legal notice that they were being sued.
This left Auckland City scrambling.
A High Court rule that writs not served on defendants become stale twelve months after court issue meant that Auckland City insurance claims against some syndicates were now deemed abandoned.
Auckland City’s solicitors told the High Court of their suspicions that lawyers for the primary insurers deliberately delayed clarifying whether they had authority to act for these other syndicates, winding down the twelve month clock.
Justice Lang said there was no evidence to support this.
A closer reading of earlier correspondence would have identified service on a number of Lloyds’ syndicates was an issue, he said.
Auckland City can file new claims against these syndicates, Justice Lang said.
These replacement claims would be based on a different allegation of breach of contract; that is, insurers wrongfully declined Auckland City’s reimbursement claim for non-weathertightness remediations.
Auckland Council v. Local Government Mutual Funds Trustee Ltd - High Court (24.02.26)
26.085