It was a thought provoking few days at the New Zealand Insurance Law Association (NZILA) conference, which was held last week in the spectacular Te Pae Christchurch Convention Centre.

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In what can only be described as masterful timing, the Court of Appeal’s decision in Moorhouse Commercial Park Ltd v VeroInsurance New Zealand Ltd [1] was published on Judgements Express at 2pm, just as the traditional long lunch was winding up on the last day of the conference. The judgment was given by Justices Cooke and Osborne and had been delivered on 3 September 2024.

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This is likely one of the last remaining earthquake insurance cases concerning the original CES policy response. While there are still cases emerging that focus on the quality of the initial policy response – what I refer to as 'second generation' CES litigation – they tend to address different issues.

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Moorhouse unsuccessfully appealed a HighCourt decision that largely dismissed its breach of contract claim againstVero. The case involved two insured commercial properties, which actually comprised of a number of buildings that had been joined together over the years, covered under an MD policy which provided reinstatement cover in the event of earthquake damage.

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Vero had the option of either making payment or undertaking reinstatement or repair in the event of earthquake damage. The standard for reinstatement/repair was “…substantially the same as…when new”.

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The policy also contained a conventional limitation on reinstatement – the insured was only able to recover the costs of reinstatement if it actually incurred them. In the absence of reinstatement, cover was limited to indemnity value.

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According to Moorhouse, the damage to concrete elements of the buildings was so extensive that the only proper response was to demolish all the buildings and start again. Vero did not agree with this approach and maintained that the damage to concrete elements of the buildings could be fixed using an epoxy injection solution.

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The Court of Appeal reject the allegation that Vero had breached the terms of the policy by declining to meet the unincurred cost of reinstatement. The Court concluded that expert evidence failed to prove that damage caused by the CES could not be repaired using epoxy injection.

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Obviously, this was a case that turned on the expert engineering evidence and there were several ancillary issues addressed in the judgment. For me however, the key takeaway was the emphasis the Court placed on the question of onus in disputes between an insured and its insurer: a claimant must prove all elements of its contract claim. The Court noted, “The burden does not shift to the insurer because this is an insurance contract”.

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A very ‘black letter’ approach to claims obligations between insured and insurer. Conduct at claim time appears to be one of the few aspects of the insured-insurer relationship that remains unaffected by the Contracts of Insurance Bill, which still seems on track to be enacted by December 2024.

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No doubt the new legislation will be the hot topic for next year’s NZILA conference in Queenstown.

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References

[1] Moorhouse Commercial Park Limited vVero Insurance New Zealand Limited {2024} NZCA, 3 September 2024