Myall v Tower Insurance Ltd - [2017] NZCA 561

IN THE COURT OF APPEAL OF NEW ZEALAND

CA142/2017
[2017] NZCA 561

BETWEEN	PAUL GEOFFREY MYALL Appellant
AND	TOWER INSURANCE LIMITED Respondent

Hearing:	26 September 2017
Court:	Harrison, Miller and Clifford JJ
Counsel:	N R Campbell QC and K P Sullivan for Appellant M C Harris and S S McMullan for Respondent
Judgment:	4 December 2017 at 2.15 pm

JUDGMENT OF THE COURT

AThe appeal is allowed in part. The amount owed by Tower under the policy is increased by $111,412, being the difference in the cost of tiles between the experts.
BThe appeal is otherwise dismissed.
CThe cross-appeal is dismissed.
DNo order for costs.

____________________________________________________________________

REASONS OF THE COURT

(Given by Miller J)

“Riverlaw” was an historic and well-restored mansion owned by Paul Myall, insured by Tower under a full replacement policy, and damaged beyond repair in the Canterbury earthquakes of 2010 and 2011. It is common ground that in these circumstances Tower might elect to pay full replacement value in lieu of reinstatement. It so elected and prior to trial it paid a total of $2,971,644.12.
The parties contest the meaning and measure of full replacement value under the policy. In his statement of claim Mr Myall said that Tower ought to have paid a total of $6,921,094. By the time of trial however the difference between the experts hired by both parties had narrowed to around $2 million. Mr Myall’s claim was largely unsuccessful before Dunningham J in the High Court, and he now appeals.[1]

Riverlaw

[1]Myall v Tower Insurance Ltd [2017] NZHC 251.

An account of the background is found in the judgment below.[2] Much of it does not concern us. Notably, we need not address reasons for delay in processing Mr Myall’s claim. For our purposes it suffices here to note salient features of the property before turning to the policy and the issues before us.
[2]At [5]–[20].
Riverlaw was a three-storey home (and category 2 heritage-listed building) on a grand scale. It comprised 799 square metres and contained eight bedrooms and six bathrooms. It was of brick construction, with some walls being of triple brick. Much of the interior was of exposed timber (kauri, rimu, cedar and baltic pine), and feature ceilings were of pressed zinc. It had working chimneys, though a computer‑controlled heating system had been installed, and a variety of Victorian, Italian, and other designer tiles throughout the house.

The policy

When seeking cover in 2004 Mr Myall explained that Riverlaw was a stately home on which $600,000 had been spent in refurbishment, including restoration of woodwork. He advised that the floor area of the house was 650 square meters, about 20 per cent less than it proved to be when measured during the claims process. On Tower’s recommendation he adopted its Super Maxi Protection Policy, which he renewed annually. It was a full replacement policy which was described by the Supreme Court in Tower Insurance Ltd v Skyward Aviation 2008 Ltd in this way:[3]
[24] The insurance policy is…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2017] NZCA 561
Decision Date: 4 December 2017 at 2.15 pm

CaseChat Overview and Summary

The Court of Appeal considered an appeal by Paul Myall against a decision of the High Court regarding the amount owed by Tower Insurance Limited under a full replacement policy for damage to his property, Riverlaw, caused by the Canterbury earthquakes of 2010 and 2011. Tower elected to pay full replacement value in lieu of reinstatement, but the parties disagreed on the interpretation and application of this term under the policy. Myall argued that the full replacement value should cover certain features and materials that Tower had not included in its payment, while Tower contended that its calculations were appropriate and aligned with the policy terms.

The Court of Appeal found that the meaning of "full replacement value" did not vary with the mode of settlement, whether by payment or reinstatement, and that some clauses limiting what Tower must do applied regardless of the chosen method. The Court also determined that the burden of proof lay with Myall to demonstrate that Tower's proposed figure for each item in dispute failed to meet the policy standard, rather than shifting the burden to Tower to prove that the figure exceeded what was reasonable, practical, or comparable with the original.

On the issue of adjusting for underinsurance, the Court upheld the Judge's approach of scaling the costs based on the insured area, as opposed to Myall's argument for including fixed costs that would not vary with the reduction in area. The Court found that the reduction in area was substantial, and it was reasonable to assume that the smaller building would feature fewer rooms to maintain its proportions.

The Court of Appeal allowed the appeal in part, increasing the amount owed by Tower by $111,412 due to the difference in the cost of tiles between the experts. The appeal was otherwise dismissed, and the cross-appeal was also dismissed. The Court found that both parties had a measure of success on the appeal, and in the circumstances, costs should lie where they fell.

Orders