O'Loughlin v Tower Insurance Ltd - [2013] NZHC 670

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IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2012-409-002385 [2013] NZHC 670

BETWEEN MATTHEW JOHN O'LOUGHLIN AND VALERIE JEAN O'LOUGHLIN Plaintiffs

ANDTOWER INSURANCE LIMITED Defendant

Hearing: 4 - 14 March 2013

Counsel: GDR Shand and KP Sullivan for Plaintiffs
AR Galbraith QC and MC Harris for Defendant

Judgment: 5 April 2013

JUDGMENT OF ASHER J

This judgment was delivered by me on Friday, 5 April 2013 at 2pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:
GDR Shand, PO Box 13090, Armagh, Christchurch 8141. Email: grant@grantshand.co.nz
KP Sullivan, PO Box 5817, Lambton Quay, Wellington 6145. Email: Kevin@portnic.co.nz
Gilbert Walker, PO Box 1595, Shortland Street, Auckland 1140. Email: matthew.harris@gilbertwalker.com
AR Galbraith QC, PO Box 4338, Shortland Street, Auckland 1140. Email: argalbraith@shortlandchambers.co.nz

O'LOUGHLIN V TOWER INSURANCE LTD HC CHCH CIV-2012-409-002385 [5 April 2013]

Table of Contents

Para No Introduction [1] Summary of findings [4] Events leading to the claim [5] Pleadings and issues [17]

Did the creation of the red zone engage the policy?
The red zone  [22]
Approach to interpreting the policy  [31] Tower’s obligation  [37] Claim under the primary insurance clause of the policy  [40] Claim under the natural disaster damage special benefit clause  [55] Is the natural disaster cover limited to physical damage?  [63] Authorities  [72] In any event, is there economic loss?  [84]
Is payment based on the repair estimate using LMG calculated in compliance with Tower’s contractual obligations?
Introduction       [87]
Context of the disagreement       [88] The engineers  [103] Where the engineers agree  [108] Where the engineers disagree  [116] Mr Hutt’s evidence  [123] The guidance document  [125] My assessment of the LMG proposed repair  [132] Questions of onus  [145] Is the offer of $390,000 calculated in compliance with Tower’s

contractual obligations? [154]

What then is Tower’s obligation? [159]
$620,000 or $540,000? [173] The extent of the drop suffered by the O’Loughlins’ home [183] General damages [186] Relief [196] Result [201] Costs [204]

Introduction

[1] Christchurch suffered two earthquakes on 4 September 2010 and 22 February

2011 and a particularly significant aftershock on 13 June 2011. All three of these events damaged the property of the plaintiffs, Matthew and Valerie O’Loughlin. They have sold the land on which their house was built to the Crown, and will move elsewhere.

[2] The O’Loughlins have brought these proceedings against their insurer, Tower

Insurance Ltd (Tower) under their house policy. The policy was taken out on

25 September 2009 and was in force at the time of the three events (the earthquakes). It insures their house but not their land. Tower accepts that there is a valid contract of insurance, there has been an accident in terms of the policy, and the O’Loughlins have suffered loss. Both parties accept that payments made by the Earthquake Commission (EQC) for damage to the house of $203,886.50 must be deducted. Tower has made an offer based on the costs of repair of the O’Loughlins’ house, and have now made…

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: [2013] NZHC 670
Decision Date: 5 April 2013

CaseChat Overview and Summary

Matthew and Valerie O'Loughlin brought proceedings against their insurer, Tower Insurance Ltd, under their house policy for damage to their house caused by three earthquakes in Christchurch in 2010 and 2011. The O'Loughlins claimed that Tower was obligated to pay them for the cost of rebuilding their house on its original site, which they claimed was $620,000. Tower, on the other hand, had offered to pay them based on the cost of repairing their house using a low mobility grout (LMG) injection method, which they estimated to be $390,000. The court held that the creation of the red zone, which was a government measure to address the consequences of the earthquakes, did not engage the policy and did not give rise to a claim under the primary insurance clause or the natural disaster special benefit clause. The court also held that the LMG repair was too uncertain and a payment based on it could not be regarded as representing the actual costs of repair. Tower had failed to establish that the LMG repair could be carried out for $390,000 and the O'Loughlins had established that the offer of $390,000 did not meet Tower's obligation to pay for the replacement value of the house on the basis of the estimated costs of repair. The court held that Tower was not in breach of contract when it made its original offer and payment based on repair costs, but it was not possible to determine whether Tower breached its contract as it was not clear whether the payment offered was sufficient to fulfil Tower's contractual obligations. The court declined to enter judgment for either party on the basis of the relief presently sought and directed the parties to provide further submissions on general damages and the appropriate relief. The court reserved the question of costs.

Orders