Polladio Holdings Limited v The New India Assurance Company Limited

[2023] NZHC 1147

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-476-000030

[2023] NZHC 1147

BETWEEN

POLLADIO HOLDINGS LIMITED

Plaintiff

AND

THE NEW INDIA ASSURANCE COMPANY LIMITED

Defendant

Hearing:

30 March and 28 April 2023

Appearances:

M C Josephson and T C Gunn for the Plaintiff

P J Napier and W M van Roosmalen for the Defendant

Judgment:

12 May 2023

JUDGMENT OF WYLIE J

This judgment was delivered by Justice Wylie On 12 May 2023 at 2.30pm

Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar

Date:…………………………

Solicitors/counsel:

T C Gunn, Warkworth/M C Josephson, Mangawhai Keegan Alexander, Auckland

POLLADIO HOLDINGS LTD v THE NEW INDIA ASSURANCE CO LTD [2023] NZHC 1147 [12 May 2023]

Introduction

[1]    On 20 November 2019, there was a major hail storm in Timaru. It caused significant damage—in particular to cars and roofs.

[2]    The plaintiff, Polladio Holdings Ltd (Polladio), owns the Grosvenor Hotel (the hotel), situated on the corner of Cains Terrace and Beswick Street in Timaru. At the time of the hail storm, Polladio held a material damage policy (the policy) in respect of the hotel issued by the defendant, the New India Assurance Co Ltd (New India).

[3]    The policy had been negotiated through a firm of insurance brokers—Abbotts Insurance Brokers Ltd (Abbotts). On 3 September 2020, Ping Lim, a director of Polladio, signed a claim form on behalf of Polladio seeking cover for damage it said had been caused to the hotel roof by the hail storm. Abbotts notified the claims officer at New India of Polladio’s claim on 11 September 2020.

[4]    The claims officer at New India was surprised to receive the notification so long after the hail storm had occurred. He replied to Abbotts on the same day, asking why there had been a delay in submitting the claim. Abbotts replied by email on 14 September 2020 advising as follows:

Reason for delay is the client is currently about to undergo some work on the property and an inspection was carried out on the roof hence the damage being discovered.

[5]    On 5 November 2020, New India advised Abbotts that the claim had been declined. It relied upon an exclusion clause in the policy—cl 5.6.1(c)—which recorded that the policy did not insure “marring and scratching” to the insured property.

The parties’ respective positions

[6]Polladio says that:

(a)the policy insured it for accidental loss to the hotel;

(b)the hail storm caused accidental loss to the roof of the hotel;

(c)the damage to the hotel roof was covered by the policy;

(d)New India is required to indemnify it by reinstating the roof;

(e)it has made a claim under the policy; and

(f)New India is not entitled to decline cover.

It alleges that New India is in breach of the insurance contract and it seeks the costs of reinstating the roof (estimated to be $744,978.21—GST inclusive) as well as additional costs it says it has incurred, together with interest.

[7]    New India says that Polladio’s claim must fail, because the claim is excluded under the policy. It relies on:

(a)clause 5.5.3(c)—which provided that the policy did not insure loss caused by rust; and

(b)clause 5.6.1(c)—which, as noted, recorded that the policy did not extend to marring.

New India also asserts that:

(c)Polladio was aware of the hail damage to the roof from at least 25 November 2019;

(d)Polladio informed New India through its broker that it did not discover the hail damage until July 2020;

(e)this statement was untrue; and

(f)Polladio breached its duty of uberrimae fidei (or utmost good faith) and cls 7 and 8 in the policy.

Analysis

[8]    I consider first whether there was damage to the hotel roof caused by the hail storm, then whether any damage constituted accidental loss in terms of the policy. Next, I consider the exclusion clauses and finally I deal with the alleged breaches of the policy conditions by Polladio.

Was there hail damage to the hotel roof?

[9]    This matter can be dealt with relatively briefly. Notwithstanding the pleadings, there was no dispute before me that parts of the roof of the hotel were damaged in the hail storm on 20 November 2019.

[10]The roof comprises a number of sections, namely:

(a)steep pitched upper roof planes on those parts of the hotel roof facing Cains Terrace and Beswick Street. This part of the roof comprises imported Marseilles clay tiles;

(b)the remaining pitched roof planes on the main hotel block which comprise galvanised corrugated steel;

(c)a lower central near flat roof area. This is a “tray type” roof and it comprises galvanised steel;

(d)a steep pitched galvanised corrugated steel roof on a building on the southern side of the hotel site running parallel to the main hotel block; and

(e)a low pitched single plane galvanised corrugated steel roof on a further building at the western end of the southern boundary of the site.

The total roof is approximately 1407 square metres in area. There are various penetrations for fans, television aerials, breather pipes and the like. Fixings are either lead head nails or screws and tie wires.

[11]   The steel roofs are approximately 50 years old. Prior to the hail storm, rust was evident in places. It was mainly limited to joints where roof sheets overlap, to the ends of sheets under flashings, to the underside of sheets overhanging gutters and around nail heads. Nail shafts were rusting and starting to fail. The ridge and hip flashings were also rusted. The roofs were nevertheless still relatively sound and they did not leak.

[12]   It seems that the hail storm passed over the hotel twice in the course of the weather event. Some of the hail stones were more than 30 millimetres in diameter. Since the hail storm there have been a number of leaks in the hotel roof.

[13]   There was little or no damage to the clay roof. One of the persons who has inspected the roof, Mr Cowperthwaite, (who was called by New India), told the Court that there were some marks on some of the tiles where hail stones may have struck, but that there were no obvious signs of cracking or damaged tiles. Some damaged tiles were found along the gutter roof line. Parts of the mortar/pointing securing some of the tiles were cracked and some tiles were loose. It was Mr Cowperthwaite’s view that this was historic damage or damage from weather going back, possibly, for some years. He was not cross-examined on this issue. Mr Fridd, a builder with extensive experience in roofing who was called by Polladio, put it no higher than to say that some of the tiles may have been dislodged by the hail storm.

[14]   The corrugated steel roof sections and the tray roof, as well as the ridges and flashings, were damaged by the hail storm. The surfaces of the steel roofs suffered indentations on all roof planes. The lead heads on a number of nails were knocked off, exposing the rusting nail shanks. In some areas, the hail penetrated the roof. Temporary repairs were carried out by Polladio’s builder, Mr Fridd and his company, David Fridd Building Ltd, on 25 November 2019, 20 December 2019, 22 June 2020, 27 November 2020, 10 February 2021, 17 February 2021, 14 August 2021, 12 January 2022, 18 January 2022, 3 May 2022 and 9 May 2022.

Is the damage to the roof covered by the policy

[15]Again, there was no dispute in this regard.

[16]The policy insured Polladio in the following terms:

We will indemnify you against accidental loss to insured property, occurring during the period of insurance at the situation.

[17]   Although the policy recorded that words marked in bold were defined in the policy and notwithstanding that it was marked in bold in the insurance clause, the term “accidental loss” was not defined. The words “accident” and “loss” were however individually defined.

(a)The word “accident” was defined as follows:

Accident means an event or omission that is unexpected and unintended from your point of view.

(b)The word “loss” was defined as follows:

Loss means accidental physical loss or accidental physical damage.

[18]   New India accepted in an email dated 18 November 2020 sent to Abbotts, that the corrugated and flat tray parts of the hotel roof suffered “loss” as defined in the policy. Before me, Mr Napier, for New India, also accepted that the hail damage to the roof of the hotel arising from the hail storm constituted accidental loss to the insured property, occurring during the period of insurance at the situation. This was an appropriate concession—the hail damage to the hotel roof was clearly covered by the insurance clause in the policy.

The exclusion clauses

[19]New India relied upon cls 5.5.3(c) and 5.6.1(c). Those clauses read as follows:

5EXCLUSIONS

…

5.5This policy does not insure any of the following:

…

5.5.3    Loss caused by any of the following:

…

(c)       rust, action of light, or inherent nature of the property.

This exclusion only applies to the insured property first affected. It does not apply to any resultant accidental loss to other parts of the insured property.

5.6This policy does not insure:

5.6.1Any of the following types of damage to insured property:

…

(c)       marring and scratching.

…

[20]   Clause 5.5.3(c) is said by New India to exclude the loss claimed by Polladio for holes punched in the rusted parts of the corrugated steel roof sections of the roof and for the damage to the lead head nails. Clause 5.6.1(c) is said to exclude the loss claimed by Polladio for the indentations on the steel roof sections of the roof.

(a)Clause 5.5.3(c)—holes/damaged nail heads

[21]I deal first with the rust exclusion—cl 5.5.3(c).

[22]   Polladio noted that the clause excluded any loss that was “caused by … rust”. It submitted that, in the insurance context, “caused by” refers to proximate cause, and that the proximate cause is the dominant or effective cause of the loss or damage. It accepted that if there are two or more causes of equal efficiency and one is expressly excluded, then there is no cover, but said that this principle has no application in this case because the hail storm caused the damage and not the rust. It was argued that what was or was not the proximate cause is a question of fact, involving a pragmatic and common-sense assessment of the combination of factors giving rise to the claimed loss. It said that the proximate cause of the loss in this case was the hail storm and not the presence of rust and that this was so, even if the roofing metal at some locations was weakened by rust and even if, in the absence of rust, the hail would not have penetrated the metal or knocked off the heads of the lead headed nails.

[23]   New India argued that the holes punched in the roof and the damage to the lead head nails only occurred in those areas already weakened by rust. It was submitted that on the evidence there were no clearly identifiable fractures in areas with sound

metal which were a direct result of the hail damage. It argued that the hail exposed weaknesses where there was already corrosion and highlighted the already existing need for repairs and maintenance. It was submitted that hail damage highlighted rust weakened spots, some of which had already started to perforate the roof metal, and that the roof required repairing or replacing due to its age and condition and not as a result of hail damage.

[24]   Under the policy, hail is an insured peril; rust is an excluded peril. The Court must seek to identify a single proximate cause of the claimed loss if it can. The proximate cause is not necessarily the last in time. Rather, the proximate cause is the cause adjudged the efficient or dominant cause.1

[25]I turn to the evidence.

(a)Mr Fridd acknowledged that rust was starting to appear in places on the roof. While he accepted that the roof was showing areas of rust, he commented that it did not leak before the hail storm. In cross- examination, Mr Fridd said as follows:

Q.… And you’re aware … that both Mr Cowperthwaite and Mr Newbol[d] … will give evidence, … that perforations or holes in the roof had only occurred on roofing material that was suffering from rust, aren’t you?

A.         Surface rust, yeah.

Q.         And that’s the case isn’t it?

A.Most of the holes have been – they’ve been damaged through the surface rust, the hail.

Q.         Well not most, all of them.

A.All the holes, the rust, where they’ve been hit by hail, have put holes in them.

Q.Yes. But let’s be quite clear, in case there’s now confusion. Absent rust, there’s no holes, is there?

1      AMI Insurance Ltd v Legg [2017] NZCA 321, [2017] 3 NZLR 629 at [45]; see also Robert Merkin and Chris Nicoll (eds) Colinvaux’s Law of Insurance in New Zealand (2nd ed, Thomson Reuters, Wellington, 2017) at [3.3.2(1)].

A.         Just dents, yes.

Q.         Just dents thank you. …

Mr Fridd did not expressly refer to the damage to the nail heads in his evidence-in-chief. He was however cross-examined in relation to this issue. The following exchange occurred:

Q.Well Mr Newbold will say that … the lead head nails were corroded, and that the lead was causing localised corrosion around the fastened head.

A.Yeah and if the hail hadn’t have hit them, they would still be in place and they wouldn’t have been an issue, but the hail’s actually hit the lead head nail and knocked the head of it, at the time, that’s what caused that. So if the hail hadn’t of hit, those lead head nails would still be in one place.

(b)Mr Cowperthwaite said that the hail storm did not affect the structural integrity or functionality of the roof, except in those areas where the impact of the hail increased the size of or created holes where the metal was already weakened from underside corrosion. He did not resile from these views when he was cross-examined. He also commented in his evidence-in-chief that the missing lead heads on nails showed that the nail shafts were rusting and starting to fail. He considered that this was a typical situation in roofs approaching 50 years of age.

(c)Mr Newbold, a roofing specialist called by New India, agreed with Mr Cowperthwaite’s view. He also said that the hail had dislodged some lead heads off roofing nails, but that that is a common result of dissimilar metal corrosion between the lead and the steel on lead head nails. He commented that “absent rust, hail would not have dislodged the lead heads”.

[26]   I am satisfied that the hail storm exposed weaknesses where there was existing corrosion; it knocked holes in rust weakened spots; it knocked off the heads of lead head nails where the shafts of the nails were rusted. Leaks as a result of the hail damage appeared but only in rust weakened areas; there were no clearly identifiable fractures in areas where sound metal was hit by the hail. Put another way, absent rust,

the hail did not punch holes in the roof. Similarly, without rust, the hail would not have damaged the nail heads. On the evidence, there were two independent causes of the holes punched in the roof which resulted in leaking and of the damage to the nail heads—namely, the rust and the hail. On the evidence, both were effective contributors to the loss suffered.

[27]   Where there are two effective and independent causes of a loss claimed under an insurance policy, one within the policy and the other excluded by it, the exclusion prevails.2 This is known as the Wayne Tank principle, after the case in which the principle was settled.

[28]   The leading authority dealing with the issue in this country is the decision of the Court of Appeal in AMI Insurance Ltd v Legg.3 In this case, the Leggs built and then set fire to a rubbish heap on their lifestyle block. Some of the material in the rubbish heap came from farming activity on the lifestyle block and some came from work undertaken by a separate landscaping company run by the Leggs. Several weeks after the fire appeared to have gone out, the remains of the heap unexpectedly reignited in dry conditions, causing extensive damage to neighbouring properties. The Leggs were liable to the New Zealand Fire Service Commission and to their local authority for the costs of putting out the fire. They sought indemnity from their insurer—AMI. The insurance policy extended to legal liability for burning green waste and rubbish from the Leggs’ farming activities on their lifestyle block; the policy however contained an exclusion for damage arising out of or in connection with any other business. The insurer said that the exclusion applied because some of the material in the rubbish heap came from work undertaken by the Leggs’ landscaping business and that there was a sufficient connection between that business activity and the damage. It argued that causation was unnecessary and that it sufficed if the one thing “ha[d] to do” with the other. The Court of Appeal stated as follows:

[46] The Wayne Tank principle — it is an aid to contract interpretation,  rather than a rule of law — states that where a loss has two effective and interdependent causes, one within the policy and one excluded by it, the exclusion prevails. The rationale is that where an insuring

2      Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corporation Ltd [1974] 1 QB 57 (CA) at 67–68 per Lord Denning MR, at 69 per Cairns LJ and at 74–75 per Roskill LJ.

3      AMI Insurance Ltd v Legg, above n 1. (Footnotes omitted).

clause and an exclusion are found together, one arrives at the parties' intent by subtracting the latter from the former. …

…

[51]The Wayne Tank principle is … consistent with New Zealand courts' usual approach to insurance contracts, which are interpreted in the same way as any other, the overall objective being to ascertain the mutual intention of the parties. Exclusion clauses are construed narrowly, but not in a strained or artificial way that deviates from this general approach. …

[52]This is a case of two interdependent causes, neither of which can be isolated as the cause of the fire on … On the facts, AMI proved on the balance of probabilities that the excluded cause — [landscaping business] material — was effective.

[29]   In the present case, hail damage is covered by the policy but loss arising from rust is not. I have found that both were effective and independent causes of the loss suffered by Polladio in respect of the holes and nail head damage. Applying the Wayne Tank principle, the rust exclusion contained in the policy must prevail. In my judgment, the loss which Polladio claims in respect of holes punched in the hotel roof in areas which were already rusted, is excluded by cl 5.5.3(c) of the policy; so is loss in respect of the damage to those lead head nails which were already rusted.

(b)Clause 5.6.1(c)—the denting

[30]   I now turn to the indentations in the steel sections of the roof which were caused by the hail. New India says that this damage is excluded by the marring exclusion in cl 5.6.1(c) of the policy.

[31]   The word “marring” is not defined in the policy. Relevantly, it is defined in the Shorter Oxford English Dictionary as follows:4

Damage so as to render useless, ruin, impair the quality. Now chiefly, detract from or impair the perfection of, disfigure.

Deteriorate, spoil.

[32]   The evidence suggested that marring exclusions are of long standing in most material damage policies. Mr West, the head of underwriting at Rosser Underwriting

4      Shorter Oxford English Dictionary on Historical Principles (6th ed, Oxford University Press, Oxford, 2007) vol 1, A-M, at 1703.

Ltd, gave evidence that the underwriting intention behind a marring exclusion is to exclude damage that is primarily cosmetic in nature, because the property insured— buildings and plant—will most likely suffer cosmetic damage during the course of its useful life.

[33]   Notwithstanding the evidence that a marring exclusion is common in most material damage policies, there does not appear to be any case law dealing with the topic in New Zealand. Nor could counsel or my research clerk find any relevant case law in the United Kingdom, Canada or Australia. Mr Josephson, for Polladio, referred to two American cases. In both cases, marring exclusions were applied to preclude insureds from recovering for floor tiles chipped by dropping items on the tiles.5 My research clerk found a further case to similar effect dealing with cosmetic damage to the hull of a boat.6 These cases suggest that cosmetic damage is excluded by a marring exclusion, but that more major damage affecting the utility of the insured property is not.

[34]   This is consistent with cl 5.6 of the policy. It provides that the policy excludes damage to the insured property from pollution, slowly developing deformation or distortion, scratching, gradual deterioration and rot or mildew—all broadly wear and tear type damage. Applying the ejusdem generis principle, the marring exclusion would seem to be confined to gradual and/or cosmetic damage.

[35]   It was Polladio’s case that the denting to the hotel roof caused by the hail was major. It was New India’s case that the denting was cosmetic only and did not affect the functionality or performance of the roof.

[36]I turn to the evidence.

(a)Mr Fridd explained that the hail dented the roofing iron. He suggested in his evidence-in-chief that this damage would promote rust, because water sitting in the dents caused by the hail would accelerate the corrosion process. He was cross-examined by reference to photographs

5      Ergas v Universal Property and Casualty Insurance Co 114 So 3d 286 (Fla App 4 Dist 2013);

Gamero v Foremost Insurance Co 208 So 3d 1195 (Fla App 3 Dist 2017).

6      Cherewick v State Farm Fire and Casualty 578 F Supp 3d 1136 (SD Cal 2022).

showing the hotel roof. He acknowledged that there was no water sitting in the dents shown in the photographs. He explained that this was because the roof was reasonably steep and because the photographs were taken on a “nice sunny day”. It was put to him that given the pitch of the roofs, and the comparatively small size of the dents, any water would rapidly evaporate so that there would be no ponding. He responded that, in his view, over time the roofs would “probably deteriorate, definitely”, but he accepted that he had not seen any water sitting in the dents on the roof. He explained that that was because he was not up there all of the time.

(b)Mr Cowperthwaite said that most of the indentations were minor only, and that, from his observations, the damage is cosmetic; the indentations have not fractured the sound metal in the roofing sheets. He acknowledged that there has been and continues to be some ponding in the area of tray roofing, but expressed the opinion that this is caused by a sag in the substrate under the roofing. He acknowledged that there were shallow indentations in the surface of the tray area from hail impact but he considered that this was not affecting the performance of the roof. He stated that water would not pond for sufficient time for it to materially affect the performance of the roof because the indentations are shallow and the roofs are “mainly pitched”. He said further that what little water may sit in indentations would soon evaporate and that it would not accelerate the corrosion process.

(c)Mr Newbold stated that the dents caused by the hail did not affect the structural integrity of the roof. He considered that the durability of the roof would only be affected if the dents resulted in prolonged ponding.

[37]   A number of photographs of the roof were produced in evidence. The photographs showed the denting, but insofar as I could ascertain, most of it was relatively minor. There was no evidence of ponding in the photographs other than on the tray roof section.

[38]   I accept on the evidence that, except in those areas where the hail punched holes in the roof, the integrity and functionality of the galvanised steel roofing was not adversely affected by the hail. The majority of the roof is pitched and water will not sit on most of the roof in any quantity for any extended time. Further, the majority of the indentations are relatively shallow. There are some larger indentations but the evidence suggested that these were likely to have been caused by people moving about on the roof rather than by hail. The evidence suggested that the flatter section of roofing—the tray section—suffers from ponding, but not as a result of indentations caused by the hail; rather the area is ponding because of the deterioration of the underling roof frame. In my judgment, the indentation damage to the roof is aesthetic and cosmetic.

[39]   Marring refers to blemishes that detract from the perfection of the item insured. It conveys the idea of superficial damage affecting the appearance of an item, which impairs aesthetics rather than functionality. In my view, the marring exclusion contained in the policy applies to the indentation damage to the roof from the hail storm.

[40]   That is enough to decide the case, but in case I am wrong in relation to the application of the exclusion clauses, I briefly consider whether or not Polladio breached the terms of the policy.

Did Polladio breach the policy conditions?

[41]   New India alleged that, regardless of the application of the exclusion clauses, Polladio’s claim has to fail because of its dishonest statement as to when the hail damage was discovered.

[42]   Mr Lim, in his initial brief of evidence, said that he did not initially realise that the hail damage might be covered by the policy and that he only became aware of this some months after the storm when he was talking to Abbotts. He said that after receiving this advice, Polladio made a claim on its policy. He referred to the claim advice form which he filled out on 3 September 2020 and which Abbotts sent to New India on 11 September 2020—some 10 months after the hail damage occurred.

[43]   In the course of cross-examination, Mr Lim was shown an email which he sent to Abbotts on 16 July 2020, where he stated as follows:

A few weeks ago, our builder here in Timaru noticed that The Grosvenor Hotel suffered quite a bit of hail damage.

Can you kindly look at our policy and advise us re where we stand with this please?

Is it covered by our insurance policy, and what excess amount are we looking at?

Mr Lim was asked whether he was truly unaware of the damage until his builder,   Mr Fridd, noticed it a few weeks before the email of 16 July 2022. Mr Lim confirmed this.

[44]   Mr Fridd said that he repaired the hotel roof on various dates, commencing on 25 November 2019. He said that these were “repairs to the roof, that was just making safe, stopping leaks”. Mr Lim’s evidence noted above was put to him. Mr Fridd responded as follows:

I think it’s just some confusion, I’ve never been in here before, this is my first time and probably [Mr Lim’s], so everyone was a bit nervous. So those dates there, [the repair dates] we were just making safe to any damage that was caused by the hail. No one knew at the time that there could be a possibility of a claim for hail damage.

When asked again whether or not Mr Lim was telling the truth when he told Polladio’s insurance broker that the damage caused by the hail was only discovered in July 2020, Mr Fridd responded:

I’m not sure. I don’t know how to answer that … I think [Mr Lim] has just got confused under oath …

I instructed Mr Fridd not to speculate. He subsequently confirmed that the “make safes” were as a result of damage caused by the hail.7

7      As a result of this evidence, New India sought leave to amend its statement of defence to add in an affirmative defence alleging breach of the policy conditions by Polladio. I took an adjournment to give Polladio the opportunity to consider its position, obtain any relevant additional discovery and, if necessary, to file an additional brief from Mr Lim. In the event, the amended statement of defence was filed by consent, as was a reply from Polladio. Mr Lim was recalled to give additional evidence, also by consent.

[45] Mr Lim was recalled. He said that he was out of New Zealand from 11 November 2019 to 10 January 2020. He said that the daily hotel operations were undertaken by duty managers and that the relevant duty manager told Mr Fridd about the leaks on 20 November and again on 9 and 11 December 2019. He confirmed that the duty manager had the authority to authorise trades people to deal with such issues and that he was not consulted in relation to the leak issues in either November or December 2019. He further asserted that he was not aware of the issues which had arisen as a result of the hail storm and that he was not aware of any other leak repairs undertaken by Mr Fridd between December 2019 and June 2020. He did however acknowledge that, on 11 May 2020, he had sent an email to Abbotts in substantially the same terms as the email sent on 16 July 2020 referred to at [43] above. He said that he had forgotten about this earlier email.

[46]   Mr Lim was extensively cross-examined about this evidence but the answers he gave were not particularly helpful.

[47] Mr Lim’s evidence was not particularly satisfactory. Even acknowledging that English is not his first language, it seemed to me that he frequently sought to avoid Mr Napier’s questions in relation to when he first became aware of hail damage to the hotel roof. In any event, even on his own evidence, he knew there was hail damage to the roof at the latest by 11 May 2020. It was probably earlier. He ultimately acknowledged in cross-examination that he first became aware of the hail damage in autumn 2020. He was reluctant to explain what he meant by autumn, but eventually, in answers to questions from me, he said that he meant April/May 2020. He accepted that the statement made by him to the broker in the email of 16 July 2020, (which was relayed in large part by Abbotts to New India on 14 September 2020 as noted at [4] above) was untrue.

[48]Relevantly, the policy provided as follows:

7CLAIMS CONDITIONS

7.1Making a claim on this insurance

You must:

(a)       Tell us as soon as you are aware of any loss covered under this policy

…

7.3      Dishonest or fraudulent claims

If your claim is dishonest or fraudulent in any way, we may decline your claim, wholly or partially and, at our discretion, declare that this policy is unenforceable from the date of the dishonest or fraudulent act.

8GENERAL CONDITIONS

8.1Comply with the policy

You must meet the following conditions BEFORE we are obliged to pay you:

8.1.1You must comply with all the policy terms, and

8.1.2Provide true statements and answers when you:

…

·make any claim under this policy.

[49]   As can be seen, the policy required Polladio to tell New India as soon as it was aware of any loss covered under the policy. Mr Lim was aware of the hail damage by April/May 2020 at the latest. He did not fill out the claim form until early September 2020 and it was not forwarded to New India until 14 September 2020. There was a breach of cl 7.1(a) in the policy. This breach however has not caused any prejudice to New India and s 9(1)(b) of the Insurance Law Reform Act 1977 applies.

[50]   The policy also provided that New India could decline a claim in the event of dishonesty. Here, I am satisfied that Mr Lim was dishonest when he advised Abbotts in September 2020 that the hail damage to the hotel roof had only been discovered “a few weeks earlier”. When the broker was asked by New India why the claim had been delayed, the broker relied on Mr Lim’s advice and told New India that the hail damage had only recently been discovered. That advice was relayed by the broker to New India in mid-September 2020. The advice was untrue and as a result, Polladio breached cls 7.3, 8.1.1 and 8.1.2 in the policy. As a consequence, New India is entitled

to decline Polladio’s claim, even if it is not excluded by the rust and marring provisions in the policy.8

Result

[51]For the reasons I have set out, I find that:

(a)the roof of the hotel was damaged in the course of a hail storm in Timaru on 20 November 2019;

(b)the hail damage to the roof of the hotel constituted accidental loss to the insured property, occurring during the period of insurance of the situation;

(c)Polladio’s losses resulting from the hail storm are excluded by cls 5.5.3(c) and 5.6.1(c) in the policy; and

(d)Polladio breached cls 7.3, 8.1.1. and 8.1.2 of the policy and New India was entitled to decline to pay the claim, if the same had not been excluded by the terms of the policy.

Costs

[52]   New India is the successful party. It is entitled to its reasonable costs and disbursements. It is my preliminary view that costs should be fixed on a 2B basis. If counsel agree, they should be able to finalise costs between their respective clients. If they disagree, I direct as follows:

(a)any claim to costs and disbursements is to be filed by way of memorandum within five working days of the date of this judgment;

(b)any response is to be filed within a further five working days; and

8      Sampson v Goldstar Insurance Co Ltd [1980] 2 NZLR 742 (SC); Purcell v The State Insurance Office (1982) 2 ANZ Insurance Cases 60–495; National Insurance Co Ltd v Van Gameren [1986] 2 NZLR 374 (HC); NRMA Insurance Ltd v McCarney (1992) 7 ANZ Insurance Cases 61–146.

(c)memoranda are not to exceed five pages.

The Court will then deal with the issue of costs and disbursements on the papers unless it requires the assistance of counsel.

Wylie J