IAG New Zealand has won an appeal against a Tribunal decision that wanted to make insurers do more when checking and paying claims for home insurance.
Bell Gully, one of New Zealand’s largest law firms, called the judgment “significant” on Tuesday and says it provides important confirmation around when insurance companies need to pay for repairs and how quickly they must assess claims.
The judgment, dated and delivered by Justice Anne Hinton on March 6, found that among discussion of common practices within the insurance industry – like the timing of payment for repair costs and the handling of professional fees – issues raised by the case were “significant for the insurance industry”.
IAG NZ had appealed against a Tribunal decision from December 2022 between IAG NZ and homeowner Willam Degen whose house was under an NZI ‘Supersurance House’ policy.
NZI was bought by IAG NZ in 2003.
The judgment says Degen’s house was damaged in the Canterbury Earthquake Sequence, and there was a “dispute” with IAG regarding whether the house needed to be rebuilt or repaired, and the extent of repairs required.
In December 2022, the Canterbury Earthquakes Insurance Tribunal (CEIT) found in favor of IAG regarding the repairability of the house but made other findings in Degen’s favor regarding the scope of repairs required.
The CEIT ordered IAG to pay all repair costs upfront upon Degen entering a building contract, contrary to policy terms.
However, the High Court overturned this in March.
In an assessment of the case on Tuesday, Bell Gully partners David Friar and Sam Hiebendaal and Senior Associate Sarah Cahill said that IAG argued in the High Court that upfront payment from the insurer contradicted the insurance policy terms (which stated that IAG would cover repair costs as they’re incurred).
The High Court agreed with this argument and overturned the Tribunal’s decision, ruling IAG was only obligated to pay repair costs as they were incurred, provided they were reasonable and related to the scope of work.
“Once an insured submits a valid claim an insurer must settle it quickly and fairly. Where there is a dispute about the validity of the claim (including as to quantum) the insured bears the burden of proving the claim,” Justice Hinton says in the judgment.
Bell Gully says the CEIT also ruled in December that IAG had a duty to accurately assess the damage to Degen’s property, based on the Fair Insurance Code’s requirement to settle valid claims “quickly and fairly”.
The Tribunal had found IAG in breach of this duty due to inadequate assessments, holding IAG responsible for certain professional fees incurred by Degen for scoping repairs, even if not covered by the policy.
But the High Court disagreed with this in the March judgment, stating insurers don’t have this duty and the burden of proof lies with the insured.
“If it is discovered during the repair process that this assessment was inadequate, an insurer will be liable to pay to repair the further damage. However, that is quite different to the situation here where an insured has disputed the insurer’s assessment in the first place. In those circumstances, the burden of proving damage or the scope of repair is on the insured,” Justice Hinton says in the judgment.
Bell Gully says the court’s decision confirms when insurance companies must pay for repairs and review claims: when costs are spent and within a reasonable timeframe, respectively.
“That said, the Court did leave the door open to future development in the scope of the insurer’s duty, saying “there may be an opportunity for the courts to consider imposing a duty on an insurer to accurately assess claims” in an appropriate case. However, it did not give any indication as to the type of case that it considered to be appropriate, and it remains to be seen whether this “never say never” approach is taken up by a Court in the future.”
4 Comments
Insurance is a gamble most of us are finding out is too expensive and unreliable to entertain, unless one is in debt to the bank for a housing loan.
The FIRE industry is gobbling up our after tax income at an alarming rate, leaving little room for further discretionary spending on other goods produced by society.
No wonder people cave in early to insurers. It ends up being my engineers report vs the insurance companies engineers report and the later will minimise the extent of repairs to the point of becoming very questionable.
Very difficult to work out how to resolve this as putting too much weight on the insured engineers report/s allows for corruption and fraud.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.