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Triple indemnity? Court settles quake claims dispute

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A dispute over whether the maximum sum insured can be claimed more than once, or for separate events, has been decided by a New Zealand court.

Tower Insurance was defending its decision to decline a claim for damage to a house that was sustained in three separate earthquakes.

The dispute was lodged with the Canterbury Earthquakes Insurance Tribunal by the plaintiffs after their claims under one policy for property damage caused by three quakes between September 2010 and June 2011 were rejected.

The tribunal subsequently referred the matter to the High Court – the equivalent of an Australian state supreme court – for its opinion on the case.

The plaintiffs, who own a 100-year-old property through a trust, had submitted claims for damages suffered in each of the three major quakes that struck the area.

But Tower argued it is only required to make one payment up to the cap set by the policy, which it has done.

Justice Rachel Dunningham agreed with Tower’s argument, saying the maximum sum insured value of $NZ455,000 ($434,588) contained in the home policy “is not a per event cap”.

They plaintiffs were paid the statutory cap of $NZ100,000 ($95,489) by the Earthquake Commission for separate damages caused by the three quakes.

Independent experts hired by the plaintiffs assessed repairs to the house would cost about $NZ3.03 million ($2.89 million) at August 2017. The house has not been repaired yet.

“The primary issue in dispute is whether the maximum sum insured, $NZ455,000, can be claimed once or in each earthquake event,” the ruling made by Justice Dunningham says.

“There is nothing to suggest that the sum of $NZ455,000 is a per event limit. Rather, it is the limit on the sum insured, which is clearly expressed to be indemnity value only.

“The market value is not a cap per event. Therefore, in practical terms, Tower has succeeded in its argument that the $NZ455,000 is not claimable per earthquake event.”