Villa owner challenges replacement cost ruling

MICHAEL BERRY
Last updated 05:00 26/12/2012
Aynsley Tce villa

CHARACTER HOUSE: The Aynsley Tce villa, which was built in 1911 and demolished after the quakes, is the subject of a court battle between insurer and insured.

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A court ruling on how government-owned insurer Southern Response should calculate its liability for a century-old Hillsborough villa has been appealed against by the owner.

The trustee-owner of the Aynsley Tce home, which was badly damaged in the quakes and has been demolished, went to the High Court to settle a dispute about the replacement cost of the house.

The property had a 2007 rateable value of $711,000 and was on TC3 land (technical category 3, which is vulnerable to severe liquefaction). The new home was being built on a different site as allowed under the insurance policy.

It is understood the new home will not be built in the style of the original and the agreed liability will be used to fund the construction, which has begun.

On December 11, High Court Justice Robert Dobson ruled that Southern Response must pay to rebuild the Edwardian villa with materials of the same quality, as long as the parts and techniques are still commonly used.

Southern Response should have to pay to reinstate the features and style of the irreparably damaged character house, but it could use cheaper methods or materials if the look or use of the new building would be unaffected, he said.

Late last week, the property's trustee-owner, Turvey Trustee, filed its intention to challenge Justice Dobson's judgment in the Court of Appeal.

In its notice of appeal, Turvey said the ruling had no evidential substance and would not result in the replacement - in appearance, function and potential - of the original home. Also, the judge should not have implied in his decision that a claimant who wants to rebuild on a different site under the policy needs the insurer to approve the new spot, Turvey Trustee said.

Justice Dobson had reasoned that liability should be calculated taking into account methods common in the building of an Edwardian-style villa in Christchurch in 2012, rather than for the cost of the old-fashioned workmanship such as in ceilings, or unseen timber such as rimu, which is more expensive now.

If the timber was exposed, it should be replaced with a similar quality wood, but if it was painted, pine would suffice, he concluded.

A second part of the High Court judgment was also challenged. It related to how the extra compliance costs of building a house that fits the current building code should be calculated when building on a different site.

The judge had reasoned the costs should be the actual costs incurred at the new site.

Turvey said that did not fit with the wording of the policy and it was impractical to separate the additional costs from the rest of the building from the cost of replacement.

Southern Response is the government-owned claims manager of failed insurer AMI after the sale of its continuing business to IAG in April.

Southern Response would not comment.

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