High Court ruling a blow for residents
A High Court ruling that rockfall-threatened Port Hills properties may not have to be written off by insurers is being described as "game-changer" for those still to settle their claims.
Sumner homeowner Helen Kraal sought a declaratory judgment as to whether the Earthquake Commission (EQC) and Allianz should pay full replacement value for her house, which cannot be occupied because of rockfall threat.
The Wakefield Ave property was red-zoned by the Government and the house made subject to a council-issued Section 124 notice, which restricts entry.
Justice Jillian Mallon dismissed the claim, saying being deprived of the use of the house because of rockfall threat was not "physical loss . . . to the property" under the EQC Act or "damage" under the natural disaster cover in her insurance policy.
S124 notices remain on 357 red-zone properties and 11 green-zoned properties. However, many landowners have accepted a Crown buyout offer and settled with insurers.
Phil Elmey, an advocate for red-stickered Port Hills red-zoners, described the ruling as a "game-changer" for those who had not settled.
Insurance lawyer Duncan Webb said the decision had "changed the landscape significantly" for those still to receive a settlement offer, even where insurers had previously paid full replacement in S124 cases.
Some had taken the view houses could not be written off - deemed a total constructive loss - unless there was physical damage to the building. Others who have been paying out total constructive loss settlements in S124 cases told The Press they are now reconsidering their position.
"The lawyers who wrote those [legal opinions] would almost certainly change their view in light of this decision, because now it's pretty clear that if you've got a policy that says, ‘We'll cover you for physical loss or damage' . . . that won't extend to a section 124 notice," Webb said.
"There was a degree of uncertainty, and the insurers had to take a position on it. That uncertainty has now been removed."
Lawyer Grant Shand, who has clients in Kraal's situation, said insurers still needed to prove work to remove the rockfall threat was achievable if they chose to complete repairs.
"It's not cheap, and often there are issues as to where the mitigation can be done. It may need to be done on council land or another owner's land, and that causes real problems," he said.
IAG spokeswoman Renee Walker said its legal advice indicated that permanent loss of use of a property constituted a physical loss, and claims had been settled on that basis.
She confirmed the company was seeking legal review of the Kraal judgment and its effect on IAG's policy response.
"Until we have received this advice, any claims for properties with a section 124 notice not already settled will not automatically receive a constructive total loss offer," Walker said.
Despite the ruling, a Vero spokeswoman said the company would continue to review all claims on a case-by-case basis.
"The Kraal case does clear up the issue about the effect of [an] S124 in terms of insurance loss. However, Vero case managers will continue to work closely with all customers to ensure that we can progress their claims," she said.
A spokesman for Southern Response, which had been paying full replacement in S124 cases, said the company was still assessing the implications of the decision.
Elmey expected more Port Hills red-zoners would now reject the Crown offer and seek to remain in their homes by pursuing individual mitigation through the council.
"People are now left with the option of taking a very outdated red-zone offer or waiting to see what the outcome of current investigations into council liability are," he said.
Kraal's lawyer, Richard Johnstone, said his client was "absolutely gutted" and the decision was too distressing for her to speak to The Press.