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Nitya Nand & Sunita Nand v Tower Insurance Ltd [2016] NZCA 1455

Written by Christina Bryant, Nick Gillies, Helen Macfarlane, Gennise Luen, Hannah Yiu, Anna King, Nina Thomson, Mary Bettersby, Richard Belcher, Rob McStay and Ella Collis on September 19th, 2016.

This case concerned a defendant's summary judgment application by Tower against its insured, Mr and Mrs Nand.  The Nands' policy contained an exclusion for losses arising from wilful acts or omissions by "you".  Tower argued that "you" included the Nands' children, which entitled it to decline a claim for fire damage while the insured property was rented to their son.  Tower's application was declined.
In 1999, the Nands bought a rental property in Flatbush, Manukau and insured it with Tower.  On 1 July 2012 there was a fire at the property and the house was extensively damaged.  The Nands’ adult son had been living in the house with his partner and young child, allegedly as a tenant.
The Nands accepted that, without their knowledge, their son let other people on to the property who began manufacturing methamphetamine and that a fire was accidentally started as a result of something going wrong in the process.
Cover under the insurance policy - The meaning of "you"
The policy defined "you" to include "the insured, your spouse and your children normally residing" at the premises.  Tower claimed the son was a child of the insured normally residing at the premises and therefore fell under the definition of "you" for the purposes of the policy.  It followed, under Tower's reasoning, that the policy excluded cover since the fire damage was due to an "unreasonable, criminal and reckless or wilful act or omission … by you".  Tower also relied on the policy conditions that the insured would "not cause or facilitate loss or damage … by any unreasonable, reckless or wilful act or omission".
The Court found the son was not an "insured" under the policy – the only property insured was that of the landlord, not the tenant.
Nonetheless, the Court considered what the situation would have been had the son been co-insured.  With the possible exception of jointly owned property, misconduct by one insured will not deprive another innocent insured of cover (relying on Maulder v National Insurance Co of New Zealand Ltd [1993] 2 NZLR 351).  In the present case, the Court concluded that, since the deliberate misconduct of an insured would not trigger exclusions depriving another innocent insured of cover, "the same must also apply when the person causing the loss is not insured under the policy at all".
Further, Tower could not rely on a breach of the requirement not to recklessly cause or facilitate loss or damage.  That condition applied to "you and any person in charge of your property with your permission".  This last language could have encompassed the son.  However, such an interpretation would be inconsistent with the exclusion for deliberate damage caused by anyone residing at the premises, which contained a specific carve-out for damage deliberately caused by tenants.  The more specific language of the exclusion and its exception was found to prevail over the more general wording of the policy condition.
Finally, there was insufficient evidence to meet the summary judgment standard that the son had caused or facilitated the fire by unreasonable, reckless or wilful acts of omissions. 
The Court dismissed Tower’s summary judgment application and awarded the Nands costs.
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