9.05.2018

Jarden v Lumley [2016] NZCA 193

Background

Mr and Mrs Jarden lived on a lifestyle property north of Rolleston.  Their house, built in 1998, suffered damage in the Canterbury earthquakes.

The Jardens had a residential insurance policy with Lumley, which required Lumley to cover any loss occurring “as the direct result” of the earthquakes.  However, this obligation did not commence until EQC paid (or agreed to pay) its statutory cap for each earthquake.  In broad terms, Lumley’s liability was to cover the difference between the actual cost of repair to the house and earthquake cover provided by EQC ($100,000 plus GST per earthquake).  This is also known as ‘top-up’ cover.

The Jardens lodged claims with EQC and Lumley for damage to their house for two earthquakes (4 September 2010 and 22 February 2011), and subsequently brought proceedings after the claims were not resolved.  Shortly before trial, the Jardens reached a settlement with EQC ($123,850 according to the Court of Appeal).  EQC’s payment was apportioned 90 per cent to the September 2010 earthquake, and 10 per cent to the February 2011 earthquake.  As a result, EQC only paid its statutory cap for the September 2010 earthquake.

The Jardens’ position was that Lumley’s liability under the policy was triggered as soon as the repair costs to their house exceeded the amount of the EQC settlement.  Lumley disagreed, and argued that it should not be automatically bound by the settlement that Jardens had agreed with EQC.

Decision

 The Court of Appeal accepted Lumley’s argument that a private insurer is not bound to accept an agreement reached between an owner and EQC regarding EQC’s statutory obligations.  Lumley was entitled to be satisfied that the amount paid (or agreed to be paid) by EQC equates with EQC’s obligations under s18 of the Earthquake Commission Act 1993.  Until the final repair costs to the Jardens’ house had been determined and the monetary effect of the apportionment of the repair costs between the September 2010 and February 2011 earthquakes had been quantified, Lumley’s liability to pay top-up cover could not be determined.

Those matters may be resolved by agreement between EQC and Lumley, but failing such agreement they will need to be determined by the High Court.

Do you need expert legal advice?
Contact the expert team at Hesketh Henry.
Kerry_100x100 1
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

Related Articles / Insights & Opinion

Don’t Let Your Guard Down
The risks arising from the use of unguarded machinery are well-known to the point of being blindingly obvious.  The measures to ensure the safe operation of machinery are usually straightforward.  W...
19.02.2019 Posted in Health & Safety Law
CONSTRUCTION CONTRACT REFORM: Ten Guidelines the Government could Adopt
“We need to lead by example and if there are things that we can do to take a leadership position with that industry then we should be.” Prime Minister Ardern[1] As 2018 draws to a close a...
21.12.2018 Posted in Construction Law
Nearly there! Only a few days of 2018 left!
Just a quick note from the Hesketh Henry Employment team about what’s on the horizon:
18.12.2018 Posted in Employment Law
When did you last have your Ts & Cs reviewed?
The Commerce Commission recently announced that, after its investigation of jeweller Michael Hill Limited, the company was fined $169K for breaching its obligations in relation to the extended warrant...
13.12.2018 Posted in Corporate & Commercial law
Time for Change (again!)
The winds of change are once again blowing through the employment law landscape.
10.12.2018 Posted in Employment Law
Summer Maritime Update
Welcome to our summer maritime update - November 2018
27.11.2018 Posted in Maritime Law
Employment Litigation Costs: In for a penny, in for a pound?
Vindication is frequently offered as a motivation for litigation.
Send us an enquiry
For expert legal advice, please complete the form below or call us on (09) 375 8700.
  • This field is for validation purposes and should be left unchanged.