9.05.2018

LWR Durham Properties Ltd (in rec) v Vero Insurance NZ Ltd & Ors [2016] NZHC 826

The High Court declined to order the discovery of insurer’s reserving information.  The decision considers the proper purpose of discovery in relation to insurance claims and the role of reserves.

Background

The plaintiff, LWR Durham Properties Ltd, brought proceedings against its insurers over damage to its buildings suffered in the 2010/2011 Christchurch earthquakes.

In a case management Minute the Court directed tailored discovery of six categories of documents (which did not include a seventh category, being “all reserves set by insurers”, proposed by the plaintiff at the time).  The plaintiffs subsequently applied for an order that its insurers disclose their reserves.

Reserving

An insurance reserve is the amount of money an insurer expects to pay for an individual claim.  Insurers set reserves in order to forecast the total amount to be set aside for meeting current claims.  Reserves are usually revisited during the life of a claim as further information becomes available.

Relying on Prattley Enterprises Ltd v Vero Insurance Ltd [2015] NZHC 1444, the plaintiff argued the reserves were disclosable because they evidenced the insurer’s view of liability and went to the credibility of its witnesses.

The defendants maintained the reserves were not relevant to any issues in the proceeding, and that it would be improper to discover these for the mere reason of seeking to impugn a witness’ credibility.

Decision

Matthews AJ held the reserves were not discoverable as they were “a relatively unsophisticated or inexact estimate of the possible financial consequences of claims as they are made, and as [the insurer] update[s] it”.  It might have some “scant value” as cross-examination material, but that was not a sufficient or proper basis for ordering its discovery.

Matthews AJ entertained the possibility the reserves could be relevant to the insurer’s belief the plaintiff’s claims for reinstatement were brought too late.  His Honour suggested they might show an assessment of possible liability that may be relevant to the question of prejudice from not having had an opportunity to assess damage after each earthquake.   However, this was dismissed on the basis that it was not subject to detailed argument.

Prattley was distinguished.  It concerned the re-opening of a settlement agreement, meaning the insurer’s knowledge at the time of the agreement was in issue.  Discovery of the insurer’s reserves was therefore relevant for reasons specific to that case, which did not apply here.

What is perhaps surprising about this decision is the apparent willingness of the Court to even consider what a party might think it may have to pay or be held liable for is discoverable (other than in limited circumstances, such as Prattley).  Reserving is a long established balance sheet exercise by insurers, which should not normally be disclosable.

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

Updated Subcontract Agreement: SA-2017
The SA-2009 form of Subcontract Agreement is commonly used in the construction industry. It has undergone a review and a new SA-2017 form has been produced.
3.07.2018 Posted in Construction Law & Health & Safety Law
Distribution Agreements – 6 Key Considerations
While the exact nature and terms of a distribution agreement will vary between industries and jurisdictions, these 6 issues will always be important.
28.06.2018 Posted in Corporate & Commercial law
Continued Importance of IP Protection for Manufacturers
The Ministry of Business, Innovation and Employment (MBIE) has recently released a report which identified key trends and challenges for the manufacturing sector (that report can be accessed here). Th...
28.06.2018 Posted in Corporate & Commercial law
CONSTRUCTION LAW UPDATE – JUNE 2018
Recent Construction Law Decisions and Developments in New Zealand
18.06.2018 Posted in Construction Law
Updated Standard Consultancy Agreements
Two of the most commonly used standard agreements to engage consultants are the ACENZ / Engineering New Zealand (formerly IPENZ) Short Form Agreement (“SFA”) and the Conditions of Contract for Consultancy Services (“CCCS”).
5.06.2018 Posted in Construction Law
Managing Employees’ Mental Health Issues
Ministry of Health statistics confirm that during 2016, 169,454 people accessed mental health services in New Zealand. The law of averages suggests that most workplaces will – to a lesser or greater degree – be affected at some time by an employee’s mental health issue.
31.05.2018 Posted in Employment Law & Health & Safety Law
Managing Medical Incapacity: Enough To Make You Feel Sick?
Managers and HR practitioners often tell us that dealing with employees who are genuinely too sick or injured to work is one of their least favourite tasks. Frankly, we can see why.
31.05.2018 Posted in Employment Law
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.