New Zealand: New earthquake judgment - Domenico Trustee Limited v Tower Insurance Limited

Domenico Trustee Limited v Tower Insurance Limited

[2015] NZHC 981

This recent earthquake judgment looks at whether the insurer or the insured has the right to elect how settlement is reached under the policy, and also whether the insurer has made an election. It also indicates that the courts are concerned at the length of time being taken to settle the earthquake claims.


Domenico Trustees Ltd (Domenico) owned a house which was left a total loss by the Christchurch earthquakes. The house was insured for replacement value by Tower Insurance Limited (Tower) under a "Provider House Policy Maxi Protection" policy. Tower admitted liability for the damage, but Domenico and Tower have been unable to agree on an amount payable under the policy.

Initially, Tower offered Domenico an amount estimated by its assessors as being the cost of rebuilding the house. This offer recorded that the right in the policy for a cash payout was for indemnity value only, but that Tower was currently offering cash settlement on the basis of the full rebuild cost.

Domenico queried some of the amounts in Tower's offer, and Tower responded with a second offer to pay $254,501, and to also manage the demolition of the house. Domenico responded by issuing court proceedings, seeking a cash payout of $842,392. Justice Gendall recorded that:

"Tower it seems then took the position that it was likely to carry out a rebuild itself, if Domenico did not accept, as appeared to be quite apparent, that its claim was 'seriously overstated'."

Through the course of the proceedings Domenico's claim regularly reduced, down to what became an accepted figure of $370,000.

Who has the right to elect?

Tower's policy provided that they will pay:

  • the full replacement value of the house on the current site;
  • the full replacement value of the house on another site, providing the cost is no more than rebuilding on the current site;
  • the cost of buying another house, providing the cost is no more than rebuilding on the current site; or
  • the present day value.

The policy also said that "we have the option whether to make payment, rebuild, replace or repair your house".

Justice Gendall affirmed the decisions in Skyward Aviation 2008 Ltd v Tower Insurance Ltd [2013] NZHC 1856 and Rout v Southern Response Earthquake Services Ltd [2013] NZHC 3262, noting that the "express terms of the policy provide for reinstatement as an option, and vest that option in Tower's discretion".

He said that:

"I therefore accept as beyond contention that, under the policy, Tower has, amongst other things, the right to reinstate or make a cash payment, and the choice between those options rests in its hands."

Has there been a formal election?

The primary issue in the judgment is whether Tower has elected to settle by cash payment, and cannot now elect to reinstate the house.

As Gendall J said of election:

"Its fundamental premise is that where a party has an option as between two or more inconsistent rights, when he or she selects one of them, that decision is irrevocable and there can be no resiling, as the other options irretrievably disappear from the moment the election is made... Before the Court will infer the existence of an election however, there must be clear evidence, which permits of little equivocation on behalf of the party in whose favour the power is vested."

A similar claim was raised in Skyward Aviation, where the offer to the insured, as in this case, was not one of the options strictly made under the policy. Justice Gendall reiterated what he said in Skyward Aviation, that:

"a party purporting to make an election under a policy can only make a choice between the suite of options available to it under that contract. The offer made by Tower here, as I see it, was not the choice of a direct option under the policy and, as such, simply could not have constituted an election."

In this case, discussions between Tower and Domenico always made it clear that a decision had not been made. While it was intimated that Tower had a desire and an interest in settling the claim by making a cash payment, it was also prepared to arrange for reinstatement of the house. In any event, the settlement discussions had always been in respect of a cash payout of more than indemnity value, and therefore not one of the options in the policy. There had therefore been no unequivocal election.

Election and waiver

Justice Gendall noted that election must be of a choice between one of the available options, and not an option not provided for in the relevant policy. However, he said that:

"There seems to be, however, nothing objectionable in principle for the doctrine of waiver to run alongside election to achieve, in combination, what each alone cannot. For example, there could be an election to reinstate, coupled with a waiver of the requirement that actual rebuild or repair costs are incurred. This method would permit of full recovery of the rebuild sum in a money payment. But, in the present case, waiver is not pleaded by Domenico."

It remains to be seen whether this argument would be successful in another case in which both election and waiver are pleaded, but this statement suggests that there would be merit in such a contention, if the facts support it.

Election through delay

After deciding that there had been no express election made by Tower, Gendall J then went on to consider whether there had been election through delay. He said that:

"To me it is trite that insurers should proceed with all due expedition to effect settlement or ultimate resolution upon acceptance of a claim. It is also obvious that settlement cannot occur in a case such as the present until the insurer elects the method of settlement."

Justice Gendall said that it was an "unsatisfactory state of affairs" that claims made in 2010 and 2011 have still not been settled, and no election made. He decided that:

"I do not consider it competent for Tower to make no final decision under the policy for such a substantial period of time while simultaneously pleading it has made no election – a ball it not only recognises, but actively asserts, is solely in its court. I therefore consider, by a reasonably fine margin that, as a result of effluxion of time, Tower has made an election to settle this claim by cash payment of indemnity value (present day value under the policy) as a base position."

Tower is therefore deemed to have elected to settle the policy by making a cash payout. As the election can only be for an option under the policy, this is an election to pay indemnity value, unless and until Domenico rebuilds or purchases another house, and Tower's liability increases to cover that additional cost.

The end result

As Gendall J said, "there has been no true victor in this proceeding". Tower has resisted the claim by Domenico, but has been found to have elected to make a cash payout of the indemnity value of the house. There was no evidence for that amount before the court. Justice Gendall has left this to the parties to see if it can be resolved, given that a cost of rebuilding the house was agreed by all parties at the hearing.

A copy of the decision is available here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.