New Zealand: New Christchurch earthquake judgment - Medical Assurance Society of New Zealand Ltd v Michael Charles East, Jane Louise East and Ingrid Robyn Taylor

Medical Assurance Society of New Zealand Ltd v Michael Charles East, Jane Louise East and Ingrid Robyn Taylor [2015] NZCA 250

This is an appeal from the High Court's judgment in East v Medical Assurance Society New Zealand Ltd [2014] NZHC 3399. The Easts own a home in Merivale, Christchurch, which was damaged in the earthquakes. They have advised MAS that they wish to restore their home.

The High Court

In the High Court, the Easts sought a number of declarations relating to the timing of when MAS needed to make payment to the Easts, and the extent of work required to restore their home.

The policy provides that MAS:

"will cover the cost of rebuilding or restoring the dwelling to a condition substantially the same as new, so far as modern materials allow, and including any additional costs which may be necessary to comply with any statutory requirements or Territorial Authority by-laws


if you elect not to rebuild or restore the building we will make a cash settlement not exceeding the indemnity value as assessed by a qualified valuer."

MAS claimed that it was only obliged to make payment to the insured when the costs are actually incurred. However Justice Whata decided that:

"if the Easts elect replacement value cover, MAS is obliged to pay compensation provided the amount claimed is necessary to cover the reasonable cost to rebuild or restore the dwelling... Liability to make payment is not conditional on the costs actually having been incurred."

Justice Whata also decided that the insurer's obligation to rebuild or restore the house to a condition "substantially the same as new" means that it must be rebuilt or restored to the standard of a new dwelling built today, not to the standards of 2007, when the house was built.

The final decision on the quantum of the claim was reserved, because there were problems with the calculations for the repair estimates, and also because a building consent needed to be obtained to determine the repair methodology for the foundations. In the meantime, MAS appealed Whata J's declarations.

The Court of Appeal

The issues on the appeal are:

  • whether the words "cover the cost of" rebuilding or restoring a dwelling oblige the insurer to pay to the insured the cost of repairing damage irrespective of whether liability to incur those costs has been or will ever be incurred; and
  • whether the insurer's obligation to rebuild or restore the dwelling to a condition "substantially the same as new" requires that the dwelling be rebuilt or restored to the standard of a new dwelling built today.

Timing of payment

Justice Harrison, giving the judgment for the Court of Appeal, noted that the policy gave the Easts the right to elect between two distinct courses, and that these resulted in different obligations for MAS. If the Easts choose not the restore the house, MAS must "make a cash settlement", whereas if they do restore, MAS must "cover the reasonable cost". He decided that:

"The composite phrase 'will cover' expresses MAS' undertaking to provide sufficient funds to secure or indemnify the Easts against liability to pay the rebuilding costs when they are incurred. It is simply shorthand for the longer phrase: 'indemnify the insured against'."

Justice Harrison went on to say that:

"MAS' reinstatement clause reflects an insurer's orthodox obligation to indemnify against a liability where the insured party elects to rebuild, not to pay out money where the insured has not incurred and may never incur a liability to meet the cost of restoration. It agrees to cover the cost, not an estimate of it, and the cost is not and will not be known until, at the least, liability to pay for the work is incurred."

He also noted that on a general basis this was the appropriate course of action. He said that:

"if MAS was bound to pay the Easts the amount of a reinstatement estimate before incurring any liability, it would be powerless to prevent them from applying the funds for some other purpose. For example, the Easts may never rebuild or restore but obtain by this means payment of an amount equal to replacement value contrary to the policy limitation to indemnity value."

The declaration made in the High Court was therefore set aside. When the house is being rebuilt or restored, MAS is not required to make payments until liability to pay for the work is incurred.

What is "substantially the same as new"?

In the High Court, Whata J decided that a house which is rebuilt or restored to "substantially the same as new" must be in accordance with the current building consents. The Court of Appeal agreed with this, saying:

"in ordinary language the phrase 'as new' where used to require the rebuilt or restored condition of the house is a quality standard, not a temporal standard."

Justice Harrison also noted that:

"There is no rational basis for reading down the Easts' right to limit it to the compliance costs with local authority requirements in 2007, not 2015 when the restoration work is to be carried out."

The Court of Appeal therefore upheld the High Court declaration.

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.