Kane Bruce Parkin v Vero Insurance New Zealand Ltd  NZHC
Mr Parkin owns a house in Lyttelton, which was damaged in the
Canterbury earthquakes. At the time of the earthquakes the
house was nearly new, having been built in March 2009.
As a result of the earthquakes, the house was briefly
red-stickered, prohibiting occupation, and the initial land-zoning
was white, requiring further review. The house remained in
the white zone until May 2012, when it was rezoned as green.
Vero arranged an initial assessment of the house in March 2011,
after which it determined that the house could be repaired.
EQC's assessment in July 2011 produced a scope of works with a
much higher cost of repair, raising the question of whether the
house was a rebuild. However, a further assessment by Vero
confirmed that the house was a repair, and in October 2011 EQC
settled with Mr Parkin based on Vero's report.
Vero advised Mr Parkin that they were unable to complete a final
scope of works for the repairs until the house was rezoned, as
there was a possibility that either the property would be red zoned
or that specific foundations would be required. Mr Parkin was
unhappy about the delay in progressing the claim, and appeared to
be of the view that the house should be rebuilt, because of
After the property was green zoned Mr Parkin suggested obtaining
a preliminary report from an engineering expert. Vero's
response was that its next step was for a full reinstatement scope,
and that while an engineer's report may be needed later, it was
premature at that stage. Mr Parkin then advised Vero that he
would obtain his own report. He then issued this claim
The main issues for the High Court to determine in this case
who had responsibility for and control of the reinstatement
whether Vero breached the implied term of good faith or the
Fair Insurance Code;
what is the standard of repair required; and
whether Mr Parkin is entitled to an award of general
Responsibility and control of the reinstatement strategy
The insurance policy provides that:
"We will insure you for
Accidental loss or damage to your home at the situation shown on
the schedule during the period of cover.
What we will pay – at our
the cost incurred in rebuilding or repairing the damaged
portion of the home using currently equivalent building materials
and techniques to a standard or specification no more extensive,
nor better than its condition when new; or
the indemnity value should you not rebuild or repair within 12
months unless we agree to extend the time period."
Justice Mander said that:
"The policy is clear on its
face. The insured, Mr Parkin, must actually incur the costs
of remediating his property before Vero's obligation as the
insurer is triggered to pay the replacement sum. In the
absence of Vero opting to pay the indemnity value as provided in
the policy as the second of two options available to it after the
elapse of 12 months, there is no entitlement on the part of Mr
Parkin to a cash payment upon assessment and quantification of the
Before Mr Parkin can incur repair
costs, he is required to obtain Vero's consent to the method of
repair and its cost, which may not be reasonably withheld by the
He went on to note that:
"While Mr Parkin must actually
incur costs, that does not equate to a requirement that he expend
his own money. Rather, a legal obligation to pay on his part
is required to have been created."
Justice Mander therefore decided that Mr Parkin has control over
the reinstatement of the property, subject to the requirement to
obtain prior consent from Vero for the works. However, this
does not entitle Mr Parkin to payment from Vero until he incurs the
cost of reinstatement.
Good faith and the Fair Insurance Code
Mr Parkin claimed that Vero breached both the implied duty of
good faith and the Fair Insurance Code by not ensuring that Mr
Parkin was aware that he had the right to control the reinstatement
of the property.
Justice Mander decided that the evidence showed that Mr Parkin
was always aware that he could obtain his own reports, rather than
relying on the Vero claims management process. He said
"I am not satisfied that Vero
breached any contractual terms of the insurance policy, implied or
otherwise. While Mr Parkin's claim was managed within the
purpose designed framework of the centralised process put in place
by Vero to administer the large number of claims generated by the
Canterbury earthquakes, it did not alter the terms and conditions
of the policy which governed the contractual relationship between
Mr Parkin and Vero. I am not satisfied that Mr Parkin did not
understand his contractual rights under the insurance policy.
He did not give evidence to that effect. Nor am I
satisfied that any actions on the part of Vero, in particular Mr
Youl, led Mr Parkin to misapprehend the rights and obligations of
the parties under the policy.
Mr Parkin was represented by an
insurance broker who was actively involved in the claim process.
In my view, it is apparent that both parties saw advantages
in having Vero directly involved in the management of the claim by
utilising resources provided by MWHM to assess, scope, and cost the
remedial work. I do not find there was any breach of the
obligation of good faith on the part of Vero in the way it sought
to manage Mr Parkin's claim. Similarly, I am not
satisfied there has been any breach of the Fair Insurance
In addition, Mr Parkin claimed that Vero's obligation to
settle the claim, and the duty of good faith in relation to that
obligation, carried on despite litigation having been
commenced. Justice Mander said that:
"Mr Webb's submission, in my
view, is unrealistic. Once a party has commenced proceedings
against the other, that party has agreed to submit resolution of
the dispute to the formal judicial process, which will be binding
upon both parties. It is unrealistic to suggest the parties
are mandated to nonetheless resolve their differences. While
they are able to do this by way of settlement, there is no
obligation to do so."
He therefore found that Vero did not breach the implied terms of
the policy, or the Fair Insurance Code.
Standard of repair
Under the Vero policy, the standard of reinstatement is to
repair or rebuild a house "to a standard or specification no
more extensive, nor better than its condition when new".
Mr Parkin argued that this meant that repairs of the damaged
portions of the house should be to a standard where it would be
considered to be new, and not patched or second-hand.
The main issue in this case was in respect of the remediation
strategy for the foundations. Mr Parkin said that he should
not have to tolerate a building which had been "jacked and
packed", or was in any way outside of new-build
tolerances. Vero's position was that if Mr Parkin's
view was correct, "it would be impossible to ever discharge
the obligation by repair, because a repaired element will never be
identical to the item which was new."
Justice Mander decided that:
"It is unlikely that it was the
parties' intention that every single item of damage would have
to result in the damaged element being replaced, rather than
repaired, which logically follows from Mr Parkin's construction
of the standard of repair provided for by the policy."
He went on to say that:
"In my view, the purpose or
utility to be achieved by the reinstatement of the individual item
which has suffered damage cannot be divorced from the standard of
remediation required to be achieved under the policy.
Broadly, the purpose of any particular part of the house can
be divided into structural or functional components and those which
have an aesthetic purpose; each, of course, is not mutually
exclusive. Where an item has only a functional purpose, so
long as the repair or replacement restores that functional purpose
to a "when new" condition, the obligations under the
policy will be met.
Where there is also an aesthetic
purpose there will be a need to ensure the remedial strategy also
restores the former aesthetic to a "when new" quality.
That will not necessarily mean there will be an obligation to
replace like for like, or to replace in every instance, but that
may be the only realistic option in order to meet the standard of
As the foundations of the house are purely functional and have
no aesthetic value, they could be repaired by "jacking and
packing", rather than a complete replacement.
Mr Parkin had claimed $25,000 for general damages. This
claim was based on Vero's alleged failure to adhere to the
terms of the policy.
Justice Mander declined to make an award for general damages,
"I do not underestimate the
personal stress and frustration Mr Parkin has experienced as a
result of the earthquake damage to his house, however, in the
circumstances of his case I have not found Vero to be in
contractual breach of its obligations, or to have acted
unreasonably in the circumstances. There is therefore no
foundation upon which an award of general damages could be
Contractors and principals should ensure they have appropriate insurance coverage instead of relying on indemnity clauses.
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