This judgment is for an earthquake case with a difference; it is
the first based on a contents policy.
Mr Newbury and his wife are collectors of Lladro figurines.
These were displayed around their home, including on a mantelpiece,
in display cabinets, and some under coffee tables where they could
In the Christchurch earthquake on 22 February 2011, 30 pieces of
Lladro were damaged. It is undisputed that the replacement cost of
these pieces is $210,065.
The contents policy
Mr Newbury insured his household contents with a policy from AA
Insurance Ltd. The policy stated that:
"Your jewellery (including
watches) and any works of art you own are covered up to $5,000 per
item or $20,000 in total for any one event. If yours are worth more
than this, you need to tell us about them so we can list them on
your policy schedule and make sure you're fully
The policy recorded a total sum insured of $328,895, and
included a number of specified items, all of which were
Works of art are defined in the policy as "pictures,
paintings, prints, sculptures, ornaments, tapestries, antiques
(other than furniture), hand woven mats or rugs." Mr Newbery
did not specify the Lladro as works of art in his insurance
The question to be determined
Justice Nation needed to decide whether the Lladro were works of
art, in terms of the policy, and therefore whether AA
Insurance's liability in respect of the damage to them was
limited to $20,000. He said that:
"I must put myself in the
position of a reasonable and properly informed third party. The
issue is then whether the parties to this insurance contract would
have agreed that the term sculptures and/or ornaments as used in
the policy would include the Lladro pieces that are the subject of
The High Court's decision
Expert evidence from a valuer and an auctioneer was heard. They
both agreed that Lladro is usually just referred to as
"Lladro", but that is could also appear in catalogues as
a Lladro ornament or a Lladro sculpture.
Justice Nation decided that the term "ornament" is
wide, but that its use in the policy:
"gives the insured the ability
to notify the insurer of his wish to have cover for more than the
limits specified in the policy. It also allows for the insurer to
be better informed as to the risk it is assuming and to avoid
surprise in the event of a claim relating to household
He went on to say that to an ordinary person, an ornament would
mean an item which has no practical use, and was on display because
the owner appreciated its appearance.
Justice Nation decided that:
"A reasonable insured would have
understood that the insurer was providing cover at a certain level
for the normal range of contents that might be found within a home,
but that the insurer would want to know if certain items it was
covering had some value greater than might otherwise be
I consider any reasonable person
wanting to insure these items under the policy would have
considered the Lladro to be 'ornaments' as that term is
used in the policy."
In this case:
"each Lladro piece, in respect
of which this claim has been made, comes within the meaning of
'ornament' as that term is used in the definition of
'works of art' in the policy. There is accordingly only
limited cover available in respect of the damage done to all such
Justice Nation went on to say that because the Lladro figurines
were mass produced in a factory he would not consider them to be
sculptures, but he also noted that if he had construed the term
"ornaments" more narrowly, he might have adopted a wider
meaning for the term "sculptures".
The end result of the case is that the amount that Mr Newbery
could claim for the damaged Lladro is limited to $20,000. This
judgment serves as a reminder to ensure that all valuable items are
specifically noted on insurance policies.
Contractors and principals should ensure they have appropriate insurance coverage instead of relying on indemnity clauses.
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