Kane Bruce Parkin v Vero Insurance New Zealand Ltd  NZHC 1675
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 EQC's assessment.
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 against Vero.
The main issues for the High Court to determine in this case were:
- who had responsibility for and control of the reinstatement strategy;
- 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 damages.
Responsibility and control of the reinstatement strategy
The insurance policy provides that:
- 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:
He went on to note that:
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 that:
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:
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:
He went on to say that:
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, saying:
A copy of the decision is available here.
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