Former Olympic rower heads to court over Christchurch insurance policy

Posted on 29/10/2013 by

Article appears originally in the National Business Review (Online version).  Written by Stephanie Flores

QBE Insurance (International) is heading to the Christchurch High Court to defend its policies with automatic reinstatement provisions. 

In a judgment before trial, Justice John Fogarty ruled the full sum of an insurance policy should be available after each insurable event if a policy includes a reinstatemnet clause.

Typically, policies set maximum payouts for the duration of the contract.  However, some include an automatic reinstatement clause, which allows the liability limit to reload for new unrelated claims. 

This caused problems for a pair of Christchurch building owners who sustained damages over three earthquakes between September 2010 and June 2011.

QBE Insurance argued in the High Court the policies shouldn't have reloaded until they paid out the plaintiffs, Wild South Holdings and Maxims Fashions.  The plaintiffs argued the policies should reload after each earthquake because they were three seperate events.

Additionally, the insurer argues it could give written notice on the payment date that the policy would not be reinstated, so any subsequent losses or damages won't be covered by the policy. 

This would only affect people who are underinsured, QBE argues, such as the plaintiffs.

Maxim's policy topped out at $3.61 million, though the replacement cost of the building was more than $8 million. 

Wild South's policy was nearly $3.04, but the replacement cost was also more than $8 million.  Don Symon, a medalist in rowing at the 1984 Olympics, is the director of Wild South Holdings.

"After the earthquakes my business premises were devastated just like so many others in Christchurch.  It has been a tough time going up against the insurers to get the money we are entitled to.  We needed to rebuild the business and completely start over." Mr Symon said in a press release.

So far, QBE has paid out $1,502,475 to Wild South and $1,523,420 to Maxims, though it is disputed whether these are full settlements.

Michael Childress, managing director of Risk Worldwide, told NBR ONLINE the ruling was a win for his clients.

"What it does is give you a consistent amount of coverage going forward," Mr Childress, the claims consultants for the building owners, told NBR ONLINE.

Justice Fogarty ruled that either party can cancel the reinstatemnet provision but the party must give "resonable notice".

In this case, the insurer gave no notice.

Stephen Rennie and Edward Bayley of Rhodes & Co. are representing the building owners.  Frank Rose of Keegan Alexander and Queen's counsel Michael Ring are lawyers for QBE Insurance.

No trial date is set.  Both QBE Insurance and the Insurance Council of New Zealand would not comment on the ruling because it is sub judice.