KRAAL V THE EARTHQUAKE COMMISSION

[2014] NZHC 919, High Court of New Zealand, Justice Mallon, 6 May 2014

Insurance (property) - Meaning of "physical loss or damage" - House not damaged but not fit to occupy due to danger of rockfalls - Whether cover attached

The assured's house was in Christchurch, New Zealand. The house was not damaged in the earthquakes in 2010 and 2011, but remained at risk of damage from rockfalls in the event of further seismic activity. As a result the assured was required to vacate the premises. The evidence before the court was that occupation of the house would not be permitted in the foreseeable future. The assured moved out and purchased another property. The question in the present case was whether the assured was entitled to recover statutory compensation under the Earthquake Commission Act 1993, which required the EQC to make payment where there was "any physical loss or damage to the property". The assured did not suggest that physical loss or damage was imminent, but instead argued that the statutory phrase should be read as meaning "physical loss of or physical damage to the property", the former catching the case in which the house was undamaged but not capable of occupation. The EQC argued that the phrase meant physical destruction or damage and not pure loss of use. It was common ground that "physical" meant something material or tangible, and that "damage" meant detriment. The dispute concerned the word "loss", which the assured claimed meant to be deprived of something whereas the EQC argued that it meant disruption to the physical integrity of the house. The court ruled that the ordinary and natural meaning of the phrase "physical loss or damage to the house" meant that something physical had happened to the house.