PRATTLEY ENTERPRISES LTD V VERO INSURANCE NEW ZEALAND LTD

[2016] NZSC 158, Supreme Court of New Zealand, Justice William Young, Justice Glazebrook, Justice Arnold, Justice O'Regan and Justice McGrath, 6 December 2016

Insurance (property) - Building damaged in two earthquakes and demolished after third earthquake - Settlement reached - Whether settlement could be overturned - Measure of indemnity for successive losses

Prattley's building was damaged in the Christchurch earthquake of 4 September 2010, suffered further damage in an earthquake on 26 December 2010 and had to be demolished following a third earthquake on 22 February 2011. The policy provided that the insurer had the option to pay the indemnity value or to repair or replace the damaged property. The sum insured was NZ$1,605,000. The claim was settled for NZ$1,050,000 in August 2011. In the present proceedings Prattley sought to overturn the settlement. It claimed an entitlement to claim up to policy limits for the damage caused by each successive earthquake: the cost of repairs after the first earthquake, NZ$178,000; the cost of repairs of the additional damage caused by the second earthquake, NZ$3,739,000, limited under the policy to NZ$1,605,000; and the post-demolition cost of reinstatement, in the order of NZ$6,000,000 to NZ$7,500,000, also limited to NZ$1,605,000.