SLEIGHT AND ANOTHER v BECKIA HOLDINGS LTD AND OTHERS

[2020] NZHC 2851, New Zealand High Court, Justice Gendall, 30 October 2020

Insurance (property) – Earthquake damage – Builder nominated by insurers for repair work – Insurers paying for repairs – Repairs carried out defectively – Whether insurers liable to pay for remedial work – Utmost good faith

The claimants’ house was badly damaged by the Christchurch earthquakes in 2010 and 2011. They were insured by IAG under a comprehensive policy under which, if the damage was repairable and the claimants chose to repair, IAG was to pay “the cost of repairing or rebuilding the home to a condition as similar as possible to when it was new, using current materials and methods …” as well as meeting the costs of complying with regulatory requirements for rebuilding. There was alongside these provisions an “important information!” box, which stated that: “This section explains when we’ll repair or rebuild the home and when we’ll pay you cash for your loss, if we accept your claim”. The policy excluded “the cost of fixing faulty design or faulty construction”. The damage was repairable and IAG accepted liability for the claim. IAG operated a Managed Repair Programme under a 2012 contract with project managers Hawkins. They allocated the repairs to Farrells, and in October 2014 the claimants entered into a building contract with Farrells for the repair work to be carried out. The repairs were paid for by IAG but proved to be defective and the claimants sought to recover the costs of repairing the house from IAG, including the cost of putting right the defects. Both Hawkins and Farrells had gone into liquidation.