With the recent seventh anniversary of the 4 September 2010 earthquake, there has been much talk about the impact of the Limitation Acts on earthquake claims. There have also of late been significant legal developments for purchasers of earthquake-damaged homes who obtained assignments of the previous owners’ earthquake claims.
Most insurers have, when requested, provided limitation waivers through to later dates either this year (Vero) or at some point next year (IAG, MAS, FMG, Southern Response). However, IAG made headlines in the last few weeks when it confirmed that there will be no automatic extension of the limitation period for assignees (those purchasers who have obtained assignments of the previous owners’ claims). The effect of this is that IAG may be intending to use the ‘statutes of limitations’ as defences to assigned earthquake claims filed after 4 September 2017.
The rights of assignees were also addressed by the High Court in August (Xu & Diamantina Trust Ltd v IAG [2017] NZHC 1964). In its decision, the court clarified that assignees are only entitled to ‘indemnity’ rights. Prior to Xu, the law on assignments was murky, but this case has removed any doubt that an earlier Court of Appeal decision (regarding a fire) does apply to earthquake claims.
It is widely believed that the Xu decision will be appealed (potentially to the Supreme Court), but in the interim, the law is very clear that assignees are not entitled to anything more than indemnity value – meaning that they cannot claim repair or replacement costs.
If you are dealing with any insurance claims, there are a few important things to keep in mind:
- If your Christchurch earthquake claims are not resolved, you must ensure that you have a limitation waiver.
- If you are taking an assignment of an insurance claim, you need to be aware that there can be no guarantee that you will receive more than an ‘indemnity value’ payment.
- If you already have an assignment and require more than an indemnity value payment, we recommend you take legal advice and consider filing proceedings to reserve your position until Xu is appealed.
Please do not hesitate to get in touch with our team if you would like any advice on these or other insurance issues.
