Payout limited to 80%
30 Mar 2017
A man who under-insured his multi-million dollar Christchurch heritage home has lost a High Court battle with his insurer. Tower Insurance must pay for only 80 per cent of Christchurch heritage home rebuild, court rules
Paul Myall bought Riverlaw in 2003 and incorrectly insured the 799-square metre house as 650sqm.
In a High Court decision released this week, Justice Dunningham said Tower Insurance should only pay Paul Myall for the insured floor space of his Hillsborough home.
Her Honour decided the insurance pay-out should be adjusted to 80 per cent of the full replacement value to reflect the 80 per cent of the floor space that was actually insured.
Her Honour said residential homes did not "come much grander than 'Riverlaw'."
"The original wood and sod house built in 1852 was subsumed within an imposing three-storey triple brick mansion, which was built in stages between 1885 and 1905."
Myall had Tower's Super Maxi Protection Policy, which covered full house replacement.
He lodged a claim for damage after the September 2010 earthquake, but due to Myall spending a lot of time overseas, little progress had been made on the claim when the February 2011 earthquake struck.
In October 2011 a quantity surveyor for Tower estimated the replacement cost of the house was $3,025,000 plus GST, noting the floor plan was much larger than identified in the policy documents.
He said landscaping, fountain and fencing costs would add approximately $300,000 to the cost.
The surveyor noted the ceilings were pressed zinc, which was no longer available.
In January 2012, Tower paid out $1,359,000 as an interim payment.
The house was demolished later that year.
In August 2012 Tower offered Myall $1,612,644 as the remainder of his settlement, which he rejected.
Tower paid him the money anyway, bringing the total paid out to almost $3 million.
In 2014 Myall's quantity surveyor estimated that rebuilding the home would cost about $6m plus GST.
Despite some renegotiation, at the time of Her Honour's judgement, the two parties' costings differed by around $2m.
They disagreed on several points, including how much the cost should be adjusted for the smaller insured floor area, construction methodology, the contractor's margin and a contingency sum.
Her Honour said Tower was not obligated to pay for an identical rebuild, but it should be "equal to" the original building.
This meant Tower was free to use some cheaper modern building methods, but some things such as the pressed zinc ceilings had to be included.
Tower was also successful in bringing down the professional fees.
The judgement said that because of the "mixed success", it was not possible to say exactly how much Tower should pay Myall.
"Nevertheless, I expect the parties should be able to calculate it based on the findings in this judgement."