High Court rules no representative action against Southern Response

Wednesday 24th February 2016

The High Court in Christchurch has rejected an attempt by a group of Southern Response Earthquake Services policyholders to bring a representative action against the Crown-owned insurance company for breach of contract, saying their claims are too varied.

The 46 individuals all had similar insurance policies and were in dispute with Southern Response over damage caused to their homes in the Canterbury earthquakes. Southern Response was established following the quake on Feb. 22 2011, when insurance company AMI considered it did not have sufficient reserve funds or reinsurance to cover its liability. The Crown injected $500 million, AMI was restructured, and its day-to-day insurance business sold to Australian insurance group IAG. Its liability from the Canterbury earthquakes transferred to Southern Response.

The claimants are part of a group of 2,587 claimants who have yet to resolve their dispute with Southern Response. The claimants alleged that Southern Response systematically underestimated relevant costs and the scope of the work required on their homes.

They accuse it of mischaracterising policy options and setting out conditions inconsistent with the terms of the policy. They also argued that Southern Response had failed to meet the policy requirement that the home be returned to "as new" status and employed inadequate repair techniques.

However, Justice Cameron Mander ruled that the individuals' claims were too varied to be a representative action:

"While it is undisputed that policyholders are in conflict with Southern Response, the range of issues that potentially arise as between the policyholder and the insurance company vary as widely from a denial by Southern Response to any liability in the absence of the policyholder's claim being over the statutory cap to disputes regarding the scope of works and standard and value of reinstatement, repair or replacement".

He said that the group needed to find a central issue or issues common to its membership and clearly articulate the unifying foundation issue.

BusinessDesk.co.nz

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