Christchurch City chases Aon for $528M damages, adding to Lyttelton Port suit

Monday 30th October 2017

Christchurch City Council (CCC) has invoked the Arbitration Act to pursue a claim against Aon New Zealand for $528 million in damages, saying the insurance company's behaviour limited its settlement of earthquake claims.

The council declined to comment on the claim, with a spokeswoman citing confidentiality requirements in s.14B of the Arbitration Act 1996. But details of the dispute are included a quarterly report to the US Securities and Exchange Commission from the insurance broker's parent Aon plc.

It marks the second attempt by a council-related entity to recover damages from Aon, which provided insurance broking services to the city in relation to its 2010-2011 material damage and business interruption programme. In November 2015, the council-controlled Lyttelton Port Co sued Aon for $184 million in damages and costs for its handling of policies during 2010 and 2011 earthquakes. It had already settled with Vero, NZI and QBE in 2013 for $450 million minus deductions of $11.7 million.

The council "contends that acts and omissions by Aon caused CCC to recover less in that settlement than it otherwise would have," according to Aon plc's quarterly report. "CCC claims damages of approximately NZ$528 million (US$381 million at September 30, 2017 exchange rates) plus interest and costs. Aon believes that it has meritorious defenses and intends to vigorously defend itself against these claims."

In the Lyttelton claim, the port company alleged Aon "was negligent and in breach of contract in arranging LPC’s property insurance programme for the period covering June 30, 2010, to June 30, 2011," according to an earlier Aon disclosure. The insurer has said it is vigorously defending that claim as well. There was a discovery judgment in December last year.

Christchurch City banked a net $603 million in early 2016 after deductions from its $635 million settlement, reportedly a record for New Zealand. The payout was $80 million higher than it had budgeted for but lower than the total $920 million in claims it had lodged for above-ground assets, Fairfax reported at the time.

According to Lyttelton Port's 2017 annual report, Aon filed its statement of defence in August 2015, refuting the port company's claims. "The directors are confident in LPC's case, however they are unable to estimate LPC's chances of success or the final amount which may be awarded," it said.

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