We are sometimes asked who is responsible for proving whether a home has or has not suffered earthquake damage – the insurer or the insured homeowner? In Jarden v Lumley General Insurance this key question was addressed, with the Court confirming that the homeowner must prove their loss.
The homeowners’ home was damaged in the Canterbury earthquakes. After failed negotiations with their insurer, they sought a rebuild of their home through the Court.
The insurer argued that much of what they were claiming for – foundation cracks, irregular floor slopes, voids in their foundation slab and leaks in their roof – was either pre-existing damage or not damage at all. The key issue for the Court to resolve was what the homeowner had to do to prove their loss/damage.
Who is required to prove loss/damage?
The Court confirmed that the burden of proving a loss/damage under an insurance policy lies with the party bringing the claim, in this case the homeowner.
The Court referred to case law which indicated that, while an insurer may suggest other (non-insured) causes of loss (such as pre-existing damage), they are not obliged to do so to counter a homeowner’s claim and, even if they do, they are not required to prove their alternative cause of loss.
Within the specific facts of the case, the Court held that the homeowners had not established that the cracks in their foundation, irregular floor levels, voids under the slab and leak in their roof were more likely than not caused by the earthquakes.
Relevant factors included:
- The expert evidence from both the homeowner and the insurer was that the cracks in the foundation were, or may well be, as a result of natural, non-earthquake shrinkage. The only counter to this was anecdotal, from one of the homeowners. That was insufficient to establish that the cracks were caused by the earthquakes.
- The homeowner’s own expert engineer indicated that the irregular floor slopes were “relatively trivial”, with the foundations settling approximately 10mm in the earthquakes but without damage. Again, this was insufficient to show that the variations in the slab levels was caused by the earthquakes or, even if it was, that it had caused the homeowners any loss as a result.
- Only anecdotal evidence from one of the homeowners and their expert surveyor was provided as to the alleged voids under the slab. No recommended investigation – ground-penetrating radar nor core holes – had been used to confirm the presence of voids, despite the expert surveyor acknowledging that such was good practice and other methods employed were “imprecise”. Consequently, once again, the homeowners were held not to have proved that their house has voids beneath the slab, that the earthquake events caused such voids, or that they have suffered any loss covered under their insurance policy as a result.
- A significant period of time had passed between when the earthquakes occurred and the major leak in the roof was identified. There was also a lack of evident damage to the ceiling lining. Finally the homeowners’ experts had either not inspected the roof or their inspection was cursory. In contrast, the insurer’s experts, who disagreed that the leak was caused by the earthquakes, had undertaken thorough examinations. As a result, the evidence as a whole did not support the homeowners’ contentions regarding the roof leak.
While the Court found that certain items of damage were not covered, others were. On the policy wording, the homeowner was therefore entitled to be paid the cost of repairs for those items once such costs were incurred and if those costs exceeded EQC’s initial liability. In other words, the homeowners were not entitled to a cheque equivalent to the estimated cost of repair but instead had to wait until the repairs had been carried out before seeking reimbursement from the insurer.
The Court expressly noted that the court proceeding was the time for the homeowners to put their best evidence forward. By failing to do so, many of their claims were dismissed.
If you are considering a claim against your insurer, it pays to get sound evidence and advice. You do not need an army of experts, but you will need to assemble the right experts for your particular problem.
If your dispute involves issues over what damage is or is not earthquake damage, the extent of that damage or how to fix it, we recommend the following checklist:
- Obtain expert evidence about the precise extent of damage actually caused by the earthquakes;
- identify a way to fix that damage that complies with current building code and practice;
- understand your insurance policy entitlements;
- cost the repairs and the other add-ons under your policy; and
- then engage with the insurer with a proper understanding of your position. Asking them to find the problems and pay you for them does not always work.
If we can assist in any way with your insurance claim, please do not hesitate to contact Paul Cowey firstname.lastname@example.org.