• Facebook
  • Youtube
  • LinkedIn
Parry Field Lawyers
  • Home
  • About
    • Insights
    • Terms of Engagement
    • Testimonials
  • Our People
  • Services
    • Property Law
      • Residential Property
      • Property Construction
      • Commercial Property
      • Property Leasing
      • Subdivisions
      • Community Housing Information Hub
    • Advisory
      • Employment Hub
      • Sale and Purchase
      • Financing
      • Governance
      • Technology/ IT
      • Artificial Intelligence (AI) Hub
    • Disputes
      • Court. Tribunals, Arbitrations
      • Estates and Wills
      • Divorce and Separation
      • Insurance
      • Employment Hub
      • Family
      • Company and Shareholding
      • Debt Collection
      • Construction
    • Trusts and Asset Planning
      • Wills and Enduring Powers of Attorney
      • Estates
      • Succession Planning and Asset Protection
      • Trust Management
    • Charities/For Purpose Organisations
      • Charities: Information Hub & Healthchecks
      • Governance Essentials
      • Incorporated Societies: Information Hub
      • Faith Groups: Information Hub
      • Impact Investing: Information Hub
      • Social Enterprises/Impact Companies
      • Start-ups and Capital Raising Hub
      • Schools & Education: Information Hub
    • Immigration and Migrants (移民)
      • Work Visas 工签
      • Family Visas 家庭签证
      • Skilled Migrants 技术移民
      • Business and Investment Visas 生意与投资签证
      • Potentially Prejudicial Information 回复移民局质疑 (PPI)
      • Employer Assistance 雇主协助
      • Overseas Investment 海外投资
  • Resources
    • Guides
    • Articles
    • Case Studies
    • Blog
      • Aotearoa Impact Sector Updates
    • Templates
    • Videos
    • Seeds Podcast
  • Careers
    • Careers at Parry Field
    • Current Opportunities
    • Summer Clerk Programme
  • Contact
    • Healthcheck
  • Pay Online
  • Search
  • Menu Menu

How much does an insurer have to pay if an insured homeowner is buying a replacement home?

Claims, Disputes

If a homeowner wishes to settle their insurance claim by buying another house (and the insurance policy provides this option), how much does the insurer have to pay?

This question was considered in the case of Skyward Aviation 2008 Ltd v Tower Insurance Ltd.

The Court held that, if the homeowner buys another home, the homeowner was entitled to receive the cost of that house, capped at the cost which the insured would have notionally incurred in repairing its existing house on site to the same condition and extent as and when new and up to the same area as shown in the certificate of insurance.

Background

The case concerned a Christchurch property located in the “Red Zone”.  The property had been deemed “uneconomic to repair” by Tower.  The owner had accepted CERA’s offer to buy the land.  It had settled with EQC and had attempted to settle its insurance claim with Tower.

The homeowner wanted to settle its claim by buying another home elsewhere.

Tower argued that it was liable to pay the cost of buying a comparable replacement home (excluding land) elsewhere.

The insured homeowner argued that it was entitled to receive the cost of reinstating its home on site to be put towards the cost of buying elsewhere.

The Policy wording

The key policy wording provided:

We will pay:

  • the cost of buying another house, including necessary legal and associated fees. This cost must not be greater than rebuilding your house on its present site. 

The Decision

The Court held:

  • the policyholder is not obliged to choose a house of comparable size, construction, condition and style as its existing house once it is agreed that its existing house is damaged beyond economic repair.
  • the only limitation is that the cost must not be greater than the cost of “rebuilding your house on its present site”. There is no other control or limit on the size, style or quality of the other house. It is implicit on the basis of the policy wording that if the insured buys a house at a greater cost, Tower’s contribution will be capped at the agreed level with the homeowner meeting the difference from its own resources.
  • In other words, if the insured buys another house, Tower is bound to pay the cost of that house up to the cost which the insured would notionally incur in repairing its existing house to the same condition and extent as and when new and up to the same area as shown in the certificate of insurance.

What if the insured customer does not intend to buy elsewhere or has not yet found a replacement home?

The Court indicated that, on Tower’s policy wording, Tower was only liable to pay the “present day value”of the existing home until the insured incurred the cost of buying elsewhere.  “Present day value” included an allowance for depreciation and deferred maintenance and was limited to the market value of the property less the value of the land.

In other words, if the insured wanted a cash settlement (without buying elsewhere), Tower was not liable to pay more than “present day value”.

This decision was appealed by Tower to the Supreme Court and heard in November 2014.  The Supreme Court dismissed the appeal, confirming that, if an insured elects to buy another home to settle its insurance claim, Tower’s liability is the lower of the cost of rebuilding the insured’s house at its present site or the cost of the other house.   There is no requirement that the other home be “comparable” to the existing insured house. 

If we can assist in any way with your insurance claim, please don’t hesitate to contact Paul Cowey at paulcowey@parryfield.com.

Tags: buy another home, purchase another home
https://www.parryfield.com/wp-content/uploads/2014/05/landscape-4346633_1920.jpg 1280 1920 support@happymonday.co.nz https://www.parryfield.com/wp-content/uploads/2019/07/Parry-Field-Lawyers-Logo.png support@happymonday.co.nz2014-05-23 01:27:312020-06-12 17:09:52How much does an insurer have to pay if an insured homeowner is buying a replacement home?

Christchurch CBD

PHONE: +64 3 348 8480
FAX: +64 3 348 6305

PHYSICAL ADDRESS:
Level 1, 60 Cashel Street
Christchurch 8013, New Zealand

POSTAL ADDRESS:
PO Box 744
Christchurch, 8140, New Zealand

Christchurch

PHONE: +64 3 348 8480
FAX: +64 3 348 6305

PHYSICAL ADDRESS:
1 Rimu Street, Riccarton,
Christchurch 8041, New Zealand

POSTAL ADDRESS:
PO Box 8020, Riccarton,
Christchurch, 8440, New Zealand

Rolleston

PHONE: +64 3 348 8480
FAX: +64 3 348 6305

PHYSICAL ADDRESS:
Level 1, 80 Rolleston Drive,
Rolleston, 7614, New Zealand

POSTAL ADDRESS:
PO Box 8020, Riccarton,
Christchurch, 8440, New Zealand

Hokitika

PHONE: +64 3 755 8673
FAX: +64 3 755 8073

PHYSICAL ADDRESS:
127 – 137 Revell Street,
Hokitika 7810, New Zealand

POSTAL ADDRESS:
PO Box 44,
Hokitika 7842, New Zealand

Parry Field Charitable Foundation

Parry Field charitable members of NZ LAw, Global Cross Legal and SCLA

© Copyright – Parry Field Lawyers     |     Privacy Policy

Who has the right to decide how an insurance claim is settled?EQC liable to pay a proportion of homeowners’ legal costs
Scroll to top