Crown Insurer Southern Response Will Not Appeal Dodds Earthquake Insurance Decision

The Crown will not appeal a court ruling on earthquake insurance that sets a “powerful precedent” for a class action lawsuit that could involve thousands of Christchurch homeowners and cost the Crown more than $ 400 million.

In August 2019, the Supreme Court found that the government insurance company Southern Response had engaged in deceptive and deceptive conduct that misrepresented the insurance rights of Karl and Alison Dodds.

The insurer had produced two Detailed Repair / Rebuild Assessments, or DRAs, that described the costs of rebuilding or repairing your home, and only showed you one that did not include some costs.

The Crown appealed to the Court of Appeals, saying it needed legal clarity due to the thousands of other cases in a similar situation. The Court of Appeal sided with the Dodds in September.

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The government could have appealed further to the Supreme Court, but announced on Tuesday that it would not.

The Dodds’ attorney, Peter Woods, said he hoped the government would launch an investigation into how Southern Response was established and how it resolved the claims.

He said it was possible that a similar situation would happen again in the future and that there were lessons to be learned.

Grant Cameron, the attorney representing a separate class action lawsuit challenging the same DRA issue, said the Dodds’ case provides “a powerful precedent.” The action could involve as many as 3,000 members, with the potential to cost the Crown hundreds of millions of dollars.

Earthquake Commission Minister Grant Robertson said officials were working on what the decision would mean for other Southern Response policyholders.

“The court’s decision provides us with greater clarity on this issue, but as we are now in the pre-election period, decisions about options on how Southern Response might better respond to other affected policyholders will be carried out in earnest after the election.

He said Southern Response would pay damages awarded by the courts to the Dodds shortly and cover the legal costs of the appeal. The damages amount to about $ 170,000.

Greater Christchurch Regeneration Minister Megan Woods said appealing the Superior Court decision was never just about the Dodds’ individual case, but about the need for greater clarity from the courts on how to fairly apply the findings. to other policyholders in a similar situation.

Southern Response CEO Casey Hurren said the company accepted the Court of Appeals findings.

“While we regret that Mr. and Mrs. Dodds were in the middle of this, we are pleased that this court decision has provided us with some of the principles on which we can base our response to other affected policyholders.”

The Dodds’ Huntsbury home designed by Warren and Mahoney was deemed uneconomical to repair after it was damaged in the February 2011 earthquake.

In December 2013, they chose to settle their claim for $ 894,937, including the EQC component, based on the DRA they filed and purchased elsewhere.

Later, the Dodds learned that the DRA’s second “office” copy included undisclosed expenses, such as demolition and professional fees, which would have bought the total up to $ 1.87 million.

Southern Response was created by the government to settle claims for the earthquake when insurer AMI failed in 2011.

The bottom

Southern Response stopped using multiple copies of the DRA after unsuccessfully arguing in court that because the property was in the red zone and the owners were purchasing a home elsewhere, some professional costs and contingencies were hypothetical and should not be paid. Judgment was passed on October 1, 2014.

At the time, then-Southern Response CEO Peter Rose said the insurance settlements made prior to sentencing were “fully and definitively resolved in good faith, and will not be reopened.” It had resolved 3,738 claims at the end of September 2014, when the ruling was rendered.

Robertson previously provided Southern Response with “compensation in connection with certain litigation”, understood in connection with the issue of the two DRAs, in September 2018.

Class action

A separate class action lawsuit against Southern Response for the use of multiple copies of the DRA is going through the court system.

The action, on behalf of Brendan and Colleen Ross, went before the Supreme Court in June. Southern Response is trying to stop the ongoing action as an “opt-out” action, which would mean that everyone affected by the issue would automatically be included unless they opted out of the case.

The Supreme Court has not yet ruled.

Grant Cameron of GCA Lawyers represents the class action lawsuit. He said the Dodds case provided a “powerful precedent” for class action on the substantive issues.

He said that it would be difficult for the Crown to attempt to prove the major issues in the class action and that it should engage with GCA on the minor issues involved in the case.

Cameron said that if it goes ahead as an opt-out class action, about 3,000 people are believed to be involved, with an average difference between the DRAs of about $ 150,000.

Based on those figures, the case would be disputed around $ 450 million. Interest is also claimed, since that money was paid six to ten years ago.