Insurance dispute to go to court

A dispute between insurers and the Earthquake Commission over quake coverage will be decided in the High Court.

The commission is treating yesterday's massive aftershocks as a new insurance event, adding a twist to the already complex disagreement over how much quake damage the commission covers and how much is left to private insurers.

In most cases, the commission has said it would reinstate another $100,000 building and $20,000 contents coverage for fresh quake damage.

However, in cases where homeowners had not had their earlier claims processed or had not rolled over their insurance policy, the commission said it would not pay out again.

That position has been challenged by private insurers, who believe up to 10,000 homeowners could fall into the gap.

The insurers have been pushing the commission to reinstate cover for all quake-damaged homes.

On Monday – before the two quakes – Tower Insurance announced it had challenged the commission's interpretation in the High Court in Wellington.

Yesterday, the Insurance Council and the commission said they had jointly filed a High Court application seeking clarity on the law.

Commission chief executive Ian Simpson yesterday said Monday's big shake would further complicate the situation, adding another quake to the mix and the need for a court ruling.

Under the commission's current interpretation, some people could now get paid out up to $360,000 by the commission, while others with the same damage could receive only $120,000 if their insurance policy had not rolled over.

The commission was never designed to deal with multiple damaging quakes in one year, and the court's guidance was needed, he said.

"It is something we need to resolve."

He stressed homeowners would not be affected by the dispute, which was an agreement about who paid the bill, not whether it was paid.

Simpson said it was unclear how much more damage would be claimed after Monday's quakes, but it would be less than the February quake because many of the homes that had been hit again had already been written off.

Most homes inspected since February would not have to be visited again, he said.

In March, The Press reported the commission and the Insurance Council were in dispute over how to treat fresh damage claims from the February quake, with Simpson insisting some people's cover would not be reinstated.

Insurance Council chief executive Chris Ryan was equally insistent that the commission should cover those people, and warned of a "$100,000 gap" for some homeowners if the disagreement was not resolved.

Yesterday, both parties struck a more conciliatory tone, saying there was legal "uncertainty" that needed to be quickly resolved.

Ryan said there was no animosity between insurers and the commission, and the legal action was to get clarity.

- The Press