Homeowner High Court Insurance Win a Decade After Canterbury September Earthquake

“Numb.”

That’s how the family of an elderly couple have described feeling after a decision handed down by the High Court in Christchurch on Friday.  The case has been described as a “test case” by IAG, as it is the first case to determine whether IAG has liability for defective work done by builders under IAG’s managed repair scheme.

Alan and Joan Sleight, who are aged 87 and 81 respectively, took their insurer IAG, project managers Hawkins Management Ltd, and builders Farrell Residential Ltd to court more than three years ago after IAG refused to accept liability for defective repairs  and scoping shortfalls in the work carried out by, Farrell Residential Ltd.

In the reserved decision released on Friday, the High Court has found all defendants liable for $389,848 being the costs to repair the earthquake damaged house in Christchurch, to the policy standard of “when new”. 

The Sleight’s son-in-law, Nigel Maxey, who has been assisting the couple, says the win is a relief but it won’t give his parents-in-law back the years and health they have lost.

“Alan and Joan should have been in control of their own lives, making decisions about how to live out their twilight years. Instead they’ve had an appalling nightmare to navigate over the last six years,” he says. “It has been an incredible strain on the whole family.”

The problems started six months after the repair work began in February 2014. With brick cladding needing to be replaced and a new foundation required, the $319,000 job should have been completed in around six months.

When it became apparent that the project was significantly behind schedule, Nigel got involved to help keep things moving and he found there were also issues with the quality of work.

“As we became increasingly concerned about the quality of work, we had to engage independent experts to check the work Farrells had done.  It became clear there were major problems with the repairs, that the parties involved were either unwilling or incapable of resolving.”  says Maxey.

“We terminated the contract in 2015, went back to IAG who basically said, sorry, the contract is between you and Farrell’s, this is nothing to do with us.  Then it became clear that IAG and their Project Manager, Hawkins, had drafted the contract to exclude both of them from any liability.  It has been a long and exhausting process, but the Court has decided that the defendants were liable because the repair work did not meet the policy standard and they were in breach of the Consumer Guarantees Act.”

-Ends-

Background here

 

SLEIGHT V IAG AND HAWKINS/QBE (the full decision is still to be uploaded to the Justice website - contact Ali Jones for a PDF of the decision, ph 0272473112).

KEY FINDINGS IN JUDGMENT OF 30 OCTOBER 2020

The judgment is 199 pages long and follows a trial over four weeks in June and July this year.
Alan and Joan Sleight’s house was insured by IAG and was repaired under IAG’s “Managed Repair Programme”.  This was a programme under which IAG appointed builders to undertake earthquake repairs and hired Hawkins to manage the repair process.  The repairs were carried out defectively by a builder known as Farrells, which has since gone into liquidation.

The Sleights sued IAG and Hawkins for the cost of remedying the defective repairs.  Hawkins was also in liquidation, but it was insured by QBE and so the claim against Hawkins became in effect a claim against QBE.

The High Court found in favour of Alan and Joan Sleight against both IAG and Hawkins/QBE and has required both insurers to meet the costs of remedying the defective repairs.

This was treated by IAG as a test case because the same issue arises in claims against it by many other homeowners whose homes were repaired defectively under IAG’s Managed Repair Programme.

See judgment at para 19

Against IAG, the key findings are:

IAG’s obligation under the insurance policy was to pay the costs required to repair the house to a “when new” standard.  IAG has failed to meet that obligation because the Sleights’ house has not been repaired to that standard.  This follows from the natural and ordinary meaning of the words of IAG’s insurance policy and IAG’s various arguments to avoid that outcome are wrong.

See judgment at paras 170; 176-184; 188-189; 193-195

IAG also represented that it would carry out the repairs properly under its Managed Repair Programme and was obliged to exercise reasonable care in doing so.

See judgment at paras 259-260

There was however “a real flaw at the heart of” IAG’s Managed Repair Programme which, as IAG’s main witness accepted, created a “recipe for disaster”.  The flaw was that IAG told the Sleights (and its other customers) that Hawkins would actively supervise the repairs, but Hawkins did not believe that was its role.  The consequence was that the builders were “effectively unsupervised, the repair defects were not identified, and Farrells were significantly overpaid for defective work”.

See judgment at paras 261, 262 and 275

“That overall situation was an unsatisfactory one.  Clearly it demanded a high level of attention, scrutiny and management from IAG.  But, from the evidence it is apparent little, if anything, was done to address the position until, so far as the Sleights’ contract was concerned, it was too late.”

See judgment at para 275, 276, 280-282, 288

Against Hawkins/QBE, the key findings are:

Hawkins was required to act as a project manager to protect the interests of the Sleights and other homeowners.

See judgment at para 338 and 342

Hawkins failed to perform that role properly.  It failed to ensure that the scope of repair works was adequate and it failed to monitor the quality of Farrells’ work.

See judgment at para 351 and 380

The overall result is that IAG and Hawkins/QBE are jointly liable to Alan and Joan Sleight for the cost of repairs, which the Court found to be $389,848.[1]

See judgment at 716

Issues of interest and costs still need to be determined.

 

 

 

[1] QBE’s liability is for $339,848, because there was a $50,000 excess in its insurance policy with Hawkins.