In a recent case the Court has held that an insurer is liable under its policy to repair a property to as “when new” following poor repairs done by the nominated builder.

The homeowner had been insured and the insurer had a scheme whereby nominated builders undertook the repair work.  The work was not up to code and the further work required to bring the work to code came to nearly $400,000.  The builder that did the poor work had gone into liquidation as had the project manager which supervised the building work.

The insurer was required to pay for the further work to be done plus accommodation costs to cover the time the homeowners had to be out of the house.  It was able to pass some of that cost onto the insurer of the project manager so the primary insurer paid around 80% of the claim and the project manager’s insurer around 20% of the claim.

In addition to being liable under their insurance policy the insurer was also liable under the Consumer Guarantees Act because the service provided was not fit for purpose.  Even though the contract for building repairs was between the owner and the builder the insurer remained liable to pay for the repairs to the required standard and they had not done so.  This case was regarded as a test case and will impact on many repair jobs undertaken following the Christchurch earthquake.

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