The High Court has found an insurer guilty of deceptive and misleading conduct in relation to its settlement of an insurance claim.  The insureds’ house was damaged in the Christchurch earthquake and during negotiations over its repair it was decided that the house was uneconomic to repair.  The insureds were entitled to a pay out to purchase another house.

The insurer obtained a report from a builder on the costs of rebuilding the insured’s house. However, before it had passed that report onto the insureds it removed almost $200,000 worth of costs out of the report, which it believed the insureds were not entitled to.  It did not inform the insureds that the report had been modified and it then settled the claim with the insureds based on the figures in the modified report.

The Court held that this was misleading and deceptive conduct and awarded damages of $178,000 plus interest.  The Court also said that the insurer’s conduct probably also breached its obligation of good faith, but because of the earlier finding it was not necessary to decide that point.

The fact that the insurer had entered into a final and binding settlement agreement with the insureds did not stop the insureds from bringing a claim for this deceptive conduct because the matter settled was not any claim to do with the deceptive conduct, but was a claim for the repair costs to their house.

Alan Knowsley
Insurance Lawyer