Refusal to re-repair home ‘unreasonable’

An insurer unreasonably refused some aspects of re-repairs to a Christchurch home after two attempts to fix it failed, Canterbury’s earthquake insurance tribunal has ruled.

In one of the tribunal’s first decisions, chairman Chris Somerville said while insurer IAG agreed Alistair and Sandra Malcolm’s Mt Pleasant house needed major repairs, the parties disagreed on the scope of works.

Somerville said the tribunal would appoint a quantity surveyor to help determine a fair repair cost, another point of dispute. The couple’s claim went to IAG after two unsuccessful repairs by the Earthquake Commission (EQC). The house needs major work. IAG said the price estimate from the couple’s builder was too high and it wanted to put the work out to competitive tender. It also baulked at paying for six items in the repair plan, of which the tribunal ruled it should meet the cost of five.

Somerville said while its policy gave it the right to approve or refuse expenses, IAG must take the owners’ interest into account and not unreasonably withhold its permission.

He said it would be ‘‘unconscionable to allow an insurer with an obligation to act with the utmost good faith to wield unbridled power over the repair or rebuild process’’.

By controlling the cost the company also controlled the repair, so needed to act reasonably: ‘‘A balance must be struck between the cost to the insurer and the risk to the insured. When the insurer takes control ... it must not act unreasonably.’’

Somerville ruled unreasonable IAG’s refusal to pay for five aspects of the repair: new roof substrate, full wrapping of the house and garage, a more thorough floor repair, a master board guarantee, and professional fees for site observation and certification.

He ruled its refusal on a sixth point – new skylights – was not unreasonable. He said he needed to more information to determine who should pay if EQC’s failed repairs have led to the house’s timber frame suffering water damage.

On determining the overall repair cost, the ruling said options included tendering as IAG wanted, or having both parties hire quantity surveyors. ‘‘Neither process is perfect,’’ Somerville said.

Somerville said the tribunal would hire its own quantity surveyor to either help the parties reach agreement, or give the tribunal independent evidence.