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- Release Date: 19/04/13 13:59
- Summary: GENERAL: TWR: TOWER Limited - Red zone case settled
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TWR
19/04/2013 11:59
GENERAL
REL: 1159 HRS Tower Limited
GENERAL: TWR: TOWER Limited - Red zone case settled
MEDIA STATEMENT
19 April 2013
For immediate release
Market Information
NZX Limited
Level 2, NZX Centre
11 Cable Street
Wellington
NEW ZEALAND
Company Announcements Office
Australian Stock Exchange Limited
Exchange Centre
Level 6, 20 Bridge Street
Sydney NSW 2000
AUSTRALIA
TOWER Limited - Red zone case settled
Rob Flannagan, TOWER's Group Managing Director, said today the company was
pleased to have reached a settlement with Mr and Mrs O'Loughlin whose
earthquake-damaged house was in Christchurch's red zone.
"We are pleased that this matter has been settled. The Court decision issued
earlier this month confirmed all the points of principle that TOWER had
sought a ruling on, while also granting the O'Loughlins a re-calculation of
their pay-out.
"We welcomed the clarity that the decision provided, and now look forward to
all concerned with this case being able to move on," he said.
The terms of the settlement were confidential.
Background to the case
What the case was about
Because their house was in the red zone Mr and Mrs O'Loughlin argued for a
full replacement pay-out irrespective of actual physical damage to the house.
TOWER defended the action because it believed its pay-out honoured the
policy, there were important principles at stake and the amount initially
sought of $1.3 million was too high.
The two key issues were:
o Whether a house in the red zone is a total loss, which would require
insurers to pay to replace the house, regardless of the physical damage
sustained.
o Whether the pay-out offered to the O'Loughlins on the basis of a
proposed repair was calculated correctly by TOWER.
There was never any question of the owners continuing to live in the red
zone. They had already sold the site to the government, and TOWER was
prepared to settle their claim with cash.
What the judgement found
Justice Asher gave an interim judgment on the case in the Christchurch High
Court on 5 April.
o The Court confirmed that the creation of the red zone did not render
all houses within it a total loss.
o The Court agreed that it was TOWER's choice as to whether it
repaired, replaced or rebuilt the house.
o It determined that on the facts of this case TOWER's proposed
methodology to repair the O'Loughlins home was not reasonably proven. The
Judge was not persuaded that the proposed low mobility grouting (LMG) repair
for the house would get a building consent.
o Given that the Court was not persuaded that the repair methodology
met TOWER's obligations, it determined TOWER was entitled to choose to pay
either:
o the cost of building a comparable new house on good ground outside
the red zone; or
o the cost of buying a comparable existing house (excluding land value)
outside the red zone.
o The Court confirmed that the O'Loughlins were not entitled to the
higher costs of rebuilding on their red zoned land as those costs would not
in fact be incurred.
Resolution
The judgment had provided a good process for resolving this case and clarity
on how to calculate insurance pay-outs in the red zone.
"TOWER's intention is to settle every claim quickly and fairly with our
policyholders and we are pleased that this matter has now been resolved," Mr
Flannagan said.
Ends
For further information, please contact:
Rob Flannagan
Group Managing Director
TOWER Limited
Tel: + 64 9 369 2084
ARBN 088 481 234 Incorporated in New Zealand
End CA:00235369 For:TWR Type:GENERAL Time:2013-04-19 11:59:20
