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Relief for Earthquake Insured

By - 25 Jun 2012

Many insurance policies contain exclusion clauses which seem wide-reaching enough to bar many claims. However, a recent High Court decision underlines the need to carefully examine the effect of those clauses.

In Marchand v Jackson the High Court examined a claim against an insurance company under a professional indemnity insurance policy. The claim was brought by Mr Jackson, who was seeking coverage in relation to a claim brought against him by the owners of a house damaged in the Christchurch earthquake. The owners had engaged Mr Jackson to insure the home and its contents, but Mr Jackson had failed to do so.

The insurance company tried to bring Mr Jackson's claim to an end at an early stage, arguing that cover was excluded by the terms of the policy. The policy excluded cover for dishonest, criminal, fraudulent or malicious acts. It also excluded claims for events that Mr Jackson knew about, or ought to have known about, prior to the policy's inception date.

The High Court was not satisfied that Mr Jackson had been dishonest, but rather concluded that he had unintentionally omitted to obtain insurance for the homeowners. This was so even though he had fallen well below the required standard when dealing with the homeowners.

The High Court was also not satisfied that the second exclusion clause applied. Mr Jackson knew, before the inception date of the policy, that the homeowners thought he had arranged insurance cover when he had not done so. However, due to health reasons Mr Jackson had forgotten about this when he renewed his insurance cover and therefore had not advised the insurance company. The Court decided that, since it could possibly be proven at trial that Mr Jackson's non-disclosure of the homeowner's situation had not been deliberate, it would not be appropriate to bring his claim against his insurer to an end at an early stage.

The Court's decision means that the insurance company may yet have to compensate the home owners for the losses they have suffered due to Mr Jackson's failure to arrange insurance cover.

This case illustrates the Courts' tendency not to determine questions of interpretation of clauses in insurance policies at a preliminary stage, due to the need for a full assessment of the relevant facts. Whether insurance cover is available will likely depend on the facts of each case.


Lisa Gerrard


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