A property owner has been given the go-ahead to sue her broker and insurance company after her house was under-insured when the Canterbury earthquakes struck.
Janine Brinsdon's house in St Albans, Christchurch, was insured for a maximum of $223,143, but suffered $350,000 worth of damage in the 2010 and 2011 earthquakes.
In 2017 she launched a lawsuit alleging insurance broker Graeme Beazley gave her defective advice in breach of the Consumer Guarantees Act, and that Vero is vicariously liable for his actions.
Beazley and Vero applied to have the court action struck out, but the High Court has now ruled the case can go ahead.
Brinsdon bought a total sum insured policy for her property in 2001 when she was going overseas and renting it out, replacing a full replacement cover policy she had held with another insurer.
Her evidence said she was unaware she was not fully insured until Vero made her a settlement offer in 2015.
Associate Judge Peter Andrew said it was "reasonably arguable" that the defendants knew the owner was "under a misapprehension as to the scope of the cover", and that she "had not been advised" on the adequacy of it either before or after renewing the policy in December 2010.
"The defendants arguably knew that Ms Brinsdon did not fully understand the implications of a sum insured as opposed to a full replacement insurance," he said.
The judge said there was "some force in Ms Brinsdon's contention about the lack of clarity in the policy wording.
"To the ordinary reader the words do tend to convey the concept that the insurer will pay for the full cost of replacing the house," he said.
Among Brinsdon's claims is that Beazley was in breach of contract by not taking reasonable care, not advising her of her policy options and the risks of the cover chosen, or not ensuring the sum insured was sufficient.
As well, she claims negligence and breach of the Act.
She also alleges her right to act was concealed by Vero and/or Beazley in a case of equitable fraud, which is not actual fraud but where a party in a special relationship takes unfair advantage of a weakness or lack of knowledge.
Vero and Beazley claimed the case should be struck out as it was outside the six-year limitation period, and the plaintiff's bid to postpone this deadline had "no air of reality".
Beazley said there was no basis for saying he had a continuing duty to Brinsdon, and Vero said they had no on-going obligation to monitor her needs, particularly as she had not sought such advice.
Judge Andrew said Brinsdon had established a tenable case that the defendants owed her ongoing duty of care to inform her about the adequacy of her insurance cover.
The case itself will be heard at a date yet to be set.
