O’Loughlin v Tower Insurance Ltd

Geographical Area
New Zealand
Case Name
O’Loughlin v Tower Insurance Ltd
Case Reference
[2013] NZHC 670
Name of Court
High Court of New Zealand
Key Facts
Following the 7.1 magnitude earthquake which struck Canterbury on 4 September 2010, a devastating 6.3 magnitude aftershock struck close to the city of Christchurch on the 22 February 2011. This aftershock caused widespread damage to property and the deaths of 185 people.

The Cabinet categorised Christchurch into four zones based on the extent of earthquake damage to land and prospect of remediation. Owners of insured properties in the red zone – where rebuilding may not occur in the short-to-medium term – were given two options: i) the Crown would buy the entire property at 100% of its 2007 valuation, with the insurance claims to be assigned to the Crown; ii) the Crown would buy the land at 100% of its 2007 valuation, with the insurance claim to remain with the owner. 98% of people accepted these offers or the subsequent offers made to uninsured property owners and left their red-zoned properties, including the O’Loughlin’s who chose option ii.

Once acquired, the Crown demolished all structures, fences and paving on these properties, leaving only grass and certain trees and plants. In addition, the Council stopped repairing/maintaining infrastructure and services in these areas, including water, electricity and roads. As a result, today, roughly 602 hectares of previously residential land in Christchurch has been turned into an empty, but green, space.

Although this case concerned whether the O’Loughlin’s insurance company was obliged to pay them the cost of rebuilding their home, rather than repairing the earthquake damage, the Court touches on effect of the red zone status on people’s ability to continue to live in these areas.
Decision and Reasoning
In considering the effects of the red zone, the Court emphasised that the creation of the red zone cannot be viewed separately from the Cabinet’s decision to purchase the homes of its residents which was made at the same time.

The Crown’s offer to purchase explicitly stated that if the offer was not accepted the owner should be aware that new services will not be installed, if only a few people remain in a street the Council and service provider may decide that it is no longer feasible or practical to continue to maintain services to those who remain, insurers may cancel or refuse to renew insurance policies, and that the Canterbury Earthquake Recovery Authority (CERA) had the power under the Canterbury Earthquake Recovery Act 2011 to require the owner to sell to them based on the market value at the time, which they state “could be substantially lower” than the amount currently offered by the Crown. However, from this offer and other submissions, the Court found that the red zone did not prohibit residents from continuing to live in the red zone and it did not require residents to demolish or repair their houses. Nor did it prohibit building or the grant of building consents for repairs or rebuilding in the red zone. Instead, it only specified an area in which CERA would make offers to purchase property.
The Court found that the red zone status did not prevent people from remaining in the red zone.

In a subsequent judgment, the Court noted that despite the Crown’s insistence that the offer was not compulsory, a property owner’s decision to accept the offer was not made voluntarily. As the offer made clear that residents either left their homes or remained in effectively abandoned communities with deteriorating services and infrastructure: Quake Outcasts v Minister for Canterbury Earthquake Recovery [2015] NZSC 27.

As of 2021, only 23 private homes remain in the flat land red zone. The Council did provide new water and wastewater services to nine of these; however, some still live with no hot water and portable toilets.
This case law summary was developed as part of the Disaster Law Database (DISLAW) project, and is not an official record of the case.