Date
Geographical Area
Pacific
Countries
New Zealand
Case Name
Earthquake Commission v New Zealand Insurance Council
Case Reference
[2014] NZHC 313
Name of Court
High Court of New Zealand
Key Facts
Following the 7.1 magnitude earthquake which stuck 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. These were followed by another four large earthquakes (ranging from magnitude 5.6 – 6) prior to 23 December 2011.
The earthquakes significantly altered the landscape of Canterbury and in some places changed the level of the land. As a direct result of the earthquakes, some properties (which were already at risk of flooding prior to the earthquakes), became more vulnerable to flooding due to land subsidence. This was through an increased risk of pluvial flooding (where the path water took over land changed), river flooding (where the capacity of rivers and streams changed), or tidal flooding (where land dropped below tide levels). Around 13,500 properties were affected by this.
In this case, one of the questions asked of the Court was whether the Earthquake Commission (EQC) – a Crown entity which provides statutory insurance for disaster damage to homeowners through a levy in home insurance policies – should compensate homeowners for the increased flood and/or liquefaction vulnerability of their properties caused by the earthquakes.
The earthquakes significantly altered the landscape of Canterbury and in some places changed the level of the land. As a direct result of the earthquakes, some properties (which were already at risk of flooding prior to the earthquakes), became more vulnerable to flooding due to land subsidence. This was through an increased risk of pluvial flooding (where the path water took over land changed), river flooding (where the capacity of rivers and streams changed), or tidal flooding (where land dropped below tide levels). Around 13,500 properties were affected by this.
In this case, one of the questions asked of the Court was whether the Earthquake Commission (EQC) – a Crown entity which provides statutory insurance for disaster damage to homeowners through a levy in home insurance policies – should compensate homeowners for the increased flood and/or liquefaction vulnerability of their properties caused by the earthquakes.
Decision and Reasoning
As the Earthquake Commission Act 1993 provides separate cover for residential land and for residential buildings, the Court split this question into two issues:
Increased flood vulnerability to residential land: In order for damage to be covered by EQC under the Act, the land or building must have sustained physical loss or damage that is imminent as the direct result of a disaster which has occurred. Therefore, although there was no dispute that the physical changes to the land were due to the earthquake, the question was whether these changes constituted physical loss or damage. The Court found that the disturbance of the physical integrity of the land – its reduced volume and altered physical state – was a direct result of the earthquakes, it was this change which resulted in the land being more vulnerable to flooding thereby affecting its use and amenity, and as the primary use of residential land is as a platform for building, land which is materially more prone to flooding is plainly less suitable for this purpose and is less habitable. For this reason, the Court held that the criteria for physical loss or damage were satisfied, so increased flood vulnerability did constitute disaster damage for the purpose of the Act.
Increased flood vulnerability to residential buildings: The Court was also asked to consider whether residential buildings which were more vulnerable to damage from future flooding as a result of an earthquake, but had otherwise not been physically damage, had sustained disaster damage. They held that they had not, instead, they said this type of damage would be covered by the residential land coverage.
Increased liquefaction vulnerability: The Court held that as they were satisfied that increased flooding vulnerability qualifies as disaster damage to residential land, then it must follow that so too does increased liquefaction vulnerability.
Increased flood vulnerability to residential land: In order for damage to be covered by EQC under the Act, the land or building must have sustained physical loss or damage that is imminent as the direct result of a disaster which has occurred. Therefore, although there was no dispute that the physical changes to the land were due to the earthquake, the question was whether these changes constituted physical loss or damage. The Court found that the disturbance of the physical integrity of the land – its reduced volume and altered physical state – was a direct result of the earthquakes, it was this change which resulted in the land being more vulnerable to flooding thereby affecting its use and amenity, and as the primary use of residential land is as a platform for building, land which is materially more prone to flooding is plainly less suitable for this purpose and is less habitable. For this reason, the Court held that the criteria for physical loss or damage were satisfied, so increased flood vulnerability did constitute disaster damage for the purpose of the Act.
Increased flood vulnerability to residential buildings: The Court was also asked to consider whether residential buildings which were more vulnerable to damage from future flooding as a result of an earthquake, but had otherwise not been physically damage, had sustained disaster damage. They held that they had not, instead, they said this type of damage would be covered by the residential land coverage.
Increased liquefaction vulnerability: The Court held that as they were satisfied that increased flooding vulnerability qualifies as disaster damage to residential land, then it must follow that so too does increased liquefaction vulnerability.
Outcome
The Court issued a declaration stating that, in relation to residential land, disaster damage under the Act may include circumstances where earthquakes have caused physical changes to any such land and such changes have adversely affected the uses and amenities that could otherwise be associated with the land by increased vulnerability of that land to flooding events.
The Court issued a declaration stating that, in relation to residential buildings, disaster damage under the Act does not include circumstances where earthquakes have caused physical changes to the land only and such changes have caused the residential building to reduce in height relative to a remote datum and adversely affected the uses and amenities that could otherwise be associated with the residential building by increasing the vulnerability of that building to flooding events.
The Court issued a declaration stating that, in relation to residential land, disaster damage under the Act may include circumstances where earthquakes have caused physical changes to any such land and such changes have adversely affected the uses and amenities that could otherwise be associated with the land by increased vulnerability of that land to liquefaction damage in future earthquake events.
The Court issued a declaration stating that, in relation to residential buildings, disaster damage under the Act does not include circumstances where earthquakes have caused physical changes to the land only and such changes have caused the residential building to reduce in height relative to a remote datum and adversely affected the uses and amenities that could otherwise be associated with the residential building by increasing the vulnerability of that building to flooding events.
The Court issued a declaration stating that, in relation to residential land, disaster damage under the Act may include circumstances where earthquakes have caused physical changes to any such land and such changes have adversely affected the uses and amenities that could otherwise be associated with the land by increased vulnerability of that land to liquefaction damage in future earthquake events.
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Disclaimer
This case law summary was developed as part of the Disaster Law Database (DISLAW) project, and is not an official record of the case.
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