At the time of the Christchurch earthquakes it was common for
commercial buildings to have replacement insurance for loss or
damage up to a maximum liability limit or 'fixed sum'.
Often these policies provided that the fixed sum would apply to
each loss causing event during the period of insurance. Whilst
fixed sum policies were also in place for residential properties
this was much less common, most of them had full replacement
insurance.
During the period September 2010 to June 2011 Christchurch
suffered hundreds of earthquakes and at least four caused
significant damage to buildings. Many policyholders with fixed sum
policies made claims for successive earthquakes. It was possible
for such claims in aggregate to exceed the fixed sum and even the
full replacement cost of the building. Such claims were often
resisted by insurers and one such case was recently considered in
the Supreme Court in Ridgecrest NZ Limited v IAG New Zealand
Limited.
