[2014] NZCA 446, (2014) 18 ANZ Insurance Cases 62-038
Islington Park Ltd owns a complex of 32 buildings which were the
Islington Freezing Works. The defendants, ACE Insurance Ltd, IAG
New Zealand Ltd, QBE Insurance (International) Ltd, and The New
India Assurance Co Ltd, insured the buildings. Seven of the 32
buildings were damaged in the September 2010 and February 2011
earthquakes.
It is common ground between the parties that the functional
replacement cost for all of the buildings is in excess of $40
million, while the depreciated replacement cost is in excess of $20
million.The insured arranged cover with an agreed value for the sum
insured of $9 million. Both the insured and the insurers knew that
the property was being underinsured. Because of the underinsurance,
the insurers raised the possibility of including a condition that
the policy would be subject to average. Instead of an average
clause, the parties agreed to a "Basis of Settlement"
clause.
