Homeowners lose onsold home case in Supreme Court

Wednesday, 3 July 2019

The Supreme Court has dismissed an appeal by owners of an onsold quake-damaged home.

Homeowners fighting to be paid out the replacement value for a house they bought in earthquake-damaged condition have lost their appeal in the Supreme Court.

In a three-to-two majority decision, the judges dismissed the request from Ruiren Xu and Diamantina Trust Ltd to overturn an earlier decision that insurers IAG need not pay to replace their house in Wainoni, Christchurch.

Bryan Staples, pictured, arranged the purchase of the Wainoni house to Xu and Diamantina who have been shareholders in his companies.

The owners had gone to the Supreme Court after losing their 2017 High Court case, which they then challenged unsuccessfully last year in the Court of Appeal.

Xu and Diamantina had the original owner's insurance claim on the house reassigned to them when they bought it in 2014. The case hinged on whether they – as buyers of an onsold home – were entitled to the rights of the original insured owner to be paid replacement value, rather than indemnity only.

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The Supreme Court's majority decision backed the High Court's judgment, based on a 30-year-old precedent, that new owners could not claim the cost of full reinstatement if the previous owner, as policyholder, had not intended to restore the house.

However, the Supreme Court's two dissenting judges said there was no reason the policy's replacement benefits could not be extended to new owners of the home.

The court also awarded costs against Xu and Diamantina.

The case differs from buyers left with no cover after repairs done for previous owners by the Earthquake Commission (EQC) were botched, sending the re-repair bill over-cap.

The purchase of the Wainoni house had been arranged by Bryan Staples, then owner of insurance advocacy firm Earthquake Services, and both Xu and Diamantina have been shareholders in Staples' companies.

In the High Court case, Xu and Diamantina Trust Ltd had sought $163,000 from EQC and $353,888 from IAG.

In a statement made following the Supreme Court ruling, Insurance Council chief executive Tim Grafton said they were please to see the court upholding the earlier judgment and affirming that 'insurers have acted in accordance with the law'.

'Selling a property instead of repairing it means the policyholder has avoided the financial cost of the repair work, which in essence means they have not suffered a loss,' he said.

'Claimants cannot assign a claim to recover costs they have chosen not to incur.'

However, Grafton said the council sympathised with those buying onsold homes under the impression they had been reassigned all the original owner's insurance benefits.

He urged those affected to seek advice from the Greater Christchurch Claims Resolution Service, and future buyers of damaged homes to talk to the original insurer.

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