Council's insurance claim for leaky building payout rejected by court

Wednesday, 22 September 2021

The Waterfront apartments on Humber St, Ahuriri, Napier. (File photo)

A council that made a multimillion-dollar payout over a leaky apartment block has failed in trying to claim part of the cost under insurance.

The payout concerned the Waterfront apartments on Humber St in Napier, completed in 2007 and later found to be leaky buildings.

In 2013, apartment owners launched legal action against Napier City Council and other parties involved in the construction. The council, and some of the parties, made a payout to settle the claim in 2019.

The settlement was confidential, but it was known the owners had sought close to $20 million.

**READ MORE:

The Humber S apartments in Napier underwent remediation in 2018. They were found to have a raft of issues, including structural steel corrosion and a leaky roof. (File photo)

* Ratepayers cough up in confidential settlement of 8-year 'rusty apartments' case

* Apartment owners increase claim against Napier City Council and others to $30million

* Critics want plans for $41m Napier pool complex stalled while consultation is challenged

The Hawke’s Bay Regional Council headquarters, built in 2006, also needed to be repaired and was the subject of a claim against Napier City Council. (File photo)

* Napier City Council paid $590,000 to fight leaky-building claim before reaching settlement

* Council settles multi-million dollar leaky-building claim, but cost to Napier ratepayers remains secret

The nightmare of leaky, rotting houses first emerged in the 1990s. It's cost homeowners billions of dollars. (First published September 2020)

They claimed the council was negligent as a building regulator for its role in issuing building consents, inspections during construction, and issuing code compliance certificates.

The buildings had numerous faults. Some related to weathertightness – or leaky building – issues; others were not attributable to weathertightness defects.

The council was insured under the Local Government Mutual Funds Trustee Ltd, or RiskPool.

Since 2009 RiskPool includes a clause that means it does not pay out on weathertightness claims, or claims with a weathertightness component.

For the past seven years the council and RiskPool have been going through the courts arguing whether RiskPool should have covered the faults that were not related to weathertightness. These faults were estimated to account for more than 10 per cent of the total pay out.

The High Court has ruled the clause meant there is no obligation to cover the council’s claim.

Justice Christine Grice noted the council should have known it was not covered because it had been notified of the clause since 2009.

The judge also noted that in 2012 Napier City Council was sued by Hawke’s Bay Regional Council in relation to similar faults found in its new council building and RiskPool had advised it then that insurance cover would not be provided.

Napier City Council told Justice Grice it was “absurd” and “unprincipled” that a building defect claim for non-weathertightness losses were uninsured simply because a plaintiff introduced a weathertightness loss.

The council used an example of a plaintiff suing a council for $10m of non-weathertightness losses along with a weathertightness loss of $1000.

Riskpool said because the single claim made against the council included weathertight features, the entire claim would be excluded from insurance cover. The council’s policy did not allow it to operate on a “defect by defect basis”.

Justice Grice said there was nothing absurd about RiskPool's policy and council staff should have been “very familiar” with its background and context, she said.