Seven years on from the September 2010 Christchurch earthquake, the case of Xu & Diamantina Trust Limited v IAG has provided much needed clarification on the assignment of insurance policies.
Many residential properties following the earthquakes were sold in their damaged condition with the vendor assigning their insurance policy and claims to the purchaser. Most residential insurance policies contain provisions that allow homeowners to claim full reinstatement costs; however the homeowner must actually repair the damage to claim the costs involved.
In this case, the new owners purchased an earthquake damaged property and took an assignment of the vendor’s insurance claim, and subsequently sought full reinstatement of costs from the insurer.
The High Court’s decision was in line with Bryant v Primary Industries Co Ltd [1990] 2 NZLR 142, which held that new owners who are assigned a vendor’s insurance claim can claim for indemnity value only, and are not entitled to full reinstatement costs. The condition of restoration in insurance policies is personal to the insured, and cannot be assigned or passed on to purchasers.