Judgment summary - Insurance claims - Earthquake Commission v Insurance Council of New Zealand Incorporated and others

[2014] NZHC 3138

As a result of the 2010 and 2011 earthquakes, significant areas of residential land in Christchurch suffered damage causing an increased risk of flooding and liquefaction.

The flooding vulnerability is caused by three processes, which have all been affected by changes to land:

pluvial flooding, which is caused by run-off that is in excess of the capacity of the stormwater systems and causes excess water to flow over land, has been exacerbated in situations where subsidence of land has occurred, as that can change overland flow paths or reduce gradients to both rivers and streams; fluvial (or river) flooding, which is caused by a flowing of water which exceeds the capacity of rivers and streams and floods adjacent land, has been effected by lateral spreading reducing the widths of rivers and increasing riverbed levels; and tidal flooding, which is caused by extreme sea levels in coastal areas and lower rivers that flood adjacent land, has been worsened because of the settling of land to a level below extreme tide levels. Preliminary results of flood modelling work show that there are up to 13,500 low lying residential properties in the Christchurch area that may now be materially more susceptible to flooding as a result of the reduced land levels.

In addition, a number of properties have become more vulnerable to liquefaction damage from future earthquakes. This is broadly because the affected land now has a thinner "crust", being the non-liquefiable layer of earth between the ground surface and the water table. This reduction in the thickness and quality of the crust renders the land more prone to liquefaction damage and less able to support a house in the event of a future earthquake.

The Earthquake Commission drafted a policy responding to potential flooding claims. A policy dealing with potential liquefaction claims is yet to be developed. This proceeding sought declarations sanctioning EQC's policy.

The issues

The High Court, sitting as a full Court (comprising Heath, Kós, and Gilbert JJ), considered a number of issues in this proceeding. These included:

whether increased flooding vulnerability and increased liquefaction vulnerability is natural disaster damage to residential land; whether increased flooding vulnerability and increased liquefaction vulnerability is natural disaster damage to residential buildings; whether the court has the jurisdiction to make declarations in anticipation of the policy being put into...