Legal expert calls insurers on moral obligations

Legal expert calls insurers on moral obligations | Insurance Business

Legal expert calls insurers on moral obligations
Well-known insurance lawyer and civil litigator Andrew Hooker has prompted industry debate by calling on insurance companies to top up previous Canterbury settlements which would fall short if subsequent rulings were to be applied.

Hooker cited the Avonside Holdings v Southern Response case where the Court of Appeal overruled a High Court decision and said even in a notional rebuild that contingency and other costs should be included when calculating the amount the insured was entitled to receive from the insurance company.

Many insureds who settled their claims for damage to their houses on a cash basis, such as those with red zone houses, could not rebuild because of the zoning of their land so they settled on what it would have cost to rebuild if they had done so, ie a notional rebuild.

Now, Hooker says, those people who had relied on their insurance company telling them they weren’t entitled to contingency or other costs are owed that money.

“I think fairness would suggest that the industry should now step up and say ‘Well, hell it’s been ruled that we were wrong, there’s a whole lot of people in Christchurch who got less money than they were entitled to, we’re now going to pay them some more,’” he told Insurance Business.

“That would be the right thing to do. And they do keep telling us they love their clients and they’re here to help them,” he added.

Insurance Brokers Association of New Zealand (IBANZ) CEO Gary Young said Hooker had a point.

“I would agree with Andrew that morally there’s an obligation on an insurer. Legally it’s another matter but both sides have a good argument.”

The issue also raised the question of balance in the industry, Hooker said, and a need for professional representation for insureds.

“A lot of that work is done de facto by insurance brokers who do a great job, but when it comes to sitting round the table for the average claim you have the insureds sitting across the table from an experienced insurance assessor who’s funded by the insurance company and people just seem to take their word for it,” Hooker said.

On the point about insureds needing professional representation, Young said at present there could potentially be a conflict of interest but it came down to professionalism.

“It’s a matter of perception versus reality. You can perceive that an in-house loss adjuster will be conflicted when doing an adjustment, on the other hand if they’re truly professional then they will come up with an unbiased result which is not affected by the fact the insurer is paying them to do it.”

Tim Grafton, CEO of the Insurance Council of New Zealand (ICNZ), said there seemed to be insufficient demand to support Hooker’s view that professional organisations should be established.

Grafton was dismissive of Hooker’s back payment suggestion.

“He simply has not thought through his argument because to propose what he has would be to say that no settlement is ever final, so open-ended liability would always exist.

“This just isn’t practical and I am somewhat surprised he is advancing this as a serious suggestion.

“The fact of the matter is that insurers and insureds settle with each other and obtain the benefit from that of certainty of outcome.”