Hypotheticals by Manny Wood. Published in the Coffs Coast Advocate on 19 May 2018.
Robert and Moira owned a house which was totally destroyed by fire.
Their insurance company offered to pay $490,000 which their insurer stated, was the reasonable cost of rebuilding the home. It was not disputed that the home could not be repaired.
Robert and Moira claimed that they were entitled to $850,000, being the amount shown on their policy for “buildings sum insured”. This was a difference of $360,000 from the amount offered by the insurance company.
Robert and Moira eventually accepted the payment of $490,000 “without prejudice” to their right to claim more under the policy.
Robert and Moira commenced proceedings in the Supreme Court against the insurance company claiming that they were entitled to the full $850,000 and in the alternative, that the amount paid by the insurance company did not represent the reasonable cost of rebuilding their home.
The insurance policy stated that the payment to Robert and Moira would be ‘the cost to repair or rebuild the part of the home that was damaged (whichever is lower)’. In other words, the payment was to be paid on an “indemnity basis”.
The Court found, based on the evidence, that the cost of repairing Robert and Moira’s house was less than the insured amount on the policy and that the insurance company was only obliged to pay Robert and Moira’s reasonable costs of rebuilding the home and no more.
The Court also found that the quote obtained by the insurance company did in fact represent the reasonable cost of rebuilding the home and associated fixtures.
Unfortunately, having been unsuccessful, Robert and Moira had to pay their own legal costs and were also ordered to pay the costs of the insurance company.
If you would like Manny to address a particular legal issue, send your request to manny.wood@ticliblaxland.com.au or call him on (02) 6648 7487.
