Insurance Settlement Agreement Not Set Aside

In Prattley Enterprises Ltd v Vero Insurance NZ Ltd [2015] NZHC 1444 the High Court (Dunningham J) considered a claim by Prattley to set aside the insurance claim settlement agreement it entered into in August 20111 with Vero Insurance for damage to its building known as “Worcester Towers”.  The building at 103-105 Worcester Street, Christchurch was damaged in the earthquakes on 4 September 2010, 26 December 2010 and 22 February 2011.  It was “red stickered” and demolished in September 2011.  In August 2011 Prattley entered into an agreement with Vero to settle the insurance claim(s) at $1,050,00 plus GST.  Later Risk Worldwide became involved and prosecuted the Prattley claim(s) seeking a further $6.5M based upon a claim to the sum insured of $1.6M per event.  The insurance policy was an indemnity insurance policy.  The Court decided that indemnity value was calculated as the market value and the insured did not intend to reinstate the building.  The Court decided that Prattley could not recover anything for the September 2010 and December 2010 earthquakes because it had not spent any money on repairing that damage.  So, its insurance policy entitlement of market value was actually less than the amount it received under the settlement agreement.  The effect of this decision was that strictly the Court did not have to consider the argument to set aside the settlement agreement, but it still did so.  The Court decided that Vero had acted fairly and that Prattley had in any event relied on its own advisers before agreeing to the settlement.  There were also no breaches of the Fair Trading Act or Contractual Mistakes Act and the agreement was a binding settlement agreement.  Vero indicated that it woull seek indemnity costs against Prattley and would look to Risk Worldwide for payment if Prattley did not pay.  The costs issue will be considered separately.