Property insurance: liability of insurers for defective repairs

The decision of Gendall J in the New Zealand High Court in Sleight v Beckia Holdings Ltd [2020] NZHC 2851 answers a question that has long been open, namely, whether a property insurer who has paid for repairs to be effected by a third-party builder bears liability under the policy to make good defective work on behalf of the builder.

The court’s reasoning in effect imposes liability in such circumstances: while an insurer who has merely agreed to provide payment cannot be responsible for the builder’s defaults, the policy obligation to provide an indemnity may – depending upon the wording of the policy – survive even though full payment for the cost of the work had earlier been made. Although the reasoning turns on the wording of the indemnity clause in the policy, it is difficult to imagine that many policies will provide anything much different.