CRYSTAL IMPORTS LTD V CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON

[2013] NZHC 3513, New Zealand High Court, Mr Justice Cooper, 19 December 2013

Insurance (property) - Partial loss caused by first earthquake not repaired - Property subsequently destroyed by second earthquake - Construction of policy - Effect of automatic reinstatement clause - Whether doctrine of merger applied - Frustration - Measure of value of property for purposes of average clause - Marine Insurance Act 1906, section 77(2)

CI owned five properties in Christchurch. All of the properties were damaged in the earthquake of 4 September 2010 and were further damaged in the earthquake of 22 February 2011. The damage proved to be so bad that all of the properties were subsequently demolished. The properties were insured at Lloyd's in respect of material damage and business interruption including damage caused by "Natural Disasters". Each building was insured for a different amount and the sum recoverable under the policy was up to the insured value of each building looked at separately. The policy also stated that the insurers' "liability will not exceed ... in respect of each [building] the Sum Insured applicable to that [building]". Under the policy, cover was automatically reinstated following a loss (the "RSI clause"), and neither party had given notice cancelling reinstatement so the effect was that each of the earthquakes was an event which gave rise to a loss under the policy. No repairs were effected to the properties between the two earthquakes.