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A lawsuit could cost government-owned Southern Response hundreds of millions in earthquake insurance claims settlements, according to reports.
Stuff reported on a class action against Southern Response which alleges the insurance settlement company underpaid on Christchurch earthquake claims. Brendan and Colleen Ross, representatives of the new class action, claim they have been short-changed by $100,000 by Southern Response, which provided them with a version of its detailed repair/rebuild analysis (DRA) for their home that allegedly missed out several costs. The abridged DRA, which was shown to them, was used as the basis for settlement.
The publication detailed that the lawsuit seeks the difference between the abridged and full DRAs, plus $25,000 in general damages, interest and costs. It also seeks a declaration from Southern Response that it breached the misleading and deceptive conduct guidelines in the Fair Trading Act.
If the court allows the latest action to proceed as an “opt-out,” Grant Cameron of GCA lawyers, who represents the claimants, explained to the publication that a high proportion of earlier settlements by Southern Response would be embraced by the terms of the action. An opt-out means parties, which could include more than 3,700 claimants, able to make the same claim against the insurer would come under the claim unless they actively withdraw.
Cameron reportedly said the average difference between the abridged and full DRAs was an estimated $100,000, based on about 100 examples his office had seen. At those figures, the publication noted, a loss in court could mean a multimillion-dollar, including damages, liability for Southern Response.
Stuff quoted Southern Response chief executive Anthony Honeybone saying the case involved complex and novel legal arguments, which were being worked through. The company was reportedly asked whether it had considered re-opening past settlements where two DRA versions had been used, and why it had not done so, but did not respond. It was also asked if it had estimated how many clients would be eligible for the class action and the potential liability if it lost the case but it did not provide a reply.
Stuff said it also asked the Treasury the same questions, and was provided a statement from Finance Minister Grant Robertson, who reportedly said he had given an indemnity to Southern Response “in respect of certain litigation” to allow it “to focus on its purpose of settling the remaining claims of its policyholders.” Which litigation the indemnity was for or what protections it provided was not disclosed.
The court will hear if the class action can go ahead as an “opt out” action in November, with a decision not expected until the New Year. The class size would be determined by the court, but there was strong interest from 25 people contacted, Cameron added.
