Earthquake compensation: The Dodds’ case against Southern Response
Southern Response v Dodds* is a successful claim brought by Karl and Alison Dodds against Southern Response Earthquake Services Limited for misrepresentation, misleading and deceptive conduct, and breach of an implied duty of good faith in settling their earthquake insurance claim.
The Dodds’ Port Hills property was damaged beyond economic repair in the 2010/2011 Canterbury earthquake sequence. The Dodds’ property was insured with AMI Insurance. The Dodds’ insurance policy provided them several options to settle the claim, including an option that the Dodds could buy another house and AMI would pay the costs of the purchase. The amount AMI would pay would be capped at the cost to rebuild the damaged house. In 2013 the Dodds elected this option and reached a full and final settlement, with Southern Response (as the Government entity formed to settle AMI insureds’ earthquake insurance claims) paying to the Dodds the cost of a new property that they purchased.
When assessing the Dodds’ insurance claim, as with all claims, Southern Response prepared what they called a “Detailed Repair/Rebuild Analysis” (DRA). The DRA set out Southern Response’s assessment of the cost of rebuilding the Dodds home, and was provided to the Dodds. The Dodds used the cost shown in the DRA as the basis to consider suitable replacement properties, and ultimately to a settlement with Southern Response.
However, Southern Response also prepared a secondary, internal DRA which included an ‘Office Use Section” containing various additional fees to rebuild the property that were not included in the first DRA provided to the Dodds. In particular, this internal DRA included Southern Response’s assessment of professional fees, project management costs, and a contingency allowance, all as part of the total costs to rebuild the insured house. The internal DRA was never disclosed to the Dodds.
In 2015, the Dodds made a Privacy Act request to Southern Response and received a copy of the internal DRA. The internal DRA clearly showed a much higher cost than the Dodds had been let to believe from the DRA they had received to rebuild their house. The Dodds claimed Southern Response misrepresented the total cost of rebuilding their house by concealing the internal DRA and they took Southern Response to court.
The High Court held that not including the contingency amount or professional fees in the DRA that was disclosed to the Dodds did misrepresent the total cost of rebuilding their house. As a result, the Dodds were awarded $178,894.30, being the amount of the professional fees and contingency allowance withheld, plus interest. This decision was upheld despite Southern Response appealing to the Court of Appeal.
In a similar proceeding, Brendan and Colleen Ross were the lead claimants of a class action launched against Southern Response based on the same findings as Dodds that Southern Response had misrepresented their repair costs and underpaid them. The Ross’ and Southern Response signed an agreement for the Ross’ to drop the lawsuit on the basis that all eligible policyholders in the same position as the Dodds and the Ross’ can now claim compensation from Southern Response without Court intervention.
As a result, Southern Response is compensating any homeowner who cash settled an earthquake claim with AMI or Southern Response prior to 1 October 2014 where an internal DRA was not provided to the homeowner.
*Southern Response Earthquake Services Limited v Dodds  NZCA 395
How can we help?
You may be one of approximately 3000 homeowners eligible for a further 'top-up' Payment Package from Southern Response if you owned a property:
- That was Insured with AMI; and
- Your home was damaged in the 2010-2011 Canterbury earthquake sequence; and
- You settled your insurance claim with either AMI or Southern Response before 1 October 2014
If you think you might be eligible (or are unsure), we recommend reading further about our Southern Response Payment Package Service by clicking the link below.