Legal update – Property Law Act, recent cases and comment

1. Legal update – Property Law Act, recent cases and comment Peter Leman 15 May 2009

2. Outline • Three topics: • Property Law Act changes • Some recent cases • Vero v Posa

3. Property Law Act changes • Post-1.1.08, if landlord has cover, then tenant covered by landlord’s cover unless damage is deliberate – no subrogation by landlord’s insurer other than for excess • So should find out what insurance landlord has – tenant may have no liability • Landlord might have got tenant to agree, in writing, that the landlord is not fully covered. Check lease. If so, landlord’s insurer may be able to sue tenant for tenant’s negligence. • Oral leases – no agreement in writing!

4. Recent cases • Auckland District Law Society v DA Constable Syndicate 386 • Insuring clause covered “legal liability [for] claims…arising out of any negligent act, error or omission…” • For cover, does an error or omission also need to be negligent or is it only an act which needs to be negligent? • Held: cover is for negligent acts, as well as errors or omissions whether or not negligent

5. Recent cases • Body Corp 205963 v Leuschke Group Architects • Exclusion for liability “for loss or damage…to any building…from moisture or water ingress through any exterior cladding or roofing system… This exclusion shall not apply any exterior cladding system, the design of which allows…the ready escape of moisture…” • Case involved deck supports penetrating the butynol deal on a deck – so no exterior cladding involved.

6. Recent cases • Body Corp 205963 v Leuschke Group Architects cont’d • Insurer argued exclusion covered liability for water damage through an exterior cladding system. Also argued there was no need for write-back unless an exterior cladding system was already excluded. • Held: if that was what insurer wanted, it should have said so. Exclusion only covered water through the exterior cladding itself. • Can’t read too much into the write-back. In fact, it shows the insurer thought there was a difference between ‘exterior cladding’ and an ‘exterior cladding system’.

7. Recent cases • Dept of Labour v Street Smart • OSH prosecution following death on rubbish truck. • Employer offered $60,000 in reparation and pleaded guilty. Reparation payment was insured. What impact on fine? • District Court said: • Serious offence so base fine should be $175,000 • Deduct $60,000 for guilty plea • Deduct $60,000 for reparation paid • Fine is balance of $55,000

8. Recent cases • Dept of Labour v Street Smart • Dept of Labour appealed to High Court. Argued there should not be any dollar for dollar deduction for reparation payments if the defendant is insured. • Held: fine increased from $55,000 to $87,500. Would only deduct $27,500 to take account of the reparation payment. • “the fact that [Street Smart’s] insurance company will meet the reparation payment is a relevant matter to be taken into account when determining the total appropriate sentence.”

9. Recent cases • Willco Tree Services Limited v Eriksen & Davis • Willco mistakenly cut down E&D’s trees – what is the loss? • E&D claimed diminution in value of property of $82,250 • Willco said E&D should have mitigated their loss by promptly planting new trees which would have grown • Held: E&D should probably have planted trees but impact on diminution of value unknown. No requirement on E&D to put in full-sized trees as that would have cost more than the diminution in value.

10. Vero v Posa • Interesting case in relation to impact of investigator. • Cover for pleasure boat. Sum insured $105,000 • Boat destroyed in suspicious circumstances and investigator appointed. • Posa had been trying to sell for $80,000. Didn’t tell Vero on renewal. • Posa misstated his attempts to sell – was that fraud in support of a claim?

11. Vero v Posa • To claim fraud, an insurer needs to prove: • a misrepresentation which is factually wrong, relevant to the claim and not trivial • moral obliquity – some sense of deliberateness or recklessness • Investigator’s role crucial – get the information, and in a way that can be supported by the ISO or the Court

12. Vero v Posa • What went wrong here • Suggested that the answers were irrelevant • Misrepresented the answers • Cut off the answers • Cajoled insured to give answers that would be prejudicial • Put words in insured’s mouth • Put insured at ease that he didn’t need to think any further about the answers he’d given

13. Vero v Posa • Safer approach: • Even if highly suspicious, be fair • Think how it will look to the ISO or Judge • Don’t let prejudices show • If you have pre-judged, don’t let it show • Act as if insured is honest so that fraud is the last and inescapable conclusion: - "How often have I said to you that when you have eliminated the impossible, whatever remains, however improbable, must be the truth? (Sherlock Holmes)

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