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A client owns a property in Christchurch. The building suffered some minor damage in Christchurch earthquakes and claim was cash settled. The damage was assessed as plaster and painting only. The tenant now has issues with the sewer pipes blocking and upon investigation from drainlayer the cause is stated as from earthquake damage.

Upon cash settlement of the claim in 2013 the insured had to sign a settlement discharge which included the following wording - "the settlement is paid by the insurer and accepted by the insured as full and final settlement and discharge of the claim and any claims, rights , demands, and set offs against insurer arising directly or indirectly out of , or in connection with the earthquake activity and or earthquake losses whether such claims arise under statute, common law, or equity , are in existence now or may arise sometime in the future, are known or unknown, in the contemplation of the parties or otherwise."

The discharge is quite clear in that it is a full and final settlement and that legal and technical advice should be sought before signing the agreement. The insured is of the opinion that since the damage to the sewers has only come to attention now that they must have some recourse to claim for this newly discovered damage.

It is impossible to establish when the damage occurred so we couldn't argue that it was a subsequent quake that caused the damage (and if it did the new application of site excess would make the claim below excess). Does the insured have any grounds to extend the settled claim for this newly established damage?


Reply: Kirsty Spendlow

Speaking from a previous claim experience - in our insured's case they accepted the full and final settlement, thinking they were doing a favour to the insurer, on the basis of verbal advice from the loss adjustor. The settlement had an allowance for underground services, however the advice provided was that the insurer would be able to provide further settlement if the actual costs exceeded the estimate, given that the full costs would not be known until the work commenced. 

Unfortunately when the additional costs were submit to the insurer, they relied on the legalities of the full and final agreement to decline any further costs. The issue went through the disputes procedure to no avail. Additional costs were circa $10,000 so the insured did not pursue further. Appreciate the circumstances are not the same, but hopefully this will give some assistance.

Reply: Crossley Gates

I am afraid the words: “Are in existence now or may arise sometime in the future, are known or unknown, in the contemplation of the parties or otherwise” mean what they say. The insured has acknowledged the risk that something unknown may arise later and has agreed to take that risk. That is the effect of those words. I don't believe your client can do anything.

Sept 2019

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