Insurer IAG must pay a couple damages for stress and mental anguish after inadequately repairing their quake-damaged award-winning home.
In the High Court in Christchurch, Justice Jillian Mallon said homeowners Stephen and Joanne Bruce had established their case because IAG had not repaired their architecturally designed Papanui house to "as when new" standard.
She awarded general damages for the couple's inconvenience, stress and mental anguish, loss of amenity and the physical inconvenience of living in their house in its "defective condition".
The sum has not yet been decided. The Bruces are seeking damages of $50,000 but Justice Mallon said the award would be likely less than that. There were existing examples of general damages in the $20,000 to $25,000 range, but she "would need persuading" to double that for two plaintiffs, she said.
The judge said the couple was entitled to modest compensation for disappointment and loss of amenity as their home had won a gold standard award in the House of the Year contest when new.
The Bruces paid $1.35 million for their house. After it suffered earthquake damage, IAG had it repaired through the Hawkins repair scheme at a cost of $867,000.
Their lawyer, Grant Shand, submitted that the couple was unhappy with the interior finish, the straightness of the walls, the floor levels, and the visual difference in the fireplaces after one was fixed.
It was an architectural home, not standard or mass-produced, and quality was important, Shand said.
Justice Mallon found that the sort of care and attention used to ensure straight walls when the house was built was "did not take place with the repair".
She recognised that while the floor levels caused no structural problems, they were not repaired "as when new" and this affected the Bruces' enjoyment of the house. She did not accept their claim over the fireplaces.
While the Bruces had claimed IAG breached its obligations because the work had defects and were entitled to damages for this, IAG had submitted that general damages were not available in New Zealand for a breach of an insurance case.
The judge ruled that damages were available as IAG had breached its obligation to repair to "as when new" standard and the defects had not been remedied.
It had been established in law that where a breach of contract caused substantial physical inconvenience and discomfort, a claimant was entitled to damages, she said.
"An insurance contract pursuant to which an insurer elects to reinstate a damaged home is not a purely commercial one. It is a contract subject to a duty of good faith ... It provides an indemnity for the private parties' domestic home," the ruling said.
However, she rejected the Bruces' claim that IAG had been dismissive of their concerns, and found the company had responded appropriately.
The house was the Bruces' dream home and the defects were noticeable and "a valid source of disappointment", Justice Mallon said.
As the defects were "largely cosmetic" and the house was liveable, the award for damages "must therefore be modest".
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