The High Court has clarified how to calculate time limitation periods for claims under domestic dwelling insurance policies structured to provide ‘top-up’ cover over the statutory natural hazard insurance1.
The Court rejected the orthodox English law position under which time begins on the date of the insured peril. In this case, time would have begun on 22 February 2011 and expired six years later in 2017.
The new position, as determined by the Court, is that time begins to run at the date on which the insurer ought to have settled the claim under the policy. In this case, that was at the expiry of the “reasonable period” after EQC advised the claimants that the claim was over-cap. On this basis, the claim is still in time, more than 14 years after the earthquake.
This case deals specifically with home insurance policies, but has implications for other occurrence-based policies.
The factual background
The homeowners initially lodged damage claims arising from the Canterbury earthquake with EQC2 in September 2010 and March 2011, and with their private insurer in March 2011.
Over the following years there was a range of assessments, site visits, scopes of works and payments by EQC and the insurer for damage to the property and associated land at the conclusion of which, in November 2022, EQC advised that the claim was over the EQC liability cap.
The insurer declined the homeowners’ claim for costs over the cap on the basis that it was now time-barred, and the homeowners filed a claim in the Tribunal3, which referred a preliminary question of law to the High Court to determine when the time limitation period began.
Limitation periods – overview
The Limitation Act 2010 applies to claims based on acts or omissions on or after 1 January 2011. The usual limitation period for money claims is six years “after the date of the act or omission on which the claim is based (the claim’s ‘primary period’)”4. This can be extended by late knowledge for three years from the “late knowledge date”5, with a maximum longstop of 15 years after the relevant act or omission6.
Key issue
The Court had to directly traverse new ground in New Zealand: for claims under an occurrence-based insurance policy, is the act or omission on which the claim is based:
• the insured peril (the fire, earthquake or theft etc causing the loss), or
• the insurer’s failure to settle under the policy at the time the obligation fell due?
The answer
The Court confirmed the central importance of the terms of the insurance contract7. In this case, the policy provided ‘top-up’ insurance structured so that the insurer pays for additional loss not covered by EQC’s statutory cap8.
It followed that the extent of EQC’s liability had to be established before the insurer could compensate the homeowners for the difference between that and the insurer’s liability under the policy9.
Therefore, the insurer’s obligation to pay under the policy was not triggered until, at the earliest, EQC had made the full extent of its payment10. That was not finally determined until November 202211.
Until that point, the private insurer’s obligation was contingent only12.
The Court went on to say that the insurer should be allowed a further “reasonable period” after EQC’s settlement to assess the over-cap claim and to make payment of any amount due13.
It follows that the relevant act or omission that begins the primary period under the Limitation Act is the insurer’s breach of its contractual obligation to settle the insurance claim, and this takes place at the time the claim should have been settled, not the date of the peril that caused the insured loss.
Implications and comment
For insurance policies structured to provide top-up cover, there is no fixed date from which the six-year (or 15-year longstop) limitation period begins to run. Commencement depends in each case on when EQC, now the Natural Hazards Commission (NHC), makes its decision to settle the claim on terms that trigger an obligation under the policy.
In the context of domestic natural disaster insurance, this uncertainty may provide further incentive for insurers to be proactive in their dealings with the NHC to try to bring claims to a head. Insurers may also consider whether to make their own decision about the likely loss and to settle independently of NHC’s decision if time is important.
The Natural Disaster Response Model partnership between NHC and a number of insurers should mean that insurers have a much better understanding of the progress of NHC claims and are able to settle those claims much more quickly. Hopefully, it will be very rare in the future for a claim to take so many years to resolve.
In the limited context of a preliminary legal question, the Court in Pearce did not engage with the reasons why EQC made its over-cap decision nearly 12 years after the February 2011 earthquake. It also did not consider the effect of the insureds’ conduct and whether they had breached any obligation to pursue their EQC claim with appropriate diligence. In an appropriate case, these matters could affect the time limit that is applied.
The decision may prompt insurers to consider policy wordings to mitigate the risk of such potentially extended time limitations. Policy terms could be drafted to create an earlier trigger for the commencement of the primary time limitation period.
1 Pearce v Toka Tū Ake Natural Hazards Commission & Anor [2025] NZHC 623.
2 Now the Toka Tū Ake Natural Hazards Commission.
3 The Canterbury Earthquakes Insurance Tribunal.
4 Limitation Act 2010, s 11(1).
5 Limitation Act 2010, s 14.
6 Limitation Act 2010, s 11(3).
7 [32].
8 [34], [36].
9 [41]-[42].
10 [43].
11 [44].
12 [43], citing Doig v Tower Insurance Ltd [2019] NZCA 107, [2021] 2 NZLRD 127 at [51].
13 At [73].
