After severe flooding, the Chan* family’s house was badly damaged and needed to be rebuilt. Their insurer accepted the claim and agreed to cover the cost of rebuilding the home.
However, a dispute arose about how high the rebuilt house needed to be raised above ground level.
The Chans believed the new house should be rebuilt at a higher finished floor level to reduce future flood risk. They were concerned that if the floor level was not raised enough, the council might place a notice on the property title warning about flood risk. They also worried this could affect future insurance or a mortgage.
The insurer agreed to rebuild the house but said it only needed to raise the floor level to the minimum required to obtain building consent. The insurer said there was no clear evidence that a higher floor level was required by the council at the time.
Our decision
We looked at:
• The terms of the house insurance policy
• Whether raising the floor level further was required to get council consent
• Expert reports and council information provided by both sides.
Under the policy, the insurer only has to pay for costs that are “reasonably required” to rebuild the home and meet legal or council requirements.
The evidence showed that a higher floor level was recommended to improve flood resilience, but it was not clearly required in order to obtain building consent at that stage.
The insurer offered to cover the cost of applying for building consent, and said if the council refused consent without the higher floor level, they would then include this in the rebuild. However, the Chans declined this offer, and said the cost for the higher floor level should be included regardless of building consent, based on expert evidence.
Because there was no firm council decision saying the higher floor level was mandatory, we found that the extra cost did not have to be included. The insurer was not required to pay for raising the floor level beyond what was clearly required for building consent.
While we understood that having a higher floor level would be preferable to reduce future flood risk, and that having a notice on the property title warning about flood risk would have significant financial implications, including affecting the Chan’s future insurance or ability to get a mortgage, we could only consider whether the insurer had correctly applied the terms and conditions of the policy to the claim. We have no power to require an insurer to make payments outside the terms of the policy, on a goodwill basis.
The complaint was not upheld.
* name changed
