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IAG/Xu ruling affirms insurers’ interpretation of assignment law

03 Jul 2019

The decision of the Supreme Court in the IAG v Xu case, released today, has affirmed long-held legal principles regarding assignment law, ICNZ has said.

The Supreme Court’s decision has provided definitive confirmation that an insurer must consent to a deed of assignment to an earthquake damaged property before its customer could pass that claim on to a third party. This legal principle is one that goes back to 1990 in New Zealand and back to the 1860s in England.

ICNZ is pleased to see the Supreme Court upholding this principle and affirming that insurers have acted in accordance with the law.

"Insurers strive to act with integrity and fairness in all their dealings," said ICNZ Chief Executive, Tim Grafton. "In this case, the purchaser did not seek the insurer’s consent to a deed of assignment. Therefore, one could not legally be provided by the property owner."

The Supreme Court has also confirmed a basic principle of assignment law: that an assignee can only assign a loss they have actually suffered.

"Selling a property instead of repairing it means the policyholder has avoided the financial cost of the repair work, which in essence means they have not suffered a loss," said Grafton. "Claimants cannot assign a claim to recover costs they have chosen not to incur."

"The ability of insurers to choose whether to take on assignments is fundamental in their ability to adequately manage the risks they choose to hold," said Grafton. "Insurers ability to look after their customers and help them recover from adverse events is dependent on management of their existing portfolio and ongoing reinsurance support. If the Supreme Court had chosen to negate this long-held principle, it could have had far-reaching and very damaging consequences for the insurance market in New Zealand."

"We sympathise with Cantabrians who have purchased earthquake damaged properties with what they thought were valid assignments, especially where they’ve been unaware that those assignments needed insurer consent to be valid," said Grafton.

ICNZ urges consumers who have invalid deeds of assignment to seek advice and support from the Greater Christchurch Claims Resolution Service (GCCRS).

ICNZ recommends anyone looking to purchase a property with a deed of assignment in future first speaks to the insurer in question and ensures they’ve received confirmation they consent to the assignment in writing before proceeding.