Insurance company Southern Response has gone back into its bunker after losing an earthquake-related court case that could potentially cost it millions.
The company has been told it has to pay another $300,000 to a property owner for a rebuild, even though the owner bought an existing house.
The case hinged around a property in the heart of Christchurch's red zone. The Supreme Court says the owners were underpaid by almost $300,000 because of the way the payout was calculated.
It may have implications for others covered by Southern Response – the Crown-owned company set up to handle claims against defunct insurance firm AMI.
"I was delighted and I think it's a great win for many homeowners," says claimant Melanie Tobeck-Bourke. "It's great to see the little guy standing up and coming out positive at the other end."
The court says Southern Response should have paid out the full costs for a rebuild, even though the owners of Avonside Dr chose to buy another, existing house elsewhere.
So Southern Response refused to pay out for all the expected new build costs, such as engineering, design and geotechnical work, estimated at $300,000.
"The fact that this is a notional, rather than actual, rebuild does not affect the inclusion of an allowance for risks generally encountered [in a new build]," the Supreme Court found. "Such risks are relevant to estimating the cost of an actual rebuild and it is the actual cost of rebuilding that must be estimated."
"For people who haven't settled, whose houses are a total loss, it puts them in a much better position, so that's really good for them," says quake lawyer Duncan Webb. "It means that they're going to get more money than they previously would have."
Lawyers say homeowners who had settled quietly and quickly are likely to be out of luck, because most settlements are full and final and that's the end of it.