Editor: I. Mallikarjuna Sharma Volume 11: 15-31 March 2015 No. 5-6

(2015) 1 LAW Quake Outcasts v. Minister for Canterbury Earthquake Recovery [NZ-SC: Court Opinion] F-175
[154] The third reason in the Brownlee paper was
that owners of residential properties “should have
been aware of the risks when choosing not to
purchase insurance”. As was recognised in that
paper, owners of vacant lots could not insure. 191
There was thus no issue of a conscious choice not
to insure for owners of vacant land. This reason
therefore must relate to uninsured residential
owners of land and improvements.
[155] As to the uninsured, as against the
uninsurable, we do not understand there to have
been any inquiry into the individual
circumstances of the members of that group,
although it was recognised in the August 2012
paper that some had consciously not insured and
some were not insured by mistake. 192 In the Quake
Outcasts group, it was not in all cases a “choice”
to be uninsured. As indicated above, a number of
the Quake Outcasts group were uninsured
through inadvertence or bad luck. 193 It may be too
that any “choice” of others not to insure could
have arisen through financial hardship, lack of
sophistication or a failure to appreciate the
risks. 194 In addition, because of the structure of
EQC cover, property owners have to insure for
fire to receive natural disaster insurance. An
owner is unable to split insurance and only get
cover for natural disaster insurance. Because
earthquake insurance is not directly insurable, but
instead is connected to fire insurance, there was
not necessarily a conscious choice not to insure
for earthquake damage.
[156] We are not suggesting that failing to take
into account individual circumstances was an
error. The red zone decisions were made on an
area-wide basis, while recognising, for example,
that there might be individual properties in the
red zones which were not damaged to any
significant extent. 195 This was legitimate. It is
191 Brownlee paper, above n 61, at [62].
192 Cabinet Paper (30 August 2012), above n 107, at [43].
193 above at [88].
194 As noted above at [153] and n 190, the risks were seen
as low in any event.
195 See above at [53].
recognised in the Act, at s 11(3)(a), that the
Recovery Strategy may need to address areas
where rebuilding may or may not occur. It was,
however, unfair to take into account a factor (that
of a conscious choice to remain uninsured) that
may not or may not have been applicable to each
member of the uninsured group. As we discuss in
the next section of this judgment, an area-wide
approach suggests an area-wide solution.
[157] As to the first reason given in the August
2012 paper, that a 100 per cent offer would
compensate for uninsured damage, this was true
but its significance is much reduced by the fact
that, in the Brownlee paper, it was anticipated
that the offers made to insured residential
property owners would cover more than the
insurance recoveries. The net cost, after insurance
recoveries, was estimated as being from $485 to
$635 million. This means that the Crown, in these
earlier purchase offers, must have contemplated
compensating for uninsured loss. The offer to pay
out at 2007 values was of course designed to
make the offers attractive and to fulfil the purpose
of encouraging the voluntary withdrawal from the
red zones (which were considered unsuitable for
rebuilding in the short-to-medium term).
[158] The fact that there had already been
compensation for uninsured loss for insured
property owners covered by the June 2011
decisions was not set out in the August 2012
paper as a factor that was taken into account. It
was a relevant consideration and therefore it
should have been considered.
[159] In addition, the concern about
compensation for uninsured loss is undermined
by the fact that in June 2012 the Crown extended
100 per cent offers to red zone properties under
construction and non-residential properties owned
by not-for-profit organisations. 196 In these cases,
the land was not insured and not insurable, but
yet the Crown still offered to purchase the
property (including the land) at its most recent
rateable value. Presumably, the offer to the
196 See above at [70].
117
Law Animated World, 15-31 March 2015