Insurance - Case Law

Question 1

Falcon Investments Vs State Insurance (1974)

Answer 1

Main Point - Supreme Court judgment on the Definition of Indemnity Value.

• Indemnity value = monetary loss to the insured.
• That the insured was not to be in a better nor worse position.

Case - Falcon Investments (developer) purchased a residential property with the ultimate goal of redevelopment. Falcon took out indemnity cover over the improvements, being a dwelling occupied by the tenant. The dwelling subsequently burnt down, with resource consent having not long after been granted permitting the construction of a block of flats. The question for the courts was the extent of the plaintiff’s loss. The dwelling had been valued at $6,500.

Held

• Indemnity value = monetary loss to the insured.
• That the insured was not to be in a better nor worse position.
• The fire did not reduce the value of the property as its H&BU use was most probably redevelopment.
• The payout from the insurer was equal to 1-year rental less the savings on demolition costs.