A lifestyle block owner recovered from two insurers the costs of fighting a fire which spread from a burn heap on their Canterbury property to neighbouring properties. The property was insured with AMI, and their landscaping business was insured with Lumley.
In New Zealand Fire Service Commission v Legg & Ors [2016] NZHC 1492 (PDF) AMI argued it had no liability because it only insured the homeowner personally, and as the homeowner had put material from its landscaping business on the heap, the claim was excluded. The court held that the use of the words “in connection with” in the exclusion required the material from the business to be causative of the homeowner’s liability, and it found on the facts that it was not. Alternatively, the court said that if the landscaping business did not need to be a cause of the homeowner’s liability for damage resulting from the fire it would apply an insurance principle (Wayne Tank) to find that the damage would have occurred whether or not the landscaping business material was added to the heap, so it was covered.
Lumley denied liability on the basis that the homeowner had breached a policy condition to take reasonable precautions to prevent fire. This meant that Lumley acknowledged that it would need to prove not just negligence or carelessness on the homeowner’s part, but reckless or gross conduct, which it did not do on the facts.
The homeowner was entitled to recover from their insurer the substantial costs ($217,118) sought against by the Fire Service Commission and the Council. But this will not be in the end of this case; there are other claims by neighbouring property owners whose property (and 18,000 chickens) were destroyed in the fire. It is thought likely that at least AMI will appeal the decision, given the further claims against it likely to result, and the involvement of a not straightforward principle of insurance law.