A Christchurch couple who have challenged a $337,000 insurance payout to repair their earthquake-damaged home by lodging a $900,000 claim at the High Court means the case will be "impossible to resolve", a court heard today.
Matt and Valerie O'Loughlin have taken insurers Tower Insurance Ltd to court after rejecting offers to repair their cracked and broken house.
The retired couple believe their two-storey Gayhurst Rd property in the badly-hit suburb of Dallington is so damaged it can't be fixed.
They say Tower is "obligated" to pay for a new home outside the red zone.
But Tower has refused to budge on their stance that the damaged home can be repaired for $337,000.
Around 50 O'Loughlin supporters greeted them on the steps of the High Court in Christchurch today. Many are homeowners in similar positions and are following the landmark case with interest.
Justice Raynor Asher heard opening submissions from both parties before visiting the O'Loughlins property this afternoon.
The O'Loughlins say their insurance policy entitles them to have a "replacement functional quality house".
"That's what the O'Loughlins expected, that's what was sold to them," their lawyer Grant Shand told the court.
It was critical that the full replacement value would mean the new property would be in the "same condition and extent as when new."
"That is Tower's ultimate obligation," Mr Shand said.
The current offer means they couldn't afford anywhere near a replacement quality home, he argued.
Mr Shand said a new house, which would be similar to their damaged one with a rateable value of $420,000, could cost around $700,000 - twice what Tower are offering.
The O'Loughlins are also claiming $50,000 in general damages from Tower for "distress, inconvenience and mental anguish".
The couple has until July to move out of their home, which will then be demolished.
Dallington was a "particularly hard-hit land area", the court heard, where most people had already moved out, and houses were being demolished regularly.
Justice Asher asked if they could get a payout and then buy a better home than the one they had pre-quakes.
Mr Shand accepted that they "theoretically" could.
Alan Galbraith QC, acting for Tower, said they would lead with evidence from engineers and re-piling experts which would say the house could be repaired for $337,000.
It was a contractual dispute, where it was Tower's obligation to replace the damaged property to a standard comparable as new, he said.
But since the O'Loughlins took on insurance claim adjusters WorldClaim to look at their legal case, they are seeking a payout cap of $888,000 - down from an original claim of $1.3 million - which Mr Galbraith said means it is "impossible to resolve".
He said the O'Loughlins' high repair figure was reached by calculating the costs of rebuilding on its present damaged site, which would have to include expensive foundation work.
Given the fact the O'Loughlins want to live outside the red zone, the foundation work won't need doing to the same extent, and therefore the additional costs don't apply, he said.
Although Tower stands by its repairs decision, if Justice Asher ruled that option out, the insurer would accept that the O'Loughlins could spend money on buying or building a comparable property, Mr Galbraith said.
But that would object to them spending up to $1m, when Tower believes a comparable property could be bought for about $500,000.
The case continues tomorrow (Tues) with Mrs O'Loughlin expected to take the witness stand.