A construction sector expert says legal action over who is responsible for starting the fire at SkyCity's International Convention Centre and further delays to it opening are likely but a legal expert says it's too soon to know.
The fire at the still under construction convention centre started around 1pm on Tuesday and was still burning on Wednesday. Its cause has yet to be determined.
John Tookey, a construction management professor at AUT, said losses as a result of the direct effect of the fire were set to be huge.
'The consequential effects of smoke and water damage are likely to be every bit as substantial if not more. When these losses and the business related cashflow impact of cancelled conferences are calculated, the final bill could see the sky as the limit."
Tookey said the convention centre project had been a "ground zero" for the financial exposure of Fletcher Building over recent years.
"There is no doubt that the company is very keen to see the back of this project. However, it is not hard to imagine that this troubled project is likely to see a future sequence of litigation related to liability."
Tookey said litigation could relate to both the fire and the delay in opening the convention.
"It could be all of the above. You are talking about a multi-million dollar loss."
"Nobody is going to put their hand up and say this was my fault."
It has been reported that the fire was started by an unattended blow-torch that was left by a worker who went on a break.
Tookey said he believed that person was likely to be a sub-contractor. But until the dust settled on the situation it would be difficult to know.
"That is why on the liability side it will be a dog's breakfast."
SkyCity Entertainment Group has declined to name its insurer but says it's an international company and that the consequences of the fire in the roof of the new convention centre and the disruption to its existing facilities will be fully covered.
Chief executive Graeme Stephens told journalists he isn't sure he can disclose the insurer's name.
"We're comfortable with the credibility of the insurer and their ability to meet their obligations," Stephens said.
An insurance broking source told the Herald the insurance risk was likely to be underwritten by more than one company and possibly up to three because of the size of it.
NASDAQ-listed insurance broker Willis Tower Watson is advising on the insurance and met with the re-insurer on Wednesday afternoon.
Fletcher Building, says it has contract works and third-party liability insurance in place.
Under a contract works policy accidental damage is covered and so is negligence but only if the company has met its duty of care.
Intentional damage is not covered by insurance.
Both Fletcher chief executive Ross Taylor and Stephens rejected a suggestion that their insurance contracts could be nullified if the fire is proven to have been caused by negligence.
But if a sub-contractor is found liable the contract works insurer could try and claw back some of the money it pays out from that sub-contractor which could be covered by public liability insurance.
Sub-contractors working on the site would be expected to have public liability insurance and professional indemnity insurance, insurance sources have told the Herald.
But Christine Meechan, a QC at Bankside Chambers, said it was too early to speculate on possible litigation.
Meechan said the contract works policy may or may not insure the contractor - Fletcher Building - as well as the sub-contractors.
"Understanding how the different policies will respond is something you can't guess." It would depend on the policy terms, she said.
"Obviously everyone will be trying to understand how the fire started, it's too early to make an educated guess on that."
She said there could be quite complicated interlocking arrangements when it came to insurance policies and how they fit together.
"If it is found that some person on site caused or contributed to the fire there could be a huge number of policy responses depending on how the policies fit together."
She said the insurance brokers would be very busy checking what the terms of the cover were given the "very very high stakes".
It was also possible there was forward looking business interruption cover in place to cover SkyCity's loss of business.
Meechan expected it to take weeks if not months to assess the damage and how it would be paid for.
She said loss adjusters and fire investigators would already have been appointed.
"The scale of it is significant, The amount of cover would have needed to be significant."
SkyCity has already withheld $39.5 million in liquidated damages over the new hotel and convention centre which was supposed to have been completed by the first quarter of this year.
Fletcher's liability for liquidated damages on the project is believed to be capped at about $40 million.
Before the fire, completion had been pushed out to the second half of 2020.
Graeme Christie, a barrister at Bankside Chambers said as the International Convention Centre was already in delay the key issue would be whether the existing delay trumps the new delay allowing the contractor an extension of time.
"This is known as concurrent delay...two competing causes of delay so what is the dominant delay...or is the contractor caught with its own existing delay which would have taken as long or longer than the fire delay so gets no extension for the fire or very little."
Christie said given history between Sky City and Fletcher Building he expected there could be litigation over the issue.
"However most disputes go to a Disputes Review Board so a confidential process on that contract rather than to court or arbitration."