Fire Service win legal battle against insurance brokers

The Fire Service has won its latest case in a string of legal battles against insurance brokers. Photo / File

The Fire Service has won its latest case in a string of legal battles against insurance brokers taking advantage of loopholes around fire levy policies.

The Supreme Court today allowed the Fire Service's appeal against a previous Court of Appeal decision on the calculation of the Fire Service levy.

The Fire Service is mainly funded by a levy paid on contracts where property is insured against the risk of fire.

The Insurance Brokers Association and Vero took the Fire Service to court, seeking clarification on the levy policy.

The High Court and the Court of Appeal declared that two current practices of insurance brokers were fair interpretations of the legislation.
The first practice is where brokers take out cover at a low indemnity value and a secondary cover policy on the excess.

The second is when brokers combine groups of commercial properties under one collective fire insurance policy.

The New Zealand Ports Collective fire insurance policy was used as the example and Vero argued that one policy for the eight ports in the collective required one levy.
The Fire Service appealed these declarations to the Supreme Court.

The Supreme Court has unanimously allowed the appeal on both issues and set aside the declarations made in the Court of Appeal and High Court.

The reasons for the court's findings were given by Justice Mark O'Regan.

Justice O'Regan said the court found that the correct interpretation of the legislation required that the levy was payable on the true indemnity value of the property.

This better reflected the intention to set the levy to reflect the property owner's level of insurance cover, the court said.

With regard to the collective policy for the ports, Justice O'Regan said the levy should be computed on the basis that each of the eight port companies had an insurance contract on which the levy was payable.

The court decided this based on a number of reasons, including that there was no joint property owned by the ports collective and that the ports had difference interests in different property.