Owners who did not disclose unconsented alteration on fire-damaged property ordered to pay Tower Insurance $72,400

The High Court at Auckland.

The owners of a rental property that was damaged by fire have been ordered by the High Court to pay Tower Insurance $72,400 following an unsuccessful claim.

Saijad Ali Maqbool and Jalal Khan Maqbool’s rental property suffered significant damage after a fire in October 2013, and a claim was lodged with Tower for $350,000.

However, Tower found the tenants had altered their property by dividing it into two self-contained units with their own kitchens, with work carried out without the required building and resource consents.

In March 2014, Tower decided to void the policy because the Maqbools failed to disclose the alterations made to the property.

Tower said it would not have agreed to insure the property due to the increased risks of liability had it been informed of the material change of circumstances.

The High Court held that Tower was entitled to avoid the policy due to the non-disclosure of material facts.

The parties have been unable to reach an agreement regarding costs, and the matter was again brought before the High Court.

According to court documents, Tower had incurred costs amounting to $306,055.70 inclusive of disbursements and was seeking a costs award of $250,000.

High Court Judge Graham Lang said in his decision the costs calculated on a Category 2B basis, based on a trial lasting three and a half days, would amount to $54.970.

It was also revealed that Tower’s solicitors had written to the property owners on a “without prejudice save as costs” basis offering them $220,000 in full settlement of their claim.

However, this offer was rejected and they countered by seeking the sum of $350,000.

“The plaintiffs ought to have been aware that their claim faced considerable difficulties because they had altered the dwelling that was destroyed by fire without advising the defendant that they had carried out the alterations,” Lang wrote.

“As I found in the judgment, this was a material factor that would have influenced the insurer in its decision to cover the property.”

He said the plaintiffs failed without reasonable justification in refusing to accept the offer.

Lang also found the sum Tower sought to be “much too high” given the fact the offer of settlement was not made until June 2021, when the proceeding was well advanced.

He directed the plaintiffs to pay Tower costs on a Category 2B basis on all steps taken until June 11, 2021, which was $54,970.

In addition, the plaintiffs were also required to pay Tower the disbursements, including expert witnesses’ expenses, amounting to $17,453.79.