Tower must replace Christchurch home

Matt and Valerie O'Loughlin arrive at the Christchurch High Court. Photo / Geoff Sloan

Insurance giant Tower must pay out a Christchurch couple for a like-for-like replacement on another site, after their home was damaged in the earthquakes, a judge has ruled.

In an interim judgment, released today, High Court judge Raynor Asher now wants to hear more submissions from both parties on what a proper pay-out should be.

Matt and Valerie O'Loughlin took their insurers Tower Insurance Ltd to court after rejecting offers to repair their cracked and broken house.

In what was seen as a potentially landmark legal case, the retired couple told how their two-storey Gayhurst Rd property in the badly-hit suburb of Dallington was so damaged it couldn't be fixed.

They said Tower was "obligated" to pay for a new home outside the red zone.

Tower said the damaged home could be repaired for $337,000 - but the O'Loughlins felt short-changed.

Now, after the two-week High Court hearing, Justice Asher has released an interim judgment which says the insurers are obligated to make a payment based on a rebuild or replacement for a comparable house to the O'Loughlins' home.

He said it must be at a site outside the red zone, and it should be left to Tower to decide whether to pay out on the basis of a rebuild or replacement.

If it was a payment based on the costs of rebuilding the O'Loughlins' home, that payment must be on the basis of the costs of rebuilding on a good site ($540,000), not on the present weakened and vulnerable section ($620,000).

"This is because the O'Loughlins have chosen not to rebuild on the existing damaged site, and both parties have proceeded on the basis of a cash payment which will enable them to purchase elsewhere in Christchurch out of the red zone," Justice Asher said.

"They are not entitled to a payment in excess of the cost of replacing the house."

Justice Asher said both parties needed to provide further submissions before he could make a final ruling on what the pay-out should be.

He also needed more submissions before he could decide what, if any, general damages should be awarded.