12 November 2021
Defective Earthquake Repairs: IAG & Hawkins/QBE Liable
In an important test case, IAG and Hawkins (QBE) have been found liable for the cost of remedying defective repairs to an earthquake damaged house carried out as part of IAG’s Managed Repair Programme.
Saunders Robinson Brown acted for Alan and Joan Sleight in a claim against IAG, Hawkins and Farrell Residential Limited in relation to defective and inadequate repair work of their earthquake damages house under the IAG Managed Repair Programme.
Farrell, the appointed builder, went into liquidation after High Court proceedings were filed. Around about the same time Hawkins went into liquidation. However, Hawkins was insured by QBE and so QBE was joined to the proceeding and the claim against Hawkins became in effect a claim against QBE.
After a trial in June and July this year, Justice Gendall has found in favour of Mr and Mrs Sleight against both IAG and Hawkins/QBE and has required both insurers to meet the costs of remedying the inadequately scoped and defective repairs.
IAG and Hawkins/QBE treated this case as a test case because it involved issues which are also live in a number of other cases by homeowners who have also made claims against IAG in relation to defective repairs carried out under the Managed Repair Programme. The Managed Repair Programme was established by IAG by appointed builders to undertake earthquake repairs and appointing Hawkins to assist with the Programme.
The High Court found that IAG’s obligation under the insurance policy was to pay the costs required to repair the house to a “when new” standard. It was held that IAG had failed to meet that obligation because the Sleights’ house had not been repaired to that standard.
The Court also held that IAG’s services to Mr and Mrs Sleight, in arranging for the reinstatement work to repair the earthquake damage to be be carried out through the Managed Repair Programme, were not carried out with reasonable care and skill. IAG failed to appoint a suitable builder, failed to ensure that the scope of works was appropriate, and failed to ensure Hawkins adequately monitored the repair works. IAG was therefore held liable under the Consumer Guarantees Act.
The Court found in relation to the claim by the Sleights against Hawkins/QBE that Hawkins was required to act as a project manager to protect the interests of the Sleights (and other homeowners) and Hawkins failed to perform that role adequately. In particular, it was held that Hawkins failed to ensure that the scope of repair works was adequate and failed to monitor the quality of Farrells’ work. Hawkins/QBE was also held to be liable under the Consumer Guarantees Act.
In determining the issues, the judge found that there was a real flaw at the heart of the Managed Repair Programme which, as IAG’s main witness accepted, created a “recipe for disaster”. The flaw was that IAG told Mr and Mrs Sleights and its other customers that Hawkins would actively supervise the repairs, but Hawkins did not believe that that was its role under the contract between it and IAG. The Judge therefore concluded that the builders were “effectively unsupervised, the repair defects were not identified, and Farrells were significantly overpaid for defective work”.
The above information is of a general nature only. The information in this article does in no way constitute legal advice and all readers should contact a law firm for advice relating to your specific circumstances.