Reinstatement Right in Insurance Policies cannot be Assigned

The Supreme Court has just issued its long-awaited decision in Ruiren Xu and Diamantina Trust Limited v IAG New Zealand Limited [2019] NZSC 68

A majority of the Court found the entitlement to replacement benefits is conditional upon reinstatement by the insured – the home owner at the time of the “event”. This right could not be assigned.

The wording of the policy in this case made recovery of the replacement benefits subject to reinstatement by the insured person(s). References to the insured in the policy could not be interpreted as extending to assignees of the insured.

This means an assignee who takes assignment of the benefits of an insurance policy when purchasing a house may not have the ability to reinstate the house and recover the costs under the insurance policy.

This decision has major implications for anyone who took an assignment of an insurance claim following the Canterbury earthquakes, and is seeking reinstatement.

The Saunders & Co Insurance Law team will now be working with our clients to determine what this decision may mean for each property on a case by case basis, taking into account relevant factors such as the timing of transactions, and the wording of specific insurance policies.