The Supreme Court of New Zealand has upheld a lower court’s ruling to allow a Canterbury quake claim class action against Southern Response to proceed on an “opt out” basis.

Southern Response, which was set up by the Government to settle the claims of policyholders who were insured through local insurer AMI after it was acquired by IAG in 2012, had appealed against the earlier decision made by the Court of Appeal.

The state-owned entity did not oppose the claim from Brendan and Colleen Ross - lead plaintiffs in the class action - being made on a representative basis. It however objected to their application to have their claim presented on an “opt out” basis.

Under an “opt out” format, it means a claim would be brought on behalf of every policyholder unless they have expressly chosen not to be part of it.

The High Court had granted leave for the representative claim to be brought in on an “opt in” basis” but the Court of Appeal later overturned the decision.

Southern Response in its appeal had argued the court should not seek to develop an opt out regime in the absence of a statutory framework, saying such an approach raises a number of problems.

It says these include process for notice and settlement approval, problems arising from the involvement of litigation funding and problems in the supervision of class actions generally.

“In sum, Southern Response says that given the uncertainties arising, the benefits of an opt out process are not established. Finally, Southern Response submits the Court of Appeal was wrong to make an opt out order in the present case,” the Supreme Court says in its ruling.

The Supreme Court says it is not persuaded by the submissions made by Southern Response. It says it agrees with the reasons put forward by the Court of Appeal in allowing the claim to proceed on an “opt out” basis. The Court of Appeal has cited, among other things, a “compelling access to justice factors” when it made the decision.

“For the reasons given by the Court of Appeal, we agree that an opt out order is appropriate in this case,” the Supreme Court said. “That is the course preferred by the applicant and nothing is advanced by Southern Response to satisfy us that there will be any real disadvantage to members of the class.

“Finally, given the nature of the claims and the fact that the class members will have been policyholders with Southern Response, it is difficult to see any force in Southern Response’s submission about a lack of awareness of the possible parameters of liability. For these reasons, the Court of Appeal was correct to allow the appeal from the High Court decision.

“We accordingly dismiss Southern Response’s appeal from the Court of Appeal decision.”

Brendan and Colleen Ross, the lead plaintiffs in the class action involving around 3000 former policyholders whose homes were damaged in the Canterbury quakes, are alleging Southern Response deceived them about their claims.

They say they were misled into settling their claims for less money than they were actually entitled to under the insurance policy.

Click here for the ruling.