The Court of Appeal in New Zealand has ruled against IAG in a dispute over whether the insurer could treat as “one event” the damages to a Christchurch property caused by two earthquakes in 2011.

The court’s decision overturned an earlier verdict in the High Court last year, which decided an aggregation clause in the insurer’s home insurance policy limited its liability to a single payment of the sum insured limit, and not compensation for each quake event.

A spokesman for IAG told insuranceNEWS.com.au yesterday the insurer is considering the judgment and weighing its options. Under New Zealand’s judiciary system, the Supreme Court is the final appellate court.

In the ruling handed down last month, the three-judge appeal panel disagreed with the High Court’s interpretation of the aggregation clause in the policy issued to Graeme Moore, who took the insurer to court when he was not compensated separately for losses arising from the February and June quake events in 2011.

His house in the Christchurch suburb of Scarborough had sustained serious damages from the quakes that struck within four months of each other that year. IAG had paid him the full sum insured of $NZ2.5 million ($2.3 million) as provided for in his policy but the estimated cost of reinstating the damage significantly exceeded that amount.

Mr Moore believed his policy entitled him to be paid up to the maximum amount for each quake event.

But the High Court had ruled the damages to Mr Moore’s house were “a series of losses” caused by “a series of events” which had the same cause – the September 2010 earthquake that hit the same region.

The Court of Appeal however had a different take on the meaning of the aggregation clause, which reads in the policy as “the most that we pay for any loss (or any series of losses caused by one event) is the sum insured shown in the schedule.”

The court found no link between the February and June quakes, and as such, did not agree the damages should be regarded as “a series of losses”.

“The losses were each sudden,” the appeal court said. “They were separated by four months and were caused by quite separate events.

“Accordingly, they cannot be aggregated for the purposes of determining the limit of cover for each loss. The answer to the preliminary question is therefore 'no',” the ruling said.

Click here for the ruling.