The appeal against the Bridgecorp decision in New Zealand continues to hang over other litigation, with a case involving QBE and Vero the latest to be caught up.

The two insurers are involved in an action against a civil engineer that had a professional indemnity policy with them.

The engineering company faces action for negligence, and the insurers applied to the New Zealand High Court for directions requiring parties wanting to sue them to file proceedings within two weeks, so the insurers can try to settle all claims.

Justice Paul Heath says this will benefit the insurers and landowners who have sued so far, but he has reservations about trying to force non-parties to take action within a relatively short time. He says there is a risk a valid claim could be wrongly shut out.

He adjourned the application in October and ordered that all landowners who might sue be notified about the action.

He was not prepared to rule on a section of law relating to insurance proceeds because of the Bridgecorp appeal.

“It is quite possible that the Court of Appeal’s decision could impact significantly on the approach to be taken to the interpretation of section 9 [of the NZ Law Reform Act],” Justice Heath said.

The QBE/Vero case relates to civil engineer MTEC Consultants’ advice that the soil in a residential subdivision near the city of Rotorua was suitable for building.

Justice Heath says MTEC is unlikely to have sufficient resources to meet any successful negligence claims.

The insurers believe that will bring section 9 of the Act into play. The section aims to preserve insurance policy proceeds for people who have suffered losses that have given rise to the claim.

In the Bridgecorp decision the New Zealand High Court last year ruled a receiver has first claim on policy proceeds when its claim might exceed the amount of cover, effectively denying company directors and executives funding for any legal costs.

The New Zealand Court of Appeal may rule on Bridgecorp at any time.

Justice Heath says the insurers deny MTEC’s liability but are concerned that if litigation succeeds, the insurance will not be sufficient to meet the potential number of claims.