The New Zealand High Court has ruled that Southern Response engaged in misleading and deceptive conduct in its handling of a Canterbury quake claim.

Justice David Gendall in his verdict last week ordered the agency to compensate Christchurch residents Karl and Alison Dodds $NZ178,894.30 ($170,000) plus interest.

Southern Response was set up by the Government to settle the Canterbury earthquake claims of policyholders who were insured through local insurer AMI, which sought government financial support to cope with the claims.

When AMI was acquired by IAG in 2012, the earthquake claims were set aside to be paid by the state through Southern Response.

The Dodds took legal action after discovering Southern Response had provided them with a modified report that did not state the actual cost of rebuilding their property, which was among the options available to the couple.

They had agreed to settle their claim in December 2013, choosing to purchase a replacement house with a cash payout of $NZ894,937 ($846,921) instead of rebuilding their damaged house.

In the detailed costing report that was withheld from the couple, it was estimated a rebuild would cost another $NZ200,000 ($189,000) in the form of demolition costs, professional and design fees and other expenses.

“The failure by Southern Response to disclose that this [settlement] figure omitted certain costs was an important factor influencing them to enter into the settlement agreement at the figure they accepted,” Justice Gendall says in his ruling.

“I am satisfied that Southern Response’s misrepresentation produced a misunderstanding in the minds of the Dodds as to the true rebuild cost of their house.

“They relied on this, and it was one of the reasons which induced them to settle their policy claim at the figure they did and to enter into the settlement contracts.”