New Zealand’s Earthquake Commission (EQC) has asked a court to rule on its liability to cover damage to land that has become more vulnerable to flooding because of the Canterbury quakes.

Three High Court judges heard legal argument last month and may hand down their decision this year, in the latest legal conundrum to emerge from the 2010/11 earthquake series.

They have been asked to confirm that increased flooding vulnerability is a form of damage covered by the EQC Act. They must also decide whether flooding vulnerability settlements based on diminution of value are permitted under the Act, and confirm whether the EQC’s assessment approach is appropriate.

Payments for up to 13,500 properties may be affected, including 4500 in the “red zone”, which have mostly been sold to the Crown because the land cannot be remediated, and 9000 in private hands.

The EQC invited the Insurance Council of New Zealand to join the proceedings so the court could get a range of arguments.

Other parties included Southern Response, which holds the earthquake claims of insurer AMI – now part of IAG New Zealand – plus a residents’ group and two “friends of the court”. The groups represent Christchurch residents, with one to argue any positions not taken by other parties.