Policyholders could cash in after New Zealand’s Supreme Court ruled an insured can make multiple earthquake claims in a single policy period, up to the sum insured each time.

Property investor Ridgecrest, which owned a four-storey building in central Christchurch, lodged four claims with IAG – on September 4 2010, December 26 2010, February 22 2011 and June 13 2011 – amid the Canterbury earthquakes.

The building eventually suffered irreparable damage, although it is disputed whether this occurred after the third or fourth incident.

IAG started repairs after the first two quakes, spending about $NZ125,600 ($112,550), but was unable to complete them before the third incident.

It then paid the sum insured of $NZ1.98 million ($1.78 million) – a figure that is accepted to be less than the cost of replacing the building.

The insurer felt it had fulfilled its obligations, but Ridgecrest believed it was entitled to claim up to $NZ1.98 million for each of the four events.

The High Court and Court of Appeal found in favour of IAG, but the Supreme Court has now agreed with Ridgecrest’s interpretation.

However, the judgement stresses that the total claims cannot exceed the cost of full replacement.

Some lawyers believe the ruling sets a precedent and may lead to further payouts in similar cases.

Christchurch and Auckland law firm Wynn Williams says policyholders with sum-insured policies will be celebrating, because they too could recover multiple losses.

“Up until now, there has been uncertainty as to whether the indemnity principle limits their recovery to the sum insured in any one policy period,” the company says.

“It is now clear that is not always the case.”

However, IAG has played down the decision, saying it is unlikely to set a precedent for other commercial quake cases because it stemmed from unusual policy wording.

“Ultimately, the view is that the peculiarities or uniqueness of specific wording in Ridgecrest’s policy have led to this decision, and therefore its wider significance for insurers is limited,” a spokesman told insuranceNEWS.com.au.

“The claim itself, which is still before the courts, can now proceed based on the principles clarified by the Supreme Court, including that the insured isn’t entitled to recover more than replacement value of the building or to double count its losses.”

The decision is not expected to affect residential earthquake claims because until recently most policies in New Zealand had no sum insured.