The New Zealand Earthquake Commission (EQC) will bear a higher proportion of claims from the Canterbury earthquakes after the country’s High Court ruled the EQC must cover households for every earthquake event rather than treating the quakes as one insurable event.

PM John Key says the ruling could add hundreds of millions of dollars to the EQC’s liability, but may give reinsurers confidence to continue providing cover to Christchurch.

The Insurance Council of New Zealand, Vero, IAG and Tower had run the test case with the EQC to clarify where the commission’s cover ended and private insurers’ cover began.

About 110,000 homes have multiple claims from the series of earthquakes and aftershocks and the court was asked to rule whether the EQC’s $NZ100,000 ($$79,468) of residential building cover applied to each event or in aggregate.

The ruling reduces the bill for the private insurers, whose coverage starts for damage beyond $NZ100,000 for buildings and $NZ20,000 ($15,896) the EQC covers for contents.

The parties have not commented while they consider the ruling. The New Zealand Cabinet is meeting in Christchurch today and will be discussing the outcome with the EQC.

The court has directed the parties in the case to settle on a declaration for it to consider.

The insurers and the EQC proposed three interpretations of the Earthquake Commission Act for the court to consider. It chose a version which it said “with a slight alteration as to the wording, was the correct interpretation consistent with the plain meaning of the legislation, its purpose and history, and insurance law generally”.