Southern Response and the Concealed DRA’s

Presentation 27 November 2017 by Grant Shand

1. What is a DRA

AMI Insurance Ltd created a process for Arrow to produce for each property a Detailed Repair/Rebuild Analysis (DRA).

The intention of the DRA was to record the:

  • Damage;
  • Owner comments;
  • Remedial Work;
  • Total remedial cost.  

The DRA is/was a living document often subject to many revisions.

2. Different versions

AMI decided to produce two versions of each DRA.  

One for the customer, and one for its own use.  

The AMI “office use” version included:

1. Arrow charges;
2. Demolition;
3. Professional fees;
4. Contingency. 

The customer version did not include these costs.

After AMI became Southern Response on 5 April 2012, the same process continued.

3. Avonside Holdings Case

The Avonside judgments confirmed that:

  • 10% for professional fees; and  
  • 10 % for contingency; 

were an essential component of a remedial costing and an entitlement of the homeowner. 

After Southern Response lost in the Supreme Court on 22 July 2015 it changed its practice.  It provided the “office use” DRA to customers. 

Southern Response agreed to revise settlements entered into between
1 October 2014 and 22 July 2015 to include omitted fees and contingency.  

It refused to reconsider pre 1 October 2014 settlements. 

4. Good Faith

In Young v Tower Insurance [2016] NZHC 2965 the High Court decided that Tower had an obligation to:

1. Disclose to the insured all material information it has/knows;
2. Act reasonably, fairly and transparently

The Court decided that Tower breached the duty by NOT providing a report it had on file. 

Common sense says that Southern Response also breached this obligation by not providing the “office use” DRA.  

The damages are likely to be the difference between the two DRA figures less demolition, which Southern Response does not pay to the insured, plus interest. 

This good faith obligation is new to NZ. 

5. Fair Trading Act

Section 9  - Misleading and deceptive conduct generally

“No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

For breach of s9 a Court can order payment of money lost by the conduct, and set aside agreements.

6. Misleading Conduct

Southern Response sent DRA’s to homeowners; often in settlement decision packs. 

The incomplete DRA rebuild/repair cost was also in letters/documents as the “total remedial cost” and the total entitlement under the policy.
Southern Response likely engaged in misleading and deceptive conduct by concealing the “office use” DRA and by representing that the number in the DRA was the total remedial cost, when it clearly was not.

Insureds will need to prove that they relied on the misleading DRA in settling.
Claim will be to set aside the settlement agreement and for the difference between the two DRA figures, plus interest – less demo.

7. Timeframes

Any claim under the Fair Trading Act must be filed in Court
within 3 years after the date on which the loss or damage, or the likelihood of loss or damage, was discovered or ought reasonably to have been discovered. 
The Press on 28 May 2015 published an article about Southern Response withholding the “office use” DRA.  

So it is at least arguable this would be the start of the 3 year limitation period.  

The effect is that if you do not sue by 28 May 2018 it will be too late for a Fair Trading Act claim.

8. State of Play

There are claims in High Court currently against Southern Response based on the omitted DRA information.  The most advanced case is likely to have a trial early next year.

There must be thousands of people who settled before 1 October 2014 based on an inaccurate DRA.  


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Melanie Tobeck