State Insurance Ltd v Cedenco Foods Ltd CA216/97, 6 August 1998
- Court
- Court of Appeal
- Judgment
- 6 August 1998
Areas of law
Judgment analysis
AI-generated summary
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Facts
Cedenco's crops were damaged by heavy rainfall in February 1993, leading to claims under its insurance policies with State. The appeal concerns one specific claim, the 'Death of Plants claim'. State received a loss adjuster's report on this claim in May 1993 but did not pay it until January 1995. Cedenco alleged that State unreasonably delayed payment to exert improper pressure on it to settle other outstanding claims on terms more favourable to State. In the High Court, Salmon J awarded Cedenco $20,000 in exemplary damages for State's failure to pay the claim promptly. State appealed this award. Cedenco cross-appealed the High Court's refusal to award further compensatory damages for alleged losses arising from the delay.
Held
- The facts of the case, specifically the delay in payment by the insurer, were insufficient to support a conclusion that the insurer's conduct was outrageous and deserving of punishment, and therefore the award of exemplary damages was quashed.
- A finding that there was no excuse for a delay in payment is not, by itself, sufficient to establish the 'outrageous' conduct necessary to ground an award of exemplary damages.
- A claim for compensatory damages for loss of business opportunities allegedly caused by delayed payment of an insurance claim will fail if the alleged losses are speculative and too remote.
Thomas J concurring.
Orders
State's appeal against the award of exemplary damages is allowed. Cedenco's cross-appeal is dismissed. The judgment entered in the High Court is varied by quashing the award of $20,000 for exemplary damages.
Key passages4
The question of whether damages can be awarded for a breach of the duty of utmost good faith remains open in New Zealand law.
“As this case turns on other issues it is unnecessary for us to decide whether damages can be awarded for a breach of the duty of utmost good faith. For present purposes we will assume they can, but without deciding as much. The point remains open and can await a case in which a decision is necessary.”
The question of whether exemplary damages can be awarded for breach of contract remains open in New Zealand law.
“It is similarly unnecessary to decide whether exemplary damages can be awarded for breach of contract. Again, we will assume that they can, but without deciding the question, which remains open.”
A finding that an insurer had 'no excuse' for failing to pay a claim and that such a failure is 'significant' is not synonymous with a finding of 'outrageous conduct' required for exemplary damages.
“The Judge did not characterise State's conduct as outrageous. Thus he appears not to have applied the law, as he earlier identified it, to the facts. The concepts of there being no excuse, and of the failure of an insurance company to pay promptly being significant, do not immediately strike us as synonymous with outrageous conduct.”
In his concurring judgment, Thomas J suggested that the court's equitable jurisdiction to award compound interest is broad and not confined, and could potentially be extended to cases where an insurer unreasonably delays payment of a valid claim.
“While it appears that there is no case at present which establishes that an award of compound interest can be made against an insurance company which has unreasonably delayed payment of a proper claim or insisted on a global settlement and withheld payment of a valid claim or claims pending that settlement, Lord Goff's view that the jurisdiction to award compound interest should not exclude any class of case simply because it has not been previously recognised, must have some attraction.”
Cases mentioned in judgment