What we talk about when we talk about a principle of indemnity: The principle of indemnity in light of Ridgecrest NZ Ltd v IAG New Zealand Ltd

Abstract

When the Supreme Court discussed the principle of indemnity in Ridgecrest New Zealand Ltd v IAG New Zealand Ltd, it referred to it as ‘awkward’ in the context of a replacement policy. The application of the indemnity principle in the case raises further questions about the nature of the principle in insurance contracts. It is submitted that the indemnity principle is currently enforceable not as a legal test or as a policy-based presumption; rather, it is applicable mostly because it is presumed the parties intended it to apply. While some policy arguments underlying the principle can be made, these are less relevant than they once were. The rationales and rules of, exceptions to, and law reform concerning the principle are considered in this paper in order to evaluate the status of the principle. Conclusions are drawn from analysis of these elements and in light of Ridgecrest and two other cases from 2014, one in the Court of Appeal and another in the Supreme Court.