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Scarfies and Insurance

You may have seen a new story about uninsured students and the risk of liability for damage to their flats; http://www.radionz.co.nz/audio/player/2584002 and http://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=11193961

These stories highlight that students may not be covered if they, or their flatmates, are negligent and this causes a fire, flood or other damage to their flats, or the loss of their contents in a fire or theft. The byline is that you need insurance.

So far so good, if you want to protect your liability and belongings insurance is a good idea. But it isn't the full story, ignoring that often student living in crowded flats cannot get insurance (too many tenants = too high a risk of loss). The stories ignore that if you (or your idiot flatmate) burns the place down and your landlord is insured, you are protected by (and from) his/her insurance policy. If a landlord is insured, the tenant is protected by sections 268 and 269 of Property Law Act 2007.

These sections came from a Law Commission report which pointed out that if you pay rent, you are in essence paying the landlords insurance premiums, and you should get the benefit of that insurance.

There were some complications because the drafting of the Act left open an interpretation that residential tenants weren't protected. There is a technical (but IMHO unprincipled) argument that these sections only protect businesses and that Parliament hadn't intended for the protection to apply to renters like our student flatters. Insurance companies have argued this to recover their losses in the past.

Thankfully, in September 2013, the District Court in Osaki v Holler (CIV 2012-004-002306) decided that if a large Corporation with a lease is protected by sections 268 and 269, then residential tenants should also be protected.

The Plaintiff in Osaki (the Holler's Insurer, AMI) is appealing the decision.