Insurance Law 660 x 300 v2

21 January 2021

Southern Response Claimants

Government Package Short-Circuits Class Actions?


Many current and settled SR claimants will have seen the various media coverage regarding the two class action lawsuits against government-owned insurer Southern Response (SR), as well as SR’s recently-announced $300 million settlement package for claimants settled prior to October 2014. 


Confused as to where you stand?  We provide some clarity below.




SR typically provided claimants with a Detailed Repair Analysis (DRA), which is a document SR utilised to scope earthquake damage to an insured property, the repair methodology and repair cost for same. 


SR had a practice prior to October 2014 whereby it kept two DRAs for each claim.  SR provided claimants with a version of the DRA recording the scope of work and cost of repairing the damaged property.  It was this DRA which informed the settlement of many SR claims prior to October 2014. 


SR maintained a second, “office” version of the DRA which it did not provide to claimants.  This office DRA contained the aforementioned scope of work and cost of repair, but included additional costings which claimants were in fact entitled to as part of their claim settlement, including professional fees, administration costs and contingency.  SR did not tell claimants about the office DRA, nor the additional amounts it contained, and many claimants didn’t know to ask for it.  As a consequence, many claimants who settled pre-October 2014 did not receive their full policy entitlements.


This “hidden costing” issue came to light and litigation ensued.  A brief summary of these cases follows.


Dodds v Southern Response


The Dodds case has garnered significant media attention.  Karl and Alison Dodds sued SR to recover these hidden costings, which they did not receive on settling their SR claim in December 2013.  In September 2020, the Court of Appeal found in favour of the Dodds, holding that SR had misrepresented the true claim position.  The Court found that the Dodds’ correct claim entitlement was what they received on settlement, plus the hidden costings in the office DRA.  SR’s misrepresentations meant the Dodds had settled their claim for less than their full entitlement, and the Court held the Dodds should be paid the difference between their true policy entitlement (as recorded in the office DRA) and the sum they accepted in settlement of their claim.


The Dodds case laid the groundwork for the Ross class action, discussed below.


Ross v Southern Response class action


While Dodds was working its way through the Courts, a Christchurch legal firm commenced a class action proceeding targeting similarly affected SR claimants.  The named plaintiffs were Brendan and Colleen Ross, who were in a similar position to the Dodds.


A note on class actions.  Class action lawsuits allows a named plaintiff to bring legal proceedings on behalf of a group of similarly affected individuals.  Although the named plaintiff brings the Court proceedings, all of the members of the class can obtain remedies against the defendant(s) as if they were named plaintiffs.  Most class actions are funded by professional litigation funders, and the litigation funder and law firm running the class action typically take a portion of each claimant’s settlement on successful conclusion of the class action. 


Opt in versus opt out class actions


The first step in commencing a class action is to obtain the Court’s consent to the matter proceeding as a class.  The Ross class action is unique in that for the first time in New Zealand, the class sought (and won) the Court’s leave to proceed as a “opt-out” versus “opt-in” class action. 


An opt-in class action is where an interested party must consent to becoming a party to the proceeding; whereas with an opt-out class action, any person with a common interest in the proceeding is automatically part of the class unless they take deliberate steps to exclude themselves.  The Supreme Court held in November 2020 that the Ross class action could proceed on an opt-out basis.  So, for the moment, everyone who fits the class criteria is part of the Ross class action unless they take positive steps to opt out (discussed further below). 


Following the Supreme Court’s decision that Ross could proceed as an opt-out class action, the next step would have been preparing for the class’ substantive claim regarding the hidden costings.  However, a development in the Dodds litigation may change the direction of the Ross class action and other class action litigation currently on foot regarding the hidden costing issue.


Dodds development and the Ross class action


Following the Court of Appeal’s decision in Dodds, it was expected SR would appeal to the Supreme Court.  However, SR announced in October that it accepted the Court of Appeal’s decision, would not appeal, and would settle affected homeowners’ unpaid entitlements.  However, due to the then-pending Ross class action decision, SR required the Court’s directions before taking any steps to settle these claims. 


SR has sought and is awaiting the Court’s direction on engagement with affected claimants.  We are keeping a watch on the case and will post updates as they become available. 


Where to next?


As it stands, SR has announced it will compensate affected claimants.  The amount of compensation available to each claimant will depend on a number of factors specific to each claim.


At this stage, we suggest affected SR policyholders stand by until more is known about the compensation process and time frames.  There is no need for you to sign up with any of the class actions, or do anything until we hear more from SR about affected claimants’ entitlement to this compensation.



Please contact the Insurance Team at Saunders if we can be of any assistance with your SR claim, or any other insurance matters.