The Court of Appeal has rejected an application to strike out an indemnity claim made by Napier City Council in Local Government Mutual Funds Trustee Limited v Napier City Council [2019] NZCA 444.

In response to proceedings issued by property owners against Napier City Council in relation to compliance issues, the Council claimed an indemnity from Riskpool under an insurance policy. The proceedings in part were based on defects concerning water ingress, and the policy provided that "liability for Claims… in relation to leaks, water penetration, weatherproofing, moisture, or any water exit or control system" are wholly excluded. Accordingly, Riskpool applied for the indemnity proceedings to be struck out.

The central issue in the case was whether the exclusion clause excluded the claim in its entirety. The High Court responded in the negative, finding that the clause would only exclude a claim to the extent that it related to water damage, and not any other damage raised, and rejected the application.

The Court of Appeal dismissed the appeal, though it did not rule conclusively on the interpretation of the exclusion clause. The drafting of the policy contained "a number of curiosities" that made it difficult to determine the intended meaning of the clause in a vacuum. The Court allowed the parties to adduce further evidence, and returned the matter to the High Court for the clause's meaning to be determined at the substantive hearing.

See the Court's decision here.