POLLADIO HOLDINGS LTD v THE NEW INDIA ASSURANCE CO LTD [2023] NZHC 1147

POLLADIO HOLDINGS LTD v THE NEW INDIA ASSURANCE CO LTD [2023] NZHC 1147 [12 May 2023]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2021-476-000030[2023] NZHC 1147BETWEEN POLLADIO HOLDINGS LIMITEDPlaintiffAND THE NEW INDIA ASSURANCECOMPANY LIMITEDDefendantHearing: 30 March and 28 April 2023Appearances: M C Josephson and T C Gunn for the PlaintiffP J Napier and W M van Roosmalen for the DefendantJudgment: 12 May 2023JUDGMENT OF WYLIE JThis judgment was delivered by Justice WylieOn 12 May 2023 at 2.30pmPursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors/counsel:T C Gunn, Warkworth/M C Josephson, MangawhaiKeegan Alexander, AucklandIntroduction[1] On 20 November 2019, there was a major hail storm in Timaru. It causedsignificant damage—in particular to cars and roofs.[2] The plaintiff, Polladio Holdings Ltd (Polladio), owns the Grosvenor Hotel (thehotel), situated on the corner of Cains Terrace and Beswick Street in Timaru. At thetime of the hail storm, Polladio held a material damage policy (the policy) in respectof the hotel issued by the defendant, the New India Assurance Co Ltd (New India).[3] The policy had been negotiated through a firm of insurance brokers—AbbottsInsurance Brokers Ltd (Abbotts). On 3 September 2020, Ping Lim, a director ofPolladio, signed a claim form on behalf of Polladio seeking cover for damage it saidhad been caused to the hotel roof by the hail storm. Abbotts notified the claims officerat New India of Polladio's claim on 11 September 2020.[4] The claims officer at New India was surprised to receive the notification solong after the hail storm had occurred. He replied to Abbotts on the same day, askingwhy there had been a delay in submitting the claim. Abbotts replied by email on 14September 2020 advising as follows:Reason for delay is the client is currently about to undergo some work on theproperty and an inspection was carried out on the roof hence the damage beingdiscovered.[5] On 5 November 2020, New India advised Abbotts that the claim had beendeclined. It relied upon an exclusion clause in the policy—cl 5.6.1(c)—whichrecorded that the policy did not insure "marring and scratching" to the insuredproperty.The parties' respective positions[6] Polladio says that:(a) the policy insured it for accidental loss to the hotel;(b) the hail storm caused accidental loss to the roof of the hotel;(c) the damage to the hotel roof was covered by the policy;(d) New India is required to indemnify it by reinstating the roof;(e) it has made a claim under the policy; and(f) New India is not entitled to decline cover.It alleges that New India is in breach of the insurance contract and it seeks the costs ofreinstating the roof (estimated to be $744,978.21—GST inclusive) as well asadditional costs it says it has incurred, together with interest.[7] New India says that Polladio's claim must fail, because the claim is excludedunder the policy. It relies on:(a) clause 5.5.3(c)—which provided that the policy did not insure losscaused by rust; and(b) clause 5.6.1(c)—which, as noted, recorded that the policy did notextend to marring.New India also asserts that:(c) Polladio was aware of the hail damage to the roof from at least 25November 2019;(d) Polladio informed New India through its broker that it did not discoverthe hail damage until July 2020;(e) this statement was untrue; and(f) Polladio breached its duty of uberrimae fidei (or utmost good faith) andcls 7 and 8 in the policy.Analysis[8] I consider first whether there was damage to the hotel roof caused by the hailstorm, then whether any damage constituted accidental loss in terms of the policy.Next, I consider the exclusion clauses and finally I deal with the alleged breaches ofthe policy conditions by Polladio.Was there hail damage to the hotel roof?[9] This matter can be dealt with relatively briefly. Notwithstanding the pleadings,there was no dispute before me that parts of the roof of the hotel were damaged in thehail storm on 20 November 2019.[10] The roof comprises a number of sections, namely:(a) steep pitched upper roof planes on those parts of the hotel roof facingCains Terrace and Beswick Street. This part of the roof comprisesimported Marseilles clay tiles;(b) the remaining pitched roof planes on the main hotel block whichcomprise galvanised corrugated steel;(c) a lower central near flat roof area. This is a "tray type" roof and itcomprises galvanised steel;(d) a steep pitched galvanised corrugated steel roof on a building on thesouthern side of the hotel site running parallel to the main hotel block;and(e) a low pitched single plane galvanised corrugated steel roof on a furtherbuilding at the western end of the southern boundary of the site.The total roof is approximately 1407 square metres in area. There are variouspenetrations for fans, television aerials, breather pipes and the like. Fixings are eitherlead head nails or screws and tie wires.[11] The steel roofs are approximately 50 years old. Prior to the hail storm, rustwas evident in places. It was mainly limited to joints where roof sheets overlap, to theends of sheets under flashings, to the underside of sheets overhanging gutters andaround nail heads. Nail shafts were rusting and starting to fail. The ridge and hipflashings were also rusted. The roofs were nevertheless still relatively sound and theydid not leak.[12] It seems that the hail storm passed over the hotel twice in the course of theweather event. Some of the hail stones were more than 30 millimetres in diameter.Since the hail storm there have been a number of leaks in the hotel roof.[13] There was little or no damage to the clay roof. One of the persons who hasinspected the roof, Mr Cowperthwaite, (who was called by New India), told the Courtthat there were some marks on some of the tiles where hail stones may have struck,but that there were no obvious signs of cracking or damaged tiles. Some damagedtiles were found along the gutter roof line. Parts of the mortar/pointing securing someof the tiles were cracked and some tiles were loose. It was Mr Cowperthwaite's viewthat this was historic damage or damage from weather going back, possibly, for someyears. He was not cross-examined on this issue. Mr Fridd, a builder with extensiveexperience in roofing who was called by Polladio, put it no higher than to say thatsome of the tiles may have been dislodged by the hail storm.[14] The corrugated steel roof sections and the tray roof, as well as the ridges andflashings, were damaged by the hail storm. The surfaces of the steel roofs sufferedindentations on all roof planes. The lead heads on a number of nails were knockedoff, exposing the rusting nail shanks. In some areas, the hail penetrated the roof.Temporary repairs were carried out by Polladio's builder, Mr Fridd and his company,David Fridd Building Ltd, on 25 November 2019, 20 December 2019, 22 June 2020,27 November 2020, 10 February 2021, 17 February 2021, 14 August 2021, 12 January2022, 18 January 2022, 3 May 2022 and 9 May 2022.Is the damage to the roof covered by the policy[15] Again, there was no dispute in this regard.[16] The policy insured Polladio in the following terms:We will indemnify you against accidental loss to insured property,occurring during the period of insurance at the situation.[17] Although the policy recorded that words marked in bold were defined in thepolicy and notwithstanding that it was marked in bold in the insurance clause, the term"accidental loss" was not defined. The words "accident" and "loss" were howeverindividually defined.(a) The word "accident" was defined as follows:Accident means an event or omission that is unexpected andunintended from your point of view.(b) The word "loss" was defined as follows:Loss means accidental physical loss or accidental physicaldamage.[18] New India accepted in an email dated 18 November 2020 sent to Abbotts, thatthe corrugated and flat tray parts of the hotel roof suffered "loss" as defined in thepolicy. Before me, Mr Napier, for New India, also accepted that the hail damage tothe roof of the hotel arising from the hail storm constituted accidental loss to theinsured property, occurring during the period of insurance at the situation. This wasan appropriate concession—the hail damage to the hotel roof was clearly covered bythe insurance clause in the policy.The exclusion clauses[19] New India relied upon cls 5.5.3(c) and 5.6.1(c). Those clauses read as follows:5 EXCLUSIONS5.5 This policy does not insure any of the following:5.5.3 Loss caused by any of the following:(c) rust, action of light, or inherent nature of the property.This exclusion only applies to the insured property first affected. Itdoes not apply to any resultant accidental loss to other parts of theinsured property.5.6 This policy does not insure:5.6.1 Any of the following types of damage to insured property:(c) marring and scratching.[20] Clause 5.5.3(c) is said by New India to exclude the loss claimed by Polladiofor holes punched in the rusted parts of the corrugated steel roof sections of the roofand for the damage to the lead head nails. Clause 5.6.1(c) is said to exclude the lossclaimed by Polladio for the indentations on the steel roof sections of the roof.(a) Clause 5.5.3(c)—holes/damaged nail heads[21] I deal first with the rust exclusion—cl 5.5.3(c).[22] Polladio noted that the clause excluded any loss that was "caused by rust".It submitted that, in the insurance context, "caused by" refers to proximate cause, andthat the proximate cause is the dominant or effective cause of the loss or damage. Itaccepted that if there are two or more causes of equal efficiency and one is expresslyexcluded, then there is no cover, but said that this principle has no application in thiscase because the hail storm caused the damage and not the rust. It was argued thatwhat was or was not the proximate cause is a question of fact, involving a pragmaticand common-sense assessment of the combination of factors giving rise to the claimedloss. It said that the proximate cause of the loss in this case was the hail storm and notthe presence of rust and that this was so, even if the roofing metal at some locationswas weakened by rust and even if, in the absence of rust, the hail would not havepenetrated the metal or knocked off the heads of the lead headed nails.[23] New India argued that the holes punched in the roof and the damage to the leadhead nails only occurred in those areas already weakened by rust. It was submittedthat on the evidence there were no clearly identifiable fractures in areas with soundmetal which were a direct result of the hail damage. It argued that the hail exposedweaknesses where there was already corrosion and highlighted the already existingneed for repairs and maintenance. It was submitted that hail damage highlighted rustweakened spots, some of which had already started to perforate the roof metal, andthat the roof required repairing or replacing due to its age and condition and not as aresult of hail damage.[24] Under the policy, hail is an insured peril; rust is an excluded peril. The Courtmust seek to identify a single proximate cause of the claimed loss if it can. Theproximate cause is not necessarily the last in time. Rather, the proximate cause is thecause adjudged the efficient or dominant cause.1[25] I turn to the evidence.(a) Mr Fridd acknowledged that rust was starting to appear in places on theroof. While he accepted that the roof was showing areas of rust, hecommented that it did not leak before the hail storm. In cross-examination, Mr Fridd said as follows:Q. And you're aware that both Mr Cowperthwaiteand Mr Newbol[d] will give evidence, thatperforations or holes in the roof had only occurred onroofing material that was suffering from rust, aren'tyou?A. Surface rust, yeah.Q. And that's the case isn't it?A. Most of the holes have been – they've been damagedthrough the surface rust, the hail.Q. Well not most, all of them.A. All the holes, the rust, where they've been hit by hail,have put holes in them.Q. Yes. But let's be quite clear, in case there's nowconfusion. Absent rust, there's no holes, is there?1 AMI Insurance Ltd v Legg [2017] NZCA 321, [2017] 3 NZLR 629 at [45]; see also Robert Merkinand Chris Nicoll (eds) Colinvaux's Law of Insurance in New Zealand (2nd ed, Thomson Reuters,Wellington, 2017) at [3.3.2(1)].A. Just dents, yes.Q. Just dents thank you. Mr Fridd did not expressly refer to the damage to the nail heads in hisevidence-in-chief. He was however cross-examined in relation to thisissue. The following exchange occurred:Q. Well Mr Newbold will say that the lead head nailswere corroded, and that the lead was causing localisedcorrosion around the fastened head.A. Yeah and if the hail hadn't have hit them, they wouldstill be in place and they wouldn't have been an issue,but the hail's actually hit the lead head nail andknocked the head of it, at the time, that's what causedthat. So if the hail hadn't of hit, those lead head nailswould still be in one place.(b) Mr Cowperthwaite said that the hail storm did not affect the structuralintegrity or functionality of the roof, except in those areas where theimpact of the hail increased the size of or created holes where the metalwas already weakened from underside corrosion. He did not resile fromthese views when he was cross-examined. He also commented in hisevidence-in-chief that the missing lead heads on nails showed that thenail shafts were rusting and starting to fail. He considered that this wasa typical situation in roofs approaching 50 years of age.(c) Mr Newbold, a roofing specialist called by New India, agreed with MrCowperthwaite's view. He also said that the hail had dislodged somelead heads off roofing nails, but that that is a common result ofdissimilar metal corrosion between the lead and the steel on lead headnails. He commented that "absent rust, hail would not have dislodgedthe lead heads".[26] I am satisfied that the hail storm exposed weaknesses where there was existingcorrosion; it knocked holes in rust weakened spots; it knocked off the heads of leadhead nails where the shafts of the nails were rusted. Leaks as a result of the haildamage appeared but only in rust weakened areas; there were no clearly identifiablefractures in areas where sound metal was hit by the hail. Put another way, absent rust,the hail did not punch holes in the roof. Similarly, without rust, the hail would nothave damaged the nail heads. On the evidence, there were two independent causes ofthe holes punched in the roof which resulted in leaking and of the damage to the nailheads—namely, the rust and the hail. On the evidence, both were effectivecontributors to the loss suffered.[27] Where there are two effective and independent causes of a loss claimed underan insurance policy, one within the policy and the other excluded by it, the exclusionprevails.2 This is known as the Wayne Tank principle, after the case in which theprinciple was settled.[28] The leading authority dealing with the issue in this country is the decision ofthe Court of Appeal in AMI Insurance Ltd v Legg.3 In this case, the Leggs built andthen set fire to a rubbish heap on their lifestyle block. Some of the material in therubbish heap came from farming activity on the lifestyle block and some came fromwork undertaken by a separate landscaping company run by the Leggs. Several weeksafter the fire appeared to have gone out, the remains of the heap unexpectedly reignitedin dry conditions, causing extensive damage to neighbouring properties. The Leggswere liable to the New Zealand Fire Service Commission and to their local authorityfor the costs of putting out the fire. They sought indemnity from their insurer—AMI.The insurance policy extended to legal liability for burning green waste and rubbishfrom the Leggs' farming activities on their lifestyle block; the policy howevercontained an exclusion for damage arising out of or in connection with any otherbusiness. The insurer said that the exclusion applied because some of the material inthe rubbish heap came from work undertaken by the Leggs' landscaping business andthat there was a sufficient connection between that business activity and the damage.It argued that causation was unnecessary and that it sufficed if the one thing "ha[d] todo" with the other. The Court of Appeal stated as follows:[46] The Wayne Tank principle — it is an aid to contract interpretation,rather than a rule of law — states that where a loss has two effectiveand interdependent causes, one within the policy and one excluded byit, the exclusion prevails. The rationale is that where an insuring2 Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corporation Ltd [1974] 1 QB 57(CA) at 67–68 per Lord Denning MR, at 69 per Cairns LJ and at 74–75 per Roskill LJ.3 AMI Insurance Ltd v Legg, above n 1. (Footnotes omitted).clause and an exclusion are found together, one arrives at the parties'intent by subtracting the latter from the former. [51] The Wayne Tank principle is consistent with New Zealand courts'usual approach to insurance contracts, which are interpreted in thesame way as any other, the overall objective being to ascertain themutual intention of the parties. Exclusion clauses are construednarrowly, but not in a strained or artificial way that deviates from thisgeneral approach. [52] This is a case of two interdependent causes, neither of which can beisolated as the cause of the fire on On the facts, AMI proved on thebalance of probabilities that the excluded cause — [landscapingbusiness] material — was effective.[29] In the present case, hail damage is covered by the policy but loss arising fromrust is not. I have found that both were effective and independent causes of the losssuffered by Polladio in respect of the holes and nail head damage. Applying the WayneTank principle, the rust exclusion contained in the policy must prevail. In myjudgment, the loss which Polladio claims in respect of holes punched in the hotel roofin areas which were already rusted, is excluded by cl 5.5.3(c) of the policy; so is lossin respect of the damage to those lead head nails which were already rusted.(b) Clause 5.6.1(c)—the denting[30] I now turn to the indentations in the steel sections of the roof which werecaused by the hail. New India says that this damage is excluded by the marringexclusion in cl 5.6.1(c) of the policy.[31] The word "marring" is not defined in the policy. Relevantly, it is defined inthe Shorter Oxford English Dictionary as follows:4Damage so as to render useless, ruin, impair the quality. Now chiefly, detractfrom or impair the perfection of, disfigure.Deteriorate, spoil.[32] The evidence suggested that marring exclusions are of long standing in mostmaterial damage policies. Mr West, the head of underwriting at Rosser Underwriting4 Shorter Oxford English Dictionary on Historical Principles (6th ed, Oxford University Press,Oxford, 2007) vol 1, A-M, at 1703.Ltd, gave evidence that the underwriting intention behind a marring exclusion is toexclude damage that is primarily cosmetic in nature, because the property insured—buildings and plant—will most likely suffer cosmetic damage during the course of itsuseful life.[33] Notwithstanding the evidence that a marring exclusion is common in mostmaterial damage policies, there does not appear to be any case law dealing with thetopic in New Zealand. Nor could counsel or my research clerk find any relevant caselaw in the United Kingdom, Canada or Australia. Mr Josephson, for Polladio, referredto two American cases. In both cases, marring exclusions were applied to precludeinsureds from recovering for floor tiles chipped by dropping items on the tiles.5 Myresearch clerk found a further case to similar effect dealing with cosmetic damage tothe hull of a boat.6 These cases suggest that cosmetic damage is excluded by a marringexclusion, but that more major damage affecting the utility of the insured property isnot.[34] This is consistent with cl 5.6 of the policy. It provides that the policy excludesdamage to the insured property from pollution, slowly developing deformation ordistortion, scratching, gradual deterioration and rot or mildew—all broadly wear andtear type damage. Applying the ejusdem generis principle, the marring exclusionwould seem to be confined to gradual and/or cosmetic damage.[35] It was Polladio's case that the denting to the hotel roof caused by the hail wasmajor. It was New India's case that the denting was cosmetic only and did not affectthe functionality or performance of the roof.[36] I turn to the evidence.(a) Mr Fridd explained that the hail dented the roofing iron. He suggestedin his evidence-in-chief that this damage would promote rust, becausewater sitting in the dents caused by the hail would accelerate thecorrosion process. He was cross-examined by reference to photographs5 Ergas v Universal Property and Casualty Insurance Co 114 So 3d 286 (Fla App 4 Dist 2013);Gamero v Foremost Insurance Co 208 So 3d 1195 (Fla App 3 Dist 2017).6 Cherewick v State Farm Fire and Casualty 578 F Supp 3d 1136 (SD Cal 2022).showing the hotel roof. He acknowledged that there was no watersitting in the dents shown in the photographs. He explained that thiswas because the roof was reasonably steep and because the photographswere taken on a "nice sunny day". It was put to him that given the pitchof the roofs, and the comparatively small size of the dents, any waterwould rapidly evaporate so that there would be no ponding. Heresponded that, in his view, over time the roofs would "probablydeteriorate, definitely", but he accepted that he had not seen any watersitting in the dents on the roof. He explained that that was because hewas not up there all of the time.(b) Mr Cowperthwaite said that most of the indentations were minor only,and that, from his observations, the damage is cosmetic; theindentations have not fractured the sound metal in the roofing sheets.He acknowledged that there has been and continues to be some pondingin the area of tray roofing, but expressed the opinion that this is causedby a sag in the substrate under the roofing. He acknowledged that therewere shallow indentations in the surface of the tray area from hailimpact but he considered that this was not affecting the performance ofthe roof. He stated that water would not pond for sufficient time for itto materially affect the performance of the roof because the indentationsare shallow and the roofs are "mainly pitched". He said further thatwhat little water may sit in indentations would soon evaporate and thatit would not accelerate the corrosion process.(c) Mr Newbold stated that the dents caused by the hail did not affect thestructural integrity of the roof. He considered that the durability of theroof would only be affected if the dents resulted in prolonged ponding.[37] A number of photographs of the roof were produced in evidence. Thephotographs showed the denting, but insofar as I could ascertain, most of it wasrelatively minor. There was no evidence of ponding in the photographs other than onthe tray roof section.[38] I accept on the evidence that, except in those areas where the hail punchedholes in the roof, the integrity and functionality of the galvanised steel roofing wasnot adversely affected by the hail. The majority of the roof is pitched and water willnot sit on most of the roof in any quantity for any extended time. Further, the majorityof the indentations are relatively shallow. There are some larger indentations but theevidence suggested that these were likely to have been caused by people moving abouton the roof rather than by hail. The evidence suggested that the flatter section ofroofing—the tray section—suffers from ponding, but not as a result of indentationscaused by the hail; rather the area is ponding because of the deterioration of theunderling roof frame. In my judgment, the indentation damage to the roof is aestheticand cosmetic.[39] Marring refers to blemishes that detract from the perfection of the item insured.It conveys the idea of superficial damage affecting the appearance of an item, whichimpairs aesthetics rather than functionality. In my view, the marring exclusioncontained in the policy applies to the indentation damage to the roof from the hailstorm.[40] That is enough to decide the case, but in case I am wrong in relation to theapplication of the exclusion clauses, I briefly consider whether or not Polladiobreached the terms of the policy.Did Polladio breach the policy conditions?[41] New India alleged that, regardless of the application of the exclusion clauses,Polladio's claim has to fail because of its dishonest statement as to when the haildamage was discovered.[42] Mr Lim, in his initial brief of evidence, said that he did not initially realise thatthe hail damage might be covered by the policy and that he only became aware of thissome months after the storm when he was talking to Abbotts. He said that afterreceiving this advice, Polladio made a claim on its policy. He referred to the claimadvice form which he filled out on 3 September 2020 and which Abbotts sent to NewIndia on 11 September 2020—some 10 months after the hail damage occurred.[43] In the course of cross-examination, Mr Lim was shown an email which he sentto Abbotts on 16 July 2020, where he stated as follows:A few weeks ago, our builder here in Timaru noticed that The Grosvenor Hotelsuffered quite a bit of hail damage.Can you kindly look at our policy and advise us re where we stand with thisplease?Is it covered by our insurance policy, and what excess amount are we lookingat?Mr Lim was asked whether he was truly unaware of the damage until his builder,Mr Fridd, noticed it a few weeks before the email of 16 July 2022. Mr Lim confirmedthis.[44] Mr Fridd said that he repaired the hotel roof on various dates, commencing on25 November 2019. He said that these were "repairs to the roof, that was just makingsafe, stopping leaks". Mr Lim's evidence noted above was put to him. Mr Friddresponded as follows:I think it's just some confusion, I've never been in here before, this is my firsttime and probably [Mr Lim's], so everyone was a bit nervous. So those datesthere, [the repair dates] we were just making safe to any damage that wascaused by the hail. No one knew at the time that there could be a possibilityof a claim for hail damage.When asked again whether or not Mr Lim was telling the truth when he told Polladio'sinsurance broker that the damage caused by the hail was only discovered in July 2020,Mr Fridd responded:I'm not sure. I don't know how to answer that I think [Mr Lim] has justgot confused under oath I instructed Mr Fridd not to speculate. He subsequently confirmed that the "makesafes" were as a result of damage caused by the hail.77 As a result of this evidence, New India sought leave to amend its statement of defence to add inan affirmative defence alleging breach of the policy conditions by Polladio. I took an adjournmentto give Polladio the opportunity to consider its position, obtain any relevant additional discoveryand, if necessary, to file an additional brief from Mr Lim. In the event, the amended statement ofdefence was filed by consent, as was a reply from Polladio. Mr Lim was recalled to give additionalevidence, also by consent.[45] Mr Lim was recalled. He said that he was out of New Zealand from 11November 2019 to 10 January 2020. He said that the daily hotel operations wereundertaken by duty managers and that the relevant duty manager told Mr Fridd aboutthe leaks on 20 November and again on 9 and 11 December 2019. He confirmed thatthe duty manager had the authority to authorise trades people to deal with such issuesand that he was not consulted in relation to the leak issues in either November orDecember 2019. He further asserted that he was not aware of the issues which hadarisen as a result of the hail storm and that he was not aware of any other leak repairsundertaken by Mr Fridd between December 2019 and June 2020. He did howeveracknowledge that, on 11 May 2020, he had sent an email to Abbotts in substantiallythe same terms as the email sent on 16 July 2020 referred to at [43] above. He saidthat he had forgotten about this earlier email.[46] Mr Lim was extensively cross-examined about this evidence but the answershe gave were not particularly helpful.[47] Mr Lim's evidence was not particularly satisfactory. Even acknowledging thatEnglish is not his first language, it seemed to me that he frequently sought to avoidMr Napier's questions in relation to when he first became aware of hail damage to thehotel roof. In any event, even on his own evidence, he knew there was hail damage tothe roof at the latest by 11 May 2020. It was probably earlier. He ultimatelyacknowledged in cross-examination that he first became aware of the hail damage inautumn 2020. He was reluctant to explain what he meant by autumn, but eventually,in answers to questions from me, he said that he meant April/May 2020. He acceptedthat the statement made by him to the broker in the email of 16 July 2020, (which wasrelayed in large part by Abbotts to New India on 14 September 2020 as noted at [4]above) was untrue.[48] Relevantly, the policy provided as follows:7 CLAIMS CONDITIONS7.1 Making a claim on this insuranceYou must:(a) Tell us as soon as you are aware of any loss covered under this policy7.3 Dishonest or fraudulent claimsIf your claim is dishonest or fraudulent in any way, we may declineyour claim, wholly or partially and, at our discretion, declare that thispolicy is unenforceable from the date of the dishonest or fraudulentact.8 GENERAL CONDITIONS8.1 Comply with the policyYou must meet the following conditions BEFORE we are obliged topay you:8.1.1 You must comply with all the policy terms, and8.1.2 Provide true statements and answers when you:• make any claim under this policy.[49] As can be seen, the policy required Polladio to tell New India as soon as it wasaware of any loss covered under the policy. Mr Lim was aware of the hail damage byApril/May 2020 at the latest. He did not fill out the claim form until early September2020 and it was not forwarded to New India until 14 September 2020. There was abreach of cl 7.1(a) in the policy. This breach however has not caused any prejudice toNew India and s 9(1)(b) of the Insurance Law Reform Act 1977 applies.[50] The policy also provided that New India could decline a claim in the event ofdishonesty. Here, I am satisfied that Mr Lim was dishonest when he advised Abbottsin September 2020 that the hail damage to the hotel roof had only been discovered "afew weeks earlier". When the broker was asked by New India why the claim had beendelayed, the broker relied on Mr Lim's advice and told New India that the hail damagehad only recently been discovered. That advice was relayed by the broker to NewIndia in mid-September 2020. The advice was untrue and as a result, Polladiobreached cls 7.3, 8.1.1 and 8.1.2 in the policy. As a consequence, New India is entitledto decline Polladio's claim, even if it is not excluded by the rust and marring provisionsin the policy.8Result[51] For the reasons I have set out, I find that:(a) the roof of the hotel was damaged in the course of a hail storm inTimaru on 20 November 2019;(b) the hail damage to the roof of the hotel constituted accidental loss tothe insured property, occurring during the period of insurance of thesituation;(c) Polladio's losses resulting from the hail storm are excluded by cls5.5.3(c) and 5.6.1(c) in the policy; and(d) Polladio breached cls 7.3, 8.1.1. and 8.1.2 of the policy and New Indiawas entitled to decline to pay the claim, if the same had not beenexcluded by the terms of the policy.Costs[52] New India is the successful party. It is entitled to its reasonable costs anddisbursements. It is my preliminary view that costs should be fixed on a 2B basis. Ifcounsel agree, they should be able to finalise costs between their respective clients. Ifthey disagree, I direct as follows:(a) any claim to costs and disbursements is to be filed by way ofmemorandum within five working days of the date of this judgment;(b) any response is to be filed within a further five working days; and8 Sampson v Goldstar Insurance Co Ltd [1980] 2 NZLR 742 (SC); Purcell v The State InsuranceOffice (1982) 2 ANZ Insurance Cases 60–495; National Insurance Co Ltd v Van Gameren [1986]2 NZLR 374 (HC); NRMA Insurance Ltd v McCarney (1992) 7 ANZ Insurance Cases 61–146.(c) memoranda are not to exceed five pages.The Court will then deal with the issue of costs and disbursements on the papers unlessit requires the assistance of counsel._____________________________Wylie J