The Court of Appeal overturns the High Court’s decision in Skyward Aviation Limited v Tower Insurance

16 April 2014

Court Decisions , Insurance Law

In Skyward Aviation Limited v Tower Insurance the Court of Appeal was asked to determine the following questions:

  1. What is the basis of Tower’s liability;

  2. What is the correct measure of Tower’s liability;

  3. Did Tower irrevocably elect to make a payment based on full replacement value.


In answering question 1 the CA found that the policy wording favoured the view that the homeowner had the right to choose whether their house was rebuilt, repaired or replaced, and said once it is established that the house is not economic to repair, Tower loses the right to choose the basis of the settlement.  This overturned the HC decision that Tower had the right of election to rebuild, repair or replace the house.

In answering question 2 the CA found that a homeowner is not obliged to choose a house of comparable size, construction, condition and style if it elects to purchase another property under the policy, rather Tower’s obligations are limited by the cost of rebuilding the property to “as new” on the same site once it is established that the house is beyond economic repair.  This is another departure from the HC’s decision that if the house was to be replaced a homeowner would have to choose a house of comparable size, construction, condition and style.

In answering question 3 the CA upheld the HC’s decision that Tower did not make an irrevocable election to settle the claim by payment of the full replacement value.